Insurance CFP

FINANCIAL PLANNING ACADEMY
Insurance Planning and Risk Management
PART - 1
1 Loss of income derived from a property is an example of:
(a) Personal risk
(b) Property risk
(c) Liability risk
(d) Financial risk
2 Insuring your house is an example of which of the following?

(a) Risk transfer
(b) Self insurance
(c) A control measure
(d) Risk retention
3 A car insurance policy with an excess of 800 in order to reduce the amount of the
regular premium is considered to be:
(a) Self insurance
(b) Risk transfer
(c) Partial risk retention
(d) Complete risk retention
4 What is the third step in the risk management process?

(a) Implement appropriate strategy
(b) Identify the risk
(c) Develop alternatives
(d) Monitor, review and update strategy
5 When a financial planner is assessing insurance needs for his/her client, the financial
planner should always:
(a) Make sure the client has life cover
(b) Identify any risks that the client may be exposed to and recommend strategies to
address those risks
(c) Recommend the client consult an insurance broker to identify risks the client is
exposed to
(d) Identify current investments, the risks associated with those investments and
recommend strategies to address those risks
Financial Planning Academy 1

6 Which of the following statements is correct with regards to an insurance agent?
(a) They are responsible for the ongoing relationship between the adviser and the
licensee
(b) They are the insurance company who issues the insurance
(c) Their duty is first and foremost to follow the client's instructions
(d) Their responsibilities and obligations are to the insurance company that they
represent
7. What does the insured's duty of disclosure mean?

(a) The insured must disclose everything to the insurer
(b) If a proposer does not answer a on the application form, the insurer does not have to
pay claims
(c) The insured must disclose to the insurer every relevant matter known
(d) If a on an application form is ambiguous, and as such the meaning of the is
misunderstood by the insured, the insurer can claim non-disclosure
8. Anti-discrimination and equal opportunity legislation prohibits discrimination on the

basis of marital status, pregnancy, race, colour, disability and religious or political beliefs.
This means that:
(a) Insurance companies cannot refuse applications on any of these factors, but they
can reflect it in an increased premium
(b) Insurance companies cannot refuse applications on any of these factors, nor can they
reflect it in an increased premium
(c) Insurance companies can refuse applications on some of these factors but only under
special circumstances
(d) Insurance companies can refuse applications on all of these factors but only under
special circumstances
9. A lender requires a particular insurer’s product to be in place before they grant a

mortgage. This is known as:
(a) A consumer contract warranty
(b) Misrepresentation
(c) Third line forcing
(d) Fraudulent disclosure
10. Which of the following client categories are considered to be a high-risk group with
regards to accidental death or injury?
(a) Young adult
(b) Young family
(c) Over 40s
(d) Mature adult

11. Insurance underwriters consider occupation for the degree in which it could cause
death or disablement. Another reason they consider occupation is:
(a) The ability to meet the premium each year
(b) The ability for clients to generate sufficient income to maintain lifestyle
(c) The likelihood of being able to return to work after a relatively minor injury,
such as a broken leg
(d) The opportunity to get to know the client
12. Which of the following occupational classifications would be considered more

hazardous for insurance purposes?
(a) Professionals, such as accountants and lawyers
(b) Clerical and other white collar workers
(c) Skilled workers
(d) Trades people doing manual work
13. The income of a client is used to determine:

I. The amount of income protection cover required
II. The amount of premium loading and/or any exclusions applicable to
the policy
III. What level of income would be required for dependants in the event of
premature death
IV. What level of income would be required in the event of disability
(a) I and II
(b) II and IV
(c) I, III and IV
(d) I, II and IV
14. Liability arising from the ownership or occupation of a property is an example of:
(a) Fixed liability
(b) Personal liability
(c) Speculative liability
(d) General liability
15. Capital Required = Living Expenses x Years Required. This is the formula for the:
(a) Future value approach
(b) Annuity approach
(c) Needs approach
(d) Multiple approach
16. Prakash earns 55,000 p.a. He estimates that his family would require 80% of his
income in the event of his death or disability. Using the annuity approach, what is the
required lump sum if the investment returned 5% per annum?
(a) 2,750,000
(b) 220,000
(c) 1,40,000
(d) 880,000

17. Which of the following is true with regards to workers compensation?
(a) It will cover the employee for any injury
(b) It can be used in place of income protection
(c) It will cover the employee for 4-12 days per annum in the event of injury
(d) It is required by law in all states
18. The two differences when considering funding a short or long term disability,
rather than death, are medical and maintenance costs. Examples of this are:
I. Modifications to the house for wheelchair access
II. II. Chiropractic treatment
III. III. Annual living expenses, including those of the client
IV. IV. Funeral expenses
(a) I and II only
(b) I, II and IV
(c) I, II, and III
(d) I, II, III and IV
19. Income Protection provides cover for up to 75% of normal income. Why doesn't it
provide a greater level of cover?
(a) Any more than 75% might be a disincentive to return to work
(b) As Income Protection payments are tax free, 75% of salary after tax is close to 40%
of salary before tax
(c) It is assumed that sick leave will provide the gap of 25%
(d) It is assumed that workers compensation will provide the gap of 25%
20. Which of the following is NOT a control measure, which may be used to reduce
property risk?
(a) Extinguishers and fire blankets
(b) An excess on the house and contents insurance
(c) Car alarm
(d) Cutting back trees around the home
21. Your house cleaner, Kylie, breaks her arm in your home. What insurance would
provide the most comprehensive cover?
(a) None, Kylie should have her own Income Protection Insurance
(b) Home Insurance
(c) Contents Insurance
(d) Domestic Workers Compensation Insurance
22. What are the two main types of life insurance premiums?
(a) Level and Stepped
(b) Uneven and Level
(c) Even and Stepped
(d) Variable and Flat

23. Which of the following is a benefit of having multiple lives covered under the one
policy?
(a) The premium is calculated based on the details of 'the person of least risk'
(b) The clients are only required to pay the equivalent of one person's premium, being
whichever is the most expensive
(c) Each of persons covered has access to their own sum insured plus that of the other
life insured, effectively doubling their level of cover
(d) The clients only incur one policy fee
24. In the event of the life insured committing suicide, what would happen under a
term life policy?
(a) A claim would be paid in full if the policy had been in force for at least 12 months
(b) Partial claim paid, depending on length the policy has been in force
(c) The claim would be paid if the policy had been in force for at least 13 months
(d) A claim will never be paid in this situation
25. With regards to TPD, the broad definition of being totally and permanently disabled
is the 'the insured is unable to return to work'. Can a homemaker then, be covered for
TPD?
(a) No, as a homemaker is technically unemployed
(b) Yes, but the homemaker must choose their desired definition of TPD from a number
of options at time of application
(c) Yes, but only if they are gainfully employed elsewhere at least on a part-time basis
(d) Yes, but there may be a separate definition of TPD applied
26. What is the term used for the insured's right to renew their life insurance policy
regardless of changes to medical status?
(a) Right to renew
(b) Guaranteed renewable
(c) Right to continue
(d) Guaranteed continuance
27. Some whole of life and endowment policies have a surrender value which gives
rise to the 'non forfeiture' principle. Which of the following best describes the 'non
forfeiture' principle?
(a) The ability to 'skip' a premium without the policy lapsing (so long as the
accumulated unpaid premiums, plus interest, do not exceed the surrender value)
(b) The ability to 'skip' a premium without the policy lapsing (so long as the premium is
paid within 6 months)
(c) The ability to 'skip' a premium without the policy lapsing (so long as the premium is
paid within 12 months)
(d) The ability to 'skip' a premium without the policy lapsing (so long as the skipped
premium, plus interest, is added to the next premium)

28. If the life insured has NOT nominated a beneficiary:
(a) The benefits will automatically be paid to the spouse
(b) The benefits will be automatically paid to the policy owner
(c) The benefits will paid to the insured's superannuation fund
(d) The benefits will be paid to the insured's estate
29. A flat tax rate, limited liability to the value of ownership and separate legal entity
are all characteristics of a:
(a) Sole trader
(b) Partnership
(c) Company
(d) Trust
30. Which of the following can sue and be sued as a separate legal entity?
I. A sole trader
II. A partnership
III. A company
IV. A trust
(a) I, II and III
(b) I and II only
(c) III only
(d) I, II, III and IV
31. Are the premiums for a business insurance policy tax deductible?
(a) Yes
(b) No
(c) Yes, but only if the purpose of the policy is to cover a revenue loss
(d) Yes, but only if the purpose of the policy is to cover a capital loss
32. Which of the following are all general insurances?

(a) House owners, consumer credit insurance and motor vehicle
(b) House owners, health, TPD and motor vehicle
(c) House owners, health and life
(d) Householders contents, death and motor vehicle

33. Professional Indemnity Insurance upholds that:
I. Duty of care is owed by suppliers of advice or information
II. Suppliers of advice or information present themselves as
having special skill and knowledge in the area that the
information is related to
III. It was reasonable that the person who took the advice or
information would rely and act on that advice
IV. Liability only arises as a result of dishonest service
(a) I, II, III & IV
(b) I, III & IV
(c) I, II & IV
(d) I, II & III
34. Major differences between underwriting life insurance and disability insurance are:
V. Death is a single event, disability can occur repeatedly
VI. II. Death is unpredictable, whilst demographic statistics
indicate likely events of disablement
VII. III. Death is permanent, disability may be permanent or
temporary
(a) I, II & III
(b) I & III
(c) III
(d) I & II
35. A financial adviser must demonstrate to the underwriter that they have considered:
(a) The insurer's requirements, for the proposed amount of cover, has been fulfilled
(b) Their clients ability to meet the cost of premiums
(c) Alternative methods to control or avoid the risk
(d) The amount of risk that the insurer is taking on by accepting the client
36. Step 2 in the insurance review process is, 'Establish changes in client
circumstances'. What would NOT be considered a 'change'?
(a) The client is made redundant
(b) The client wants their insurances reviewed more frequently
(c) The client's mother has permanently moved in
The client's marriage recently ended

PART - 2
Q1. An executive is offered two ways of collecting his company bonus: either cash
equivalent to 6 months’ salary or a stock option with a 50-50 chance of either doubling in
value or becoming worthless in the next year. If the executive were a risk seeker, what
would he take?
A. Definitely the cash.
B. Definitely the stock option.
C. Probably the cash.
D. Probably the stock option.
Q2. A house owner contends that he is exposed to the following risks:

I. Loss from fire.
II. Loss from theft.
III. Loss from legal liability.
IV. Possibility of loss when the house is sold. Identify the pure risks amongst those listed.
A. I, II
B. II, III
C. I, II, III
D. All of the above.
Q3. Gambling losses are uninsurable for the following reason/s:

I. It makes those partaking in such a system indifferent to losses.
II. Legislation prohibit insuring gambling losses.
III. The losses are unpredictable.
IV. The losses may be catastrophic.
A. I, II
B. I, III
C. II, III
D. III, IV
Q4. The ease with which an asset can be converted into cash for an approximation of its
true value is referred to as the asset’s?
A. Return.
B. Critical mass.
C. Liquidity.
D. Margin.

Use the following information to provide answers to Questions 5 to 6.
Your client has entered into a partnership that offers an additional business interest of
450,000 in 10 years’ time or on earlier death or disability of his partner. Your client has
decided to fund this buy-sell arrangement by ten annual contributions, the first beginning
now. Assuming that the fund earns 7.0% per annum net returns, calculate:
Q5. The annual contributions (assuming that the partner survives for 10 years):
A. 30,439
B. 28,447
C. 35,111
D. 45,000
HINT :-
FVA= PMT * [ (1+k)n – 1] * (1+k) )
k
450,000 = PMT * (13.8614) * (1.07)
PMT = 450,000/14.7835
PMT = 30,439 (multiply by (1+k) because the annual contribution is made at beginning
of the period
Q6. The maximum amount your client has to raise immediately to meet the buy-sell
arrangement if the partner dies after 5 years from now.
A. 324,958
B. 312,700
C. 283,952
D. 262,700
HINT :-
FVA= PMT * [ (1+k)n – 1] * (1+k) )
k
FVA = 30,439 * [(1.07)5 – 1] * (1.07)
.07
FVA=30,439*6.15329 = 187,300
Max. Amount need to be raise = 450,000 - 187,300 = 262,700
Q7. Which amongst the following is a benefit that arises when a life insurance policy is
purchased?
A. It serves as an immediate source of funds for the repayment of loans.
B. It acts as a collateral for loans.
C. It frees properties from leasehold encumbrances.
D. It creates an immediate estate if the insured dies.

Q8. A client has the need to provide for his child’s college education costs. He envisages
that four annual payments of 20,000 would be needed beginning 15 years from now.
Ignoring inflation and assuming that the fund earns 8% per annum returns throughout,
calculate the value to be placed on this liability when carrying out a needs analysis for
this client.
A. 80,000
B. 25,219
C. 97,332
D. 22,553
Solution :-
Annual Payment Period Discounted Value
PV Rate
20,000 15 0.3152 6,304
20,000 16 0.2919 5,838
20,000 17 0.2703 5,406
20,000 18 0.2502 5,005
DCF 22,553
Q9. A client recently purchased a new home for 150,000 including the lot valued at
40,000. How much insurance would you recommend that your client purchase to cover
full replacement of the house in the event of a loss?
A. 88,000
B. 110,000
C. 120,000
D. 150,000
HINT :-
Cost of new home less Value of the lot 150,000 – 40,000 = 110,000
Q10. In relation to life assurance, identify the incorrect statement amongst the following:
A. A joint-life policy is payable upon the death of the first of two or more lives insured
under the single contract.
B. A last survivor policy is payable upon the death of the last of two or more lives insured
under the single contract.
C. Even with renewable term insurance, the policy owner/insured would not be
permitted to renew the policy if he or she had contracted a terminal disease prior to
the renewal date.
D. With a level premium policy, level premiums in excess of the policy’s share of death
claims in the early years of the contract are accumulated at interest in a reserve.

Q11. The gross premium is obtained by loading the net premium. The loading reflects all
of the following except:
A. A percentage of the premium.
B. A constant amount per 1,000 sum assured.
C. A constant amount per policy.
D. A factor for investment expenses.
Q12. An annuity that makes lifetime payments with the first payment made after one
period from issue is called a(an):
A. Life annuity immediate.
B. Life annuity due.
C. Annuity certain.
D. Annuity due.
Q13. A disability income policy that specifies a flat benefit amount may contain a
supplemental benefit granting the insured the right to increase the benefit amount in
accordance with increases in his earnings, if he can prove a commensurate increase in
income. The supplemental benefit contained in this policy is known as:
A. A cost-of-living adjustment (COLA) benefit.
B. A future purchase option benefit.
C. A partial disability benefit.
D. A guaranteed income contract (GIC) benefit.
Q14. Investment related risks arise primarily due to:

I. Lack of diversification in the assets held.
II. The mismatching of assets and liabilities.
III. Lack of clear guidelines from the authorities.
A. I
B. II
C. I, II
D. I, III
Q15. Identify the correct statement among the following with regard to an insurer’s
quality rating on the insurer’s financial condition:
A. An insurer’s rating can affect its ability to attract new business.
B. A ratings downgrade can damage an insurer’s persistency.
C. In order to improve its rating an insurer may have to invest in highly conservative
investments.
D. All of the above.

Q16. Before a contract of insurance is sold to a proposer, a life insurance agent should
undertake the following except:
A. Explain all the essential provisions of the contract.
B. Draw attention to the long-term nature of the policy and the effects of early
discontinuance.
C. Attempt to persuade a prospective policyholder to cancel any existing policies.
D. Explain the benefits arising from the plan and its riders.
Q17. The following are statements concerning contracts of insurance. Identify the
statement(s) that is/are correct.
I. Whenever the wording in an endorsement or rider is in conflict with the terms of the
policy to which it is attached, the endorsement or rider takes precedence.
II. One reason for exclusions in insurance policies is that the risks are covered by other
insurance.
A. I
B. II
C. All of the above.
D. None of the above.
Q18. All of the following statements regarding insurable interest are correct except:
A. A party has an insurable interest in a life insurance contract when he or she is subject
to a loss upon the death of an insured.
B. Only immediate family members can have insurable interest in each other’s lives.
C. Persons are presumed to have an insurable interest on themselves.
D. Generally, the person to have an insurable interest must give his or her consent before
a policy is issued, even if the applicant has an insurable interest.

PART - 3
1) What are the criteria for determining Insurable Risk?
(A) Law of Large Numbers
(B) The loss must be definite and measurable
(C) The loss must not be catastrophic
(a) (C) only

(b) (B) & (C)
(c) (A), (B) & (C)
(d) None of the above
2) A type of risk with high frequency but low severity is probably best handled by:
(a) A voidance
(b) Subrogation
(c) Self-insurance
(d) Under-Insurance
3) Speculative risk can have following outcomes ________.

(A) Loss
(B) (B) Gain
(C) (C) Status Quo
(a) A only
(b) B only
(c) C only
(d) A, B & C
4) LALGI is ___________.
(a) Private contribution guarantee scheme
(b) Private insurance
(c) Public benefit guarantee scheme
(d) Social insurance
5) For risk to be insurable which one of following is not correct?

(a) The loss must be fortuitous or accidental.
(b) The loss must not be catastrophic.
(c) The loss produced by the risk must be definite and measurable.
(d) There must be a sufficiently large number of heterogeneous exposure units to
make the losses reasonably predictable.

6) Consideration under the law is a return promise to:
1. Do certain things
2. Abstain from doing certain things
3. Forbear some acts
4. A minor
(a) (1), (2), and (3) only
(b) (1), (2), and (4) only
(c) (1), (3), and (4) only
(d) (2), (3), and (4) only
7) A client explains that she only wants an insurance policy that will cover her family
against financial risk over the next five years, while she still has dependent children and a
large mortgage. It is unlikely her income will increase over this period. What type of
insurance is she looking for?
(a) An unit linked insurance plan
(b) Money back policy
(c) Term insurance with a level premium
(d) Term insurance with a stepped premium
8) Which of the following is type of pecuniary insurance?

a) Commercial vehicle insurance
b) Engineering insurance
c) Money policy
d) Workman’s compensation
9) Participating policies are those where _____________.

(a) Both insurer and insured participates in each others loss
(b) Insured participates in running of insurance of company
(c) Insured participates in surplus of insurance company
(d) Insurer participates in loss of insured
10) In Unit-Link policy, market risk is with ______.

(A) Insured
(B) Insurer
(a) A
(b) B
(c) Both A & B
(d) Neither A nor B

11) If the life insurance policy is endorsed under MWP Act, 1874 then ________.
(a) Creditors have claim only to the extend of outstanding principal, on policy proceeds
(b) Creditors have first claim on policy proceeds
(c) Creditors have no claim on policy proceeds
(d) Creditors have residual claim on policy proceeds
12) Minimum age at entry for Medi-claim is ___________.

(a) 8 years
(b) 91 days
(c) 365 days
(d) 18 years
13) Jigar was driving his car home from work, when a pit dug by the municipal
corporation in the road, remained open and unmarked. He met with an accident and had
to be hospitalised for 3 months. What are the insurance claims that can a rise from this
accident?
(a) Jigar can claim personal insurance for the accident, as it was not caused by
negligence on his part; the municipal corporation cannot claim third party loss
insurance to pay damages to Jigar, as it was negligent. Jigar can claim insurance
for damage due.
(b) Jigar can claim temporary disability insurance and insurance for his damaged car
(c) Jigar has to apply to the municipal corporation for damages, which the corporation
will pay out of its claims for liability to third party. His motor insurance will cover
damages to his car.
(d) Since the municipal corporation was negligent, it would not be able to lodge a claim
to recover payment of damages to Jigar. Jigar will only receive motor insurance
claims on his car.
14) Sujata was standing on the terrace of her building hanging out clothes. She
accidentally fell off and landed on the sunshield of the next floor, which crashed and
damaged the car of her neighbour parked below. What are the insurance claims that arise
from this event?
(a) Sujata can claim personal accident insurance. Both her neighbours will claim
property insurance for the freak accident.
(b) Sujata cannot claim accident insurance as the accident was caused by her negligence.
Her neighbours can claim property insurance cover for loss to their property
(c) Sujata’s neighbours will collect damages from her, which Sujata can pay out of
insurance cover for losses to third parties.
(d) Sujata’s neighbours will not be able to claim insurance, as the damage to their
property due to such freak accidents is not usually covered by insurance. Sujata will
be able to claim her accident insurance, as she did not fall intentionally.

15) Your client has bought life insurance and medical insurance, but has not bought a
cover for permanent disability. His argument is that he is paying too much by way of
premium for risks that he believes are "farfetched" and "not likely to affect him". What
would you advise the client?
a) A financial planner can persuade the client to consider the losses from permanent
disability and highlight the risks to the client and recommend an appropriate policy for
him.
b) If a client is not willing to bear the costs of premium, it can be assumed that he is
willing to bear the costs of risk retention. Insurance may not be necessary in such cases.
c) If losses that would occur to the client in the event of permanent disability are
higher than what he can bear, the client is better off buying insurance. The costs of
insuring against losses, which have lower probability of happening, will in any case
be lower.
d) The amount of insurance a person will buy depends on his perception of risks and their
impact on him. It would not be possible to persuade this client to buy more insurance.
16) Suresh has not bought accident insurance cover, though his two-wheeler is covered
for damages from accidents. He wears a helmet and drives carefully. What can you say
about his risk management?
(a) Suresh has insured the property risk. He controls some of his personal risk and
retains the rest of the risk.
(b) Suresh has controlled his personal risk and insured his property risk
(c) Suresh has not done anything to manage his risks and has to immediately go for
accident and personal risk cover. He cannot rely on third party damages alone to
cover the risk of the road.
(d) Suresh has transferred his personal risk to other drivers of the road, insured his
property risk and can claim damages is accidents are caused by third party
negligence.
17) Mrs.Kapoor, a 40-year-old widow, has a 8-year-old son. Her current savings are not
adequate to provide for her son’s post graduate studies however she will be able to save it
up by the time he finishes graduation i.e. when he is 20 years old. Mortality tables
indicate that her life expectancy is another 30 years. Which of the following is true?
(a) She needs to insure her life for 12 years
(b) She does not need to insure her life
(c) She needs to insure her life for 30 years
(d) She needs to insure her son’s life for 30 years

18) Bhimrao, 36 years and married, works for a multinational firm, which provides
adequate medical and related covers. He is also able to accumulate sick leave. He already
has his own home and savings of Rs. 35 lakh, which are well invested. Which insurance
cover does he require the most?
(a) Life Cover
(b) Medical Cover
(c) Property Insurance
(d) Temporary Total Disablement Cover
19) Premium on Motor Insurance policy doesn’t depend on which one of the following
factors?
(a) Zone of operation of the vehicle
(b) Insured Declared Value (IDV) of the vehicle
(c) Cubic capacity of the vehicle
(d) Age of the owner of the vehicle
20) All of the following statements describe the operation of a life annuity EXCEPT:
(a) Because of the interest factor, an annuitant is assured of receiving back more
than he or she paid in
(b) The annuitant is assured that he or she cannot outlive the length of time of the annuity
payments
(c) The emphasis is on the liquidation of the fund as opposed to its growth
(d) The older the annuitant is when he or she receives the first annuity payment; the
greater will be the amount of each payment

21) In a sample of 200 observations, the lowest and the highest scores were 45 and 265
respectively, what would be range of the distribution?
(a) 14
(b) 155
(c) 155.56
(d) 220
HINT:-
Range=265-45=220
22) Derive the ’Policy Cost Per Thousand’ with following data; Policy cost per thousand
conversion = 0.001 Interest rate selected equivalent to the after-tax rate of return = 4%
Dividend or Bonus = Rs.13000 <Death benefits =Rs.20, 00,000 <BR>Annual Premium =
Rs. 23,000. Cash surrender value at the end of current policy year = Rs.6,00,000 Cash
surrender value at the end of the previous policy year = Rs. 5,70,000
(a) Rs. 25.04
(b) Rs. 28.07
(c) Rs. 30.4
(d) Rs. 31.15
Solution (b)
Refer Belth method

[((570000+23000)*1.4)-(600000+13000)]
___________________________________
(2000000-600000)*.001

PART - 4
1 (A)Death of the family’s breadwinner is a “financial risk”

( B)It is a pure risk.
(a) Both statements A and B are correct.

(b) Both statements A and B are incorrect.
(c) Statement A is correct.
(d) Statement B is correct.
2 Radha had the option of investing her retirement funds in PO (MIS) Or Bank deposits
or with private fund raisers. She could get her funds back with great difficulty when she
invested in 3rd option. This was a case of Radha
(a) Not understanding the risks
(b) Taking a gamble for high returns
(c) Succumbing to greed
(d) Exercising poor judgment.
(HINT : b c and d logically follow from a)
3 Mr. Kumar has suffered severe damages to his property (uninsured) because of a fire.
Thereby he suffered severe financial losses. This happened because he did not cover
(a) The investment risk
(b) The pure risk
(c) The speculative risk
4 Which of the following statements is true?

The impact of the death of one sole breadwinner of the family-over 40s family-would
be severe in the area of
(a) Meeting household debts
(b) Meeting basic needs
(c) Meeting medical needs
(d) Meeting educational needs
5 Bhima the driver causes injuries to a pedestrian by rash driving of car. The injured
victim had to spend Rs.400 in treating his injuries. Bhima ‘s act has created liabilities
under
(a) Common law
(b) Contract
(c) Statue and Common law
(d) Statute only

6 Mr. K.Mangla took a business premise on lease with the provision that he himself had
to pay the insurance premium for fire and other perils on the premises and not the owner
of the premises. This would be an instance of
(a) Risk control
(b) Risk transfer
(c) Risk retention
(d) Risk reduction
7 The decision to retain risk should be based on

(a) Ability to pay premiums
(b) Ability to afford the financial consequences of self insurance
(c) Standard practices
(d) None of these.
8 Insurance is an agreement to
(a) Share the losses
(b) Spread the economic burden throughout the group
(c) Make the individual feel more secure
(d) All of the above
9 In insurance, the contingency insured against is usually the

(a) Financial loss
(b) Certain financial loss
(c) Uncertain financial loss
(d) Loss of profit
10 (A) The existence of insurance may make people to exert less effort to control losses
(B)It might also induce commitment of frauds against insured.
(a) Both A and B statements are true

(b) Statement A is true
(c) Statement B is true
(d) Both A and B are not true.
11 (A) Insurance companies reduce risk by predicting losses within narrow limits based
on the law of large numbers
(B) It is the increasing pool of resources accessible to an insurer that reduce the risk
of non payment.
(a) Statement B alone is correct.

(b) Both statements A and B are correct
(c) Both statements A and B are incorrect.
(d) Statement A is alone correct

12 (A) The law of large numbers is useful for making predictions about the future only if
we assume that future occurrences will approximate past experiences.
(B) The law of large numbers would have predictive value only if future happenings are
also a result of chance
(a) Statement A alone is true

(b) Statement B is alone true
(c) Both A and B are not true
(d) Both A and B are true
13 An entrepreneur who was into manufacturing corrugate boxes also owned few
photocopying machines and also ran courier and fax services, sought a single
comprehensive protective non-life insurance cover from an insurance company. The
insurance company declined the business based on the principle of
A ) “ Measurability and definiteness of loss”
B) “ Large number of homogenous exposure units”
(a) Statement A alone is correct
(b) Statement B alone is correct
(c) Both statements A and B are incorrect
(d) Both statements A and B are correct
14 An owner of a large group of privately owned residential property units is seeking

cover from a general insurance company for (1) fire and other associated perils (2)
depreciation in the value of property (3) complete destruction of property from terrorist
attacks for the next six months. The chances are that the insurance company will
(a) Offer cover for (1) (2) and (3) above
(b) Offer cover for (1) and (3) above
(c) Offer cover for (1) above only
(d) Offer cover for (1) and (2) above
15 (A) Gambling or wager creates the risk by its act of betting on it

(B) The chance of loss exists in life, whether or not the risk is insured

(c) Both statement A and B are incorrect
(d) Both statements A and B are correct
16 Insurance companies often offer the services of specialists and experts to industry in
different fields. This is for rendering advice on
(a) Reduction in uncertainties
(b) Loss prevention/minimization
(c) Indemnification

17 (A) Over time , operating expenses of insurance companies go up for rendering
customer services.
(B) The availability of insurance gives a fill up to moral hazard
(a) Statements A and B are true

(b) Statements A and B are not true
(c) Statement A alone is true
(d) Statement B is true
18 In controlling risks, the overwhelming consideration will be

(a) Economic
(b) Physical
(c) Specialized steps
19 To cope with losses, total or partial, the steps to be taken include the following items
which are given here in a jumbled up manner. Order these in their correct or logical
sequences by indicating the correct ranking against each as 1,2 3
(A) Take into account potential impact of inflation
(B) Itemize and value assets exposed to loss
© Assess the size of potential income/liability losses
(a) A-3, B-1,C-2

(b) A-2, B-1, C-3
(c) A-3, B-1, C-2
(d) A-1,B-2,C-3
20 Generally speaking, high severity of losses will be accompanied by

(a) High frequency of losses
(b) Low frequency of losses
(c) Equal frequency of losses
(d) None of these
21 The demand for insurance tends to be inelastic because of

(a) Statutory requirements
(b) Financial prudence
(c) Business transaction requirements
(d) All of the above.
22 Highly refined risk classification systems enable insurers to

(a) Earn greater profits
(b) Reduce costs
(c) Expand the market

23 In a business cycle situation when insurance underwriters are unable to correctly
assess claim costs?
(a) Profits falls
(b) There is excess supply of insurance
(c) Many new players are tempted to enter the market
24 The length of the insurance industry’s business cycle is shortened because of

(a) Regulatory provisions
(b) High specialization
(c) Easy entry and exit conditions
(d) None of these
25 Reserve management practices result in extending the period of business cycle by

A. Increasing reserves in good times and lowering reserves in bad times
B. Reporting greater profits in good times and lower profits in bad times
(a) Both A and B statements are correct

(b) Statement A alone is correct
(c) Statement B alone is correct
(d) Both A and B are incorrect
26 The probability distribution of number of possible accidents to the car of a fleet of

owner of 40 cars is as under
Number of Accidents Cumulative Relative Frequency
0 0.60
1 0.80
2 0.90
3 0.97
4 1.00
TOTAL 1.00
What is the probability that a car from the above pool of 40 cars has met with at least 3
accidents?
(a) 0.1
(b) 0.2
(c) 0.3
(d) 1.0
( Hint: the probability that a vehicle has met with 2 accidents is 0.90.Hence the
probability ha I has me with at least 3 accidents i.e. accident or more I –0.90=0.1)
27 Probability distribution is generally used by insurers to

(a) Estimate profitability
(b) Determine premium
(c) Estimate future losses
(d) Select risks

28 When there is the possibility of loss or no loss in an outcome it is a case of
(a) Gambling
(b) Speculative risk
(c) Pure risk
(d) Special risk
29 Every employer is obliged to ensure that his employees get a safe and secure
workplace. In relation to the risks arising in the workplace which affects the employees,
cover is provided through
(a) Employees’ Provident fund
(b) Workmen’s compensation insurance
(c) Employees’ group life insurance
(d) Employees’ personal accidents insurance scheme
30 Besides meeting the essential requirement of a valid contract (offer and acceptance,
consideration etc ) the following must be there for a contract to be present.
(a) Duty of care
(b) Consensus ad idem
(c) Waiver and Estoppel
(d) None of these
31 In a life insurance contract, offer refers to

(a) Proposer paying the first premium
(b) Proposer’s application form for insurance
(c) Original policy bond
(d) Company brochure duly authenticated
32 In life insurance
(A) Consideration is the payment of premium by the insured
(B) Consideration is the payment of premium or the promise to pay future premiums

(b) Statement B alone is contract
(c) Statements A and B are both correct
33 (A) Payment of the first premium is legal consideration

(B) Payment of the first year’s premium as also the subsequent two years’ premium
constitute legal consideration.
(a) Statement A is correct

(b) Statement B is correct
(c) Statement A and B are both incorrect
(d) None of these

34 When it is said that insurance contracts, generally speaking are contracts of indemnity,
the reference is to
(a) Life insurance
(b) Group insurance
(c) Reinsurance
(d) Non-life or general insurance
35 (A) Under the principle of indemnity, the amount payable by the insurer in the event
of contingency insured against happening, payment will be limited to the loss the insured
suffers.
(B) In certain forms of medical/health insurance, the principle of indemnity is applicable
(a) Statement A is only correct

(b) Statement B is only correct
(c) Statement A and B are incorrect
(d) Statement A and B are correct
36 Which among the following limits the applicability of the principle of indemnity in
insurance:
(a) The subject matter of insurance is the insured’s interest in that subject
(b) The maximum liability of the insurer is limited to the sum insured
(c) The sum insured may not always reflect the full value at risk
(d) The value at risk is usually the depreciated value
37 A person owns a flat worth (market value) Rs.200000. He had insured it only for Rs
1,50,000. The flat is damaged by an earthquake, which loss is assessed at Rs.40000.
Assuming the insurer applies the principle of Average to the loss, The insured will get a
claim payment of
(a) Rs.75000
(b) Rs.70000
(c) Rs.37900
(d) Rs.40000
(HINT: S.I/F.V.R*L=150000/200000*40000=75000)
38 In life insurance, for a claim to be entertained, insurable interest must exist

(a) At the time of contract
(b) At the time of occurrence of loss
(c) Both at (a) and (b)
39 In the above question if contact is for property insurance(excluding marine insurance)

insurable interest must present
(a) At the time of contract.
(b) At the time of occurrence of loss.
(c) Both at (a) and (b) above.
(d) None of the above.

40 (A) Debtors have insurable interest on the lives of creditors
(B) Children have insurable interest on the lives of parents

(c) Statements A and B are incorrect
(d) None of these
41 In marine insurance claims, insurable interest must shown to exist at the time of
(a) Loss
(b) Contract
(c) Both a and b above
42 The principle of subrogation enables

(a) An insured to recover to the extent of indemnity (loss) only
(b) To prevent the insurer from recovering more than the amount paid as claim
(c) The insurer to reduce overall losses
43 The principle of subrogation is derived from the principle of

(a) Utmost good faith
(b) Adhesion
(c) Duty of disclosure
(d) Indemnity
44 Because of the application of the doctrine of adhesion, the courts construe the terms of
insurance contracts in favor of
(a) The insured
(b) The insurer
(c) Depends on circumstances
45 (A) When an insurer makes an ex-gratia payment to the claimant, he is not entitled to
subrogation rights
(B) Because the insurer has already made a payment to the insured, he is within his rights
to claim subrogation.

(c) Both statements A and B are incorrect
(d) None of these

46 (A) Insurance contracts are contracts based on the principle of “uberrima fide “
(B ) The principle of “caveat emptor” governs ordinary commercial contracts.
(a) Statement A and B both are correct

(b) Statement A is incorrect while B is correct
(c) Statement A and B are incorrect
(d) Statement A is correct while statement B is wrong
47 The “ Duty of disclosure” follows from

(a) The doctrine of adhesion
(b) The principle of subrogation
(c) The principle of indemnity
(d) The principle of utmost good faith
48 (A) In life insurance where the proposer was born would be deemed a material fact.
(B) In personal accident insurance medical history would be deemed a material fact
(a) Statement A is wrong while B is correct

(b) Both statements A and B are correct
(c) Statement A is correct while B is wrong
(d) Both statements A and B are incorrect
49 (A) In fire insurance, type of construction will be considered a material test.

(B) In motor insurance, driving track record of the driver will be considered a
material fact.
(a) Both statements A and B are correct

(b) Statement A is correct while B is wrong
(c) Statement A is wrong while B is correct
(d) Both statements A and B are incorrect
50 (A) Longevity and age are inversely related.

(B) Poor health and risk of death are directly related.
(a) Statement A is correct

(b) Statement B is correct
(c) Statement A and B both are correct
(d) Statements A and B are both wrong

51 Explain the difference between a warranty and a representation?
(a) A warranty must be strictly and literally complied with whereas a misrepresentation
need not be literally true but substantially correct.
(b) A breach of warranty will make the contract void able but breach of misrepresentation
will make the contract void able only if it is material to the risk.
(c) A warranty must be included in the policy either expressly or by reference. A
representation does not appear in a policy.
52 Contribution is considered as a corollary to the principle of indemnity. If in the event

of loss, the insured recovers under various policies, the total amount recovered from such
insurers would be more than his actual loss.
(a) True
(b) False
53 Personal accident policies are not strictly contracts of indemnity and hence principles
of subrogation and contribution are not applicable there under. The insured can claim in
respect of injuries sustained by him as well as recover damages from the negligent third
party who has caused the injuries.
(a) True
(b) False
54 Sunil insured the building of his house for a sum of Rs.500000 against fire insurance.
One day the house is totally gutted in a devastating fire. The insurance surveyors certified
that the building is a total loss with no salvage value and that the insurable value of the
building just prior to the loss was Rs.40000. The insurer will pay to Sunil:
(a) Rs.400000
(b) Rs.250000
(c) Rs.500000
(d) Nil
(In case of partial loss full amount will be given)
55 Premium under endowment plans equals

(a) Risk premium+ savings element +expenses
(b) Risk premium +expenses
(c) Risk premium +saving element
(d) None of these

56 Shri. Mohan is an assistant manager in a private firm. His present age is 35 years and
he is to retire at age 60.His present net salary per annum is Rs.240000. Total life
insurance premium as on date including children and wife’s policies come to Rs.15000
p.a. Income tax and professional tax amount to Rs.35000. Reasonable self –maintenance
expenses including entertainment, sports, club membership, recreation etc are Rs.30000.
Medical expenses are being reimbursed by the company. Calculate the amount of
insurance required using HLV method? Assume discount rate to be 8% p.a.
(a) Rs.1850000
(b) Rs.1844600
(c) Rs.1689000
(d) Rs.1900500
(HINT: H=(E-M)*An H=human life value, E= earnings per annum, M=maintenance
charges+ taxes+ life insurance premium, An annuity factor at a given rate of discount,
N=number of years (working span)
Calculation Amount in Rs.

Gross total income= 240000
Less:
Self maintenance expenses 30000
Taxes payable 35000
Life insurance premium 15000
Surplus income generated for the family 160000
This surplus income will be capitalized through discounting at the interest rate of
8% per annum for 25 years term.
160000 pmt, bgn mode , 25 n, 8 i
Comp pv=1844600
57 The most important reason for the perceived increase in the longevity of adult life
expectancy is because of improvements in
(a) Child mortality
(b) Migration of population
(c) Improved mortality of older sections of people
(d) None of these
58 The increase in adult life expectancy have implications for

(a) Disability insurance
(b) Long term care
(c) Sickness insurance

59 Ram born in 1950 has a life expectancy at birth of 65 years. Sita his wife born in
1955 has a life expectancy at birth of 70 years. Assuming that the life expectancies have
not changed. Ram is planning to buy an annuity to be paid to him or his wife till anyone
of them is alive. Ram will retire on attaining age 58 i.e. in 2008
(a) 4 years
(b) 12 years
(c) 7 years
(d) 17 years
(HINT : Ram needs an annuity which will cover his expected span of life
(1950+65=2015) as well as the expected life span of his wife Sita (1955+70=2025).So
the annuity should be life spans of both Ram and Sita)
60 Under the event of the death or serious disabilities of spouse (home maker), the
economic consequences to be covered by financial planning are
(a) Day care for dependent children
(b) Costs to meet domestic chores hitherto attended by spouse
(c) Income substitution, if earning
(d) All of these
61 For dependent parents, the least important risk to be covered is through

(a) Life insurance cover
(b) Hospitalisation /sickness cover
(c) Disability cover
(d) Long term care cover
62 One of the items stated below, will not generally have an impact in estimating the
incidence and severity of losses and determining the premium for motor car insurance
(a) Make
(b) Age
(c) Colour
(d) Rating zone
63 Vishal made a proposal for insurance cover to protect his holiday home property
which was occupied on and off during the year. One of the following perils may be
excluded from the cover by the insurance company?
(a) Fire
(b) Third party liability
(c) Theft
(d) Loss of rental income

64 “Fact finder” usage has many features and advantages . In the following list find the
odd man out.
(a) Use of fact finder is compulsory in India
(b) It helps the client and advisor to arrive at precise recommendations
(c) It is a safety and protection provision for the advisor against future litigations.
(d) Enables easier periodic review of client needs based on information contained in
“fact finder”
65 (A) Term insurance provides protection on insured lives for a selected period only
(B) Premiums payable under term insurances are low because nothing is payable to
the policyholder at the end of the term, if he survives
(a) Statement A and B both are correct

(b) Both statements are incorrect
(c) Statement A is correct
(d) Statement B is correct
66 John 22, is a young executive at the start of his career . He travels extensively by road
in and out of the city. He has to start a family in 5-6 years time.What kind of life
insurance cover should be suitable for him?
(a) Endowment insurance policy
(b) Money back policy
(c) Unit-linked policy
(d) Temporary insurance policy with convertibility and renew ability option
67 In our country terminal illness is defined as a condition where medical examiners do

not consider the patient to be alive for more than
(a) 9 months
(b) 12 months
(c) 18 months
(d) 6 months
68 One way of protecting the erosion in the value of a term insurance policy is by taking
an
(a) Level benefit constant term insurance
(b) Decreasing benefit term insurance
(c) Increasing benefit term insurance
(d) None of these
69 For repayment of mortgage (housing loan) or meeting hire purchase liabilities, this
type of policy could be the most appropriate?
(a) Decreasing term insurance
(b) Level benefit term insurance
(c) Increasing benefit term insurance

70 The conversion option in temporary assurance means that the assured can opt to
convert the term cover into say a whole life or endorsement policy. Under this , one will
normally get the
(a) Same sum assured benefit level in the changed policy
(b) Increased sum assured level in the changed policy
(c) Reduced sum assured level
(d) None of these
71 (A) Mortality of a life is influenced by age, gender and personal habits.

(B)Under stepped premium method , premium at higher ages would be prohibitive for the
life assured.
(a) Statement A and B are both correct

(b) Statement A and B are both incorrect
(c) Statement A alone is correct
(d) Statement B alone is correct
72 In a limited payment with profit whole life insurance, while the premium paying
period is limited to a certain number of years, at the time of claim settlement:
(a) Bonuses will be paid for the same period as the premium paying period
(b) Bonuses for the period commencing from the year of cessation of premium to the
claim date will be paid
(c) Bonuses will be paid for the period commencing from the date of risk till the
date of claim.
73 The most important component for cash value (surrender value) accumulation in the
early years of the policy term is the
(a) Interest factor
(b) Level premium
(c) Home office exempts
(d) None of these
74 The whole life policy which meets both the needs of providing for assureds
dependents as well as providing for the assureds periodic financial needs is
(a) Convertible whole life plan
(b) Increasing whole life insurance policy
(c) Anticipated whole life plan
(d) Limited payment whole life plan

75 A father takes out a policy to meet his son’s enhanced educational needs when the son
reaches 18 years of age. Unfortunately after paying 5 years premium, the father dies. By
what means can the policy be kept in force without payment of further premiums so that
the intended benefits are retained.
(a) Accident benefit premium
(b) Lien On policy
(c) Premium waiver facility
(d) None of these
76 Any payment received from an insurance policy by way of death or maturity claim ,
anticipated settlement payment, bonus etc are exempt from income tax as per the
provisions of
(a) Section 10 of the Income Tax Act, 1961
(b) Section 88 of the Income Tax Act
(c) Section 80 C of IT Act
(d) None of these
77 Sums received from any policy under which more than 20% of the sum assured is
payable as premium will be
(a) Taxable
(b) Tax-exempt
(c) Tax-exempt up to 50%
(d) None of these
78 Under a deferred annuity, the purchaser can pay the purchase premium as
(a) Single premium only
(b) By installments only
(c) In any way as stated in (a) and (b) above
79 (A) Riders add to the basic benefits of a life policy

(B) Riders do not cost anything to the assured
(a) Statements A and B both are correct

(b) Statement A and B are incorrect
80 In financial planning, regular life insurance cover plus superannuation schemes

help build resources for
(a) Death cover
(b) Savings fund
(c) Retirement income

81 The following are important exclusions from personal accident cover exept for one
item, which is
(a) War and nuclear risks
(b) Insane people
(c) Horse race jockeys
(d) Persons with existing disablement
82 A typical personal accident policy would normally have provisions to pay

(a) 2% of the sum assured per week up to a maximum of 52 weeks
(b) 1% of the sum assured per week up to a maximum of 44 weeks
(c) 1.5% of the sum assured per week up to a maximum of 48 weeks
(d) None of these
83 The maximum benefit per adult male/female per year under the Jan Arogya Bima
Policy is
(a) Rs.7500
(b) Rs.5000
(c) Rs.8000
(d) Rs.4000
84 Under “Unborn Child Disability” policy, the following risks are covered except one:
(a) Congenital defects
(b) Congenital deformity
(c) Malformation
(d) Still Birth
85 (A) The maximum paid up capital of a TPA in equity shares amount to Rs.1 crore
(B) The TPA should have a working capital at all times of not less than Rs.1 crore
(a) Statement A alone is true

(b) Statement B alone is true
(c) Statement A and B are both correct
(d) Statement A and B are incorrect
86 The purpose of coinsurance or average clause is to

(a) Persuade insured to go in for full value insurance cover
(b) Make premium reasonable
(c) Reduce losses
(d) None of these

87 (A) For electronic goods the basis for claim is replacement value
(B) No, it is market value

(c) Statement A and B are both incorrect
(d) None of these
88 Under motor vehicle insurance , the following losses are covered. Except for one
(a) Terrorist action
(b) Riot and strike
(c) Burglary housebreaking or theft
(d) Manufacturing defects
89 (A) Insured’s declared value (IDV) is a negotiated arrangement between the insurer
and the insured
(B) In case of total loss, IDV and not the sum assured is payable as the claim amount
(a) Statement A is correct and statement B is incorrect

(b) Statement A is incorrect and statement B is correct
90 Under an Overseas Travel insurance policy , the maximum cover for third party
liability is
(a) US $ 40000
(b) US $ 200000
(c) US $ 500000
(d) None of these
91 Insurance is the method of transfer and distribution of ----------?

(a) Funds
(b) Resources
(c) Risks
(d) Losses
92 Life Insurance business is ------------ to the State’s efforts in social management.

(a) Supplementary
(b) Complementary
(c) Contradictory

93 The factors affecting computation of premium are:
(a) Mortality
(b) Rate of interest
(c) Management expenses
94 Unit linked Insurance Plan is designed for ----------------.

(a) Residents in India
(b) NRI’s
(c) Both residents in India and NRI’s
95 Calculate the paid up value under a policy with the following particulars.
S A (sum assured) =Rs.25000 Plan and Terms Endowment- 25 years
DOC (date of commencement) 14.06.1989 Mode =quarterly
Last premium paid 14.03.1997.
(a) Rs.8000
(b) Rs.4000
(c) Rs.7500
(d) Rs.8500
Solution:
Policy in force up to : = 14-06-199
Total period premiums paid = (14-06-1997)-(14-06-1989)
= 8 years
No of premiums paid = 32
No of premiums payable = 25*4=40
Paid up value= { (no of paid installments*SA)/ No of payments in total}

= 32*25000/40=8000
96 Claim is the demand on the insurer for ---------------.

(a) Policy money
(b) Performance of promise
(c) Terminating the contract

97 In a death claim no evidence of the claimant title is required if there exists a proper----
(a) Assignee
(b) Nominee
(c) Children
98 The term Master Policy is related to insurance cover---------------------------

(a) For servant obtained by his master
(b) Obtained by a group of employees for their master
(c) Obtained for a number of persons under Group Insurance Scheme
99 For obtaining an insurance cover under Group Insurance Scheme for a group of
people, The group concerned---------------------
(a) Should be formed immediately before applying for the cover
(b) Should already exist
(c) Should be formed after finalizing terms with the insurer
100 A group insurance scheme that offers insurance cover together with the savings
element is called------------------
(a) Group annuity scheme
(b) Voluntary retirement scheme
(c) GSLI

PART - 5
1. (A) Death of the family’s breadwinner is a “financial risk”

(B) It is a pure risk.
(a) Both statements A and B are correct.

(b) Both statements A and B are incorrect.
(c) Statement A is correct.
(d) Statement B is correct.
2. The value of Rupee one receivable 15 years for on today at 5% interest are
(a) 0.48
(b) 0.36
(c) 0.55
(d) 1.00
3.A has lodged a theft claim in a policy in his name for a watch belonging to his uncle for
which he has no insurance. This is in infringement of the principle of:
(a) Insurable Interest
(b) Indemnity
(c) Utmost Good faith
(d) Utmost Good faith & Insurable interest
4. In marine insurance, for a claim to be entertained, insurable interest must exist

(a) At the time of contract
(b) At the time of occurrence of loss
(c) Both at (a) and (b)
5.In the above question if contact is for non marine insurance (excluding marine
insurance) insurable interest must be present
(a) At the time of contract.
(b) At the time of occurrence of loss.
(c) Both at (a) and (b) above.
6. What is the amount of claim payable if the loss is Rs.8000/- under a policy with a sum
insured of Rs.1 lakh and ‘excess’ limit is Rs. 4,000/-
(a) Rs.2000/-
(b) Rs.400/-
(c) Nil
(d) Rs.3000/-

7. Discharge of Cargo at the port of distress is covered under
(a) ICC - A Only
(b) ICC-C & B
(c) ICC-A, B & C
(d) ICC- A & C
8. Under Private Car Package Policy, the insured vehicle shall be treated as a constructive
Total Loss if the cost of repair of the vehicle exceeds---% of the IDV of the vehicle:
(a) 75%
(b) 80%
(c) 90%
(d) 40%
9. Salvage Charges under Marine Insurance refers to:

(a) Charges deducted by insurers from the claim amounts towards value of salvage after a
cargo loss.
(b) Charges paid to a person for preventing an insured maritime loss independent of
any contract.
(c) Charges incurred by Ship owner, Chartered in salvaging a marine adventure
10. Cut-through Clause is a reinsurance agreement refers to:

(a) The provision to reduce documentary formalities.
(b) The right of the original insured to claim directly from the reinsurer
(c) The provision to rescind the reinsurance contract under certain conditions.
11. Which of the following statement regarding small losses is correct:

(a) Low severalty
(b) Low Frequency
(c) Significant impact
(d) Minimum predictability
12. B/L stands for

(a) Bill of Lading
(b) Bill of Loading
(c) Bale of loading
(d) Bales of Loading

13. Vishal made a proposal for insurance cover to protect his holiday home property
which was occupied on and off during the year. One of the following perils may be
excluded from the cover by the insurance company?
(a) Fire
(b) Third party liability
(c) Theft
(d) Loss of rental income
14. The Principle of UBERIMA FIDES applies to

(a) Facultative Method
(b) Excess of Loss Method
(c) Stop of Loss Method
15. Under the Fire Tariff the Buildings are classified as:
(a) Industrial Building & Godown
(b) Class a, b, c,
(c) Kaccha construction & Other constructions
16. Under a liability insurance cover the risk factor is:

(a) Low
(b) High
(c) Unlimited
(d) Actual
17. The Letter of Credit is issued to

(a) Importer
(b) Exporter
(c) All the Parties of the Contract
(d) Authorised Bank who guarantee
18. Which of the following methods does not fall under Risk Retention
(a) Self-insurance fund
(b) Voluntary deductible
(c) Transfer of Risk of Sub-Contractor
(d) Losses debited to operating expenses

19. State whether the following statements are true in relation to personal Accident policy
A) Once a claim for permanent total disablement, the policy becomes inoperative
B) Weekly compensation becomes payable only after the total amount payable is
ascertained & agreed.
(a) Only Statement A

(b) Only Statement B
(c) Both Statements
(d) Neither of the statements
20. Which of the following requires additional premium to be covered under Money
(transit) policy
A) Dishonesty of employees carrying the cash
B) ‘Hold-up’ risk
C) Disbursement risk

(c) Only Statement C
(d) All three
21. As per IRDA Regulations, if an insurer on receipt of Survey report requires additional
information on specific issues, he shall make request within ______ days of receipt of the
original report.
(a) 15 days
(b) 3 days
(c) 21 days
(d) 7 days
22. Which of the following is covered on a payment of extra premium under Agriculture
Pump set policy?
(a) Mechanical breakdown
(b) Electrical breakdown
(c) Flood
(d) Terrorism
23. Which of the following is excluded under Horticulture / Plantation policy?

(a) Fire
(b) Forest fire
(c) Bush fire

24. Which of the following statements is correct under private car package policy?
Statement A: The liability of insurer shall not exceed for total loss – the insured’s
Declared Value of vehicle less the value of wreck.
Statement B: The liability for partial losses shall not exceed costs of repairs / replacement
subject to depreciation.

(c) Both Statements
(d) Neither of the Statements
25. Breach of which of the following conditions in the policy will prevent the insured
from recovering only a particular loss, the policy remaining unaffected.
(a) Condition precedent to liability
(b) Condition subsequent to liability
(c) Condition precedent to contract
(d) Condition subsequent to contract
26. Which of the following claims can not be settled by Branch offices of Public Sector
insurance companies?
(a) Cattle claims
(b) Marine cargo claims
(c) Motor Third Party claims
(d) Fire claims
27. Which of the following statements is true?

Statement A: The principle of subrogation supports the principle of contribution
Statement B: The principle of subrogation supports the principle of indemnity

(c) Both Statements
28. Under Universal Health Scheme the maximum sum insured per person or family does
not exceed Rs._______.
(a) Rs. 20,000
(b) Rs. 4,000
(c) Rs. 30,000
(d) Rs. 15,000

29. To obtain a license a Surveyor has to undergo practical training not
exceeding_______ months.
(a) 3 months
(b) 24 months
(c) 6 months
(d) 12 months
30. Which of the following statements are true?

Statement A: Under Tariff classes of insurance all insurers must charge the same
minimum rates.
Statement B: As long as Tariff rates are charged the insurer may use their own policy
wordings.

(c) Both Statements
31. Which of the following statements are true?

Statement A: The sum insured under a fire policy stands reduced to the extent of the
amount of claim paid.
Statement B: The sum insured under a Marine Cargo policy stands reduced to the extent
of the amount of claim paid

(c) Both Statements
32.Principle of Subrogation does not apply to:

(a) Property Insurance
(b) Liability Insurance
(c) Motor Insurance
(d) Life Insurance
33. No Fault Liability provisions the compensation payable for permanent disablement is
(a) Rs. 25000 under Section 140
(b) Rs. 25000 under Section 141
(c) Rs. 50000 under Section 140
(d) Rs. 50000 under Section 141

34.As per IRDA (Brokers Regulations) 2000 the kind of brokers are:
a. Direct General Insurance Broker

b. Direct Life Insurance Broker
c. Direct Insurance Broker
d. Corporate Insurance Broker
e. Reinsurance Broker
f. Composite Broker
The correct options are:

1. a, b, d, e,
2. b,d,e,f,
3. c,e,f
4. a,b,c,
35. The nature of a reinsurance contract is:

(a) Domestic
(b) Export
(c) Internationals
(d) Commercial
36. The Rate of Commission payable of reinsurance business is:

(a) 30%
(b) 35%
(c) No Cap
(d) 40%
37. The License of Insurance Company is renewable after:

(a) 2 years
(b) 3 years
(c) 5 years
(d) Annually
38. In Reinsurance Business the ‘Cession’ means:

(a) The amount transfer on account of commission payable to the basic insurer
(b) The money returned the insurer for payment of proportionate claims
(c) The amount payable to the Reinsurer in proportion of the treaty arranged
(d) The Discount given in lieu of commission to the insurer
39. The limit of filing of an appeal against the order of the District Consumer Court:
(a) 6 months
(b) 3 months
(c) 1 months
(d) 1 year

40.An Insurance Company is subject to which of the following audits:
(a) Internal Audit
(b) Statutory Audit
(c) Audit of Comptroller & Auditor General
41. Which of the following statement (s) are “True”?

Statement A: Insurance is relevant only if there is a possible economic loss.
Statement B: An event, which will certainly happen cannot be insured against.

(c) Both Statements
42. An important role of insurance in the development of the economy is to

(a) Reduce investment in infrastructure
(b) Reduce poverty in the nation.
(c) Reduce inflation in the economy.
(d) Give financial protection to the insurer \ d family

Statement A: Insurance reduces social costs.
Statement B: Insurance is an instrument of social security

(c) Both Statements

Statement A: Insurance avoids risks.
Statement B: Insurance does not avoid risks.

(c) Both Statements
45. Identify which of the following are basic principles of insurance

(a) Utmost good faith
(b) Insurable interest
(c) Indemnity

Statement A: Compulsory Owner-driver cover is restricted to Indian Territory only.
Statement B: The insured is not liable for compensation under any other policy in respect of same
of disablement in case of personal accident insurance.
(a) Only statement A

(b) Only statement B
(c) Both
47. In case of fire and miscellaneous insurance the insurable interest must be present
(a) At the time of taking the policy
(b) At the time of loss
(c) Both of above
(d) None of above
48. In marine insurance insurable interest must be present

(a) At the time of taking policy
(b) At the time of loss
(c) Both of above
(d) None of above
49. Assignment of policy requires prior consent of the insurer in case of

(a) Fire & miscellaneous policies;
(b) Marine policy
(c) Marine hull
(d) a & c
50. For applicability of principle of contribution the following must be common

(a) Subject matter
(b) Peril
(c) Interest covered
51. Which of the following principles supports the principle of indemnity?

A) Subrogation
B) Contribution
(a) Only B
(b) Both A & B
(c) Neither A nor B
(d) Only A

52. Endorsement is issued ____________
(a) When change of insurer’s address
(b) When cover requires cancellation
(c) When risks are to be added/ deleted
53. If an insurance policy is ‘not’ stamped as per the Indian Stamp Act, the contract
becomes_____________.
(a) Unenforceable
(b) Void
(c) Voidable
(d) Illegal
54. Which of the following statement(s) is true?

Statement A: Endorsements are issued during the policy period to record alterations
Statement B: Endorsements are issued as part of the policy at the time of issue
(a) Only statement A
(b) Only statement B
(c) Both statements

Statement A: A warranty is an express condition.
Statement B: A warranty must be strictly complied with, whether it is material to risk or
not.

(c) Both Statements

Statement A: As per IRDA Regulations there is legal obligation on the part of insurers to
issue a renewal notice to the insured.
Statement B: Issue of renewal notice means that the policy is automatically renewed, if
the premium is paid.

(c) Both Statements

57. In case of technical breach of warranty, the claims are settled on
_____________ basis
(a) Ex-gratia
(b) Non-standard
(c) Past precedents
(d) Arbitration
58. In motor, Cover note is valid for __________ days

(a) 15 days
(b) 30 days
(c) 45 days
(d) 60 days
59. Where risk period exceeds nine months, what %age of annual premium will be
charged under motor policies?
(a) 50%
(b) 75%
(c) 85%
(d) 40%
60. Under motor insurance premium is fixed by

(a) Make of the Vehicle
(b) Age of the Vehicle
(c) Value of the Vehicle
61. The minimum premium under a Fire Policy for offices/ shops is
(a) Rs.500
(b) Rs. 250
(c) Rs. 40
(d) Rs. 50
62. Which of the following statements is true”?

Statement A: The principle of utmost good faith is the same as the principle of ‘ let the
buyer beware’.
Statement B: The existence of high blood pressure need not be disclosed, as the doctor
can find it out during the medical examinations

(c) Both Statements

63. To whom can the policyholder apply in case of bad service from an insurer?
(a) I.R.D.A.
(b) Consumer Forum
(c) Ombudsman
64. Which of the following statements is true under the Consumer Protection Act?
Statement A: An appeal to the national commission against the order of the State
commission has to be filed through an advocate
Statement B: The decision of the national commission is final with no further appeal
(a) Both statements

(b) Neither of the statements
(c) Statement A only
(d) Statement B only
65. According to Fire Tariff, which of the following cannot be covered under value
polices ?
(a) Obsolete machinery
(b) Brand new machinery
(c) Curios
(d) Works of art
66. Domiciliary Hospitalisation Benefit is provided if treatment is needed exceeding 3

days at home in India
Statement A: The patient is not in position to go to nursing home
Statement B: The patient does not have sufficient funds for treatment
Statement C: The patient can not be removed to hospital for lack of accommodation
(a) A and C are correct

(b) B and C are correct
(c) B is correct
(d) C is correct
67. _____ is not an example of Standing charges insured under consequential loss (fire)
policy.
(a ) Purchase cost of raw materials
(b) Salaries to permanent staff
(c) Office & general establishment expenses
(d) Insurance premium

68. Which of the flowing statements is true?
Statement A: Arbitration condition appears in all insurance policies.
Statement B: Arbitration condition appears only on marine cargo policies.

(c) Both Statements
69. Under the Transit Clause (Warehouse to Warehouse) of Institute Cargo Clauses, the
insurance terminates on the expiry of __________ days after discharge from the vessel at
the final port of discharge.
(a) 30
(b) 60
(c) 7
(d) 15
70. Which of the following documents is common to claims processing under marine
import policies and inland transit (Rail/Road) Policies?
(a) Invoice
(b) Bill of Lading
(c) Copy of protest
(d) Lost overboard certificate

Statement A: Marine cargo policies are valued policies
Statement B: Marine hull policies are valued policies
(a) Neither of the statements

(b) Only statement A
(c) Only statement B
(d) Both statements
72. Which of the following statements is false in relation to marine cargo insurance?
Statement A: The entire marine cargo insurance is governed by Tariff or market
agreements
Statement B: Special storage insurance is granted in conjunction with inland transit open
policy

(d) Both statements

73. Under which of the following sale contracts, the seller is responsible for arranging the
cargo insurance for the entire voyage?
(a) C&F
(b) C.I.F.
(c) F.O.B.
(d) F.O.R.
74. Which of the following is true in relation to marine cargo insurance?

(a) Claim survey fee is payable by insurers only if the claim is payable
(b) Under every marine policy for export shipments, certificate of insurance is issued
(c) General average loses are covered only under Institute Cargo Clauses (A)- All risks.
75. What is the maximum limit of cover for Third Party Property Damage under liability
only polices in case of private cars
(a) Rs 1 lac
(b) Rs. 2 lacs
(c) Rs. 5 lacs
(d) Rs. 7.5 lacs
76. Which of the following is taken as sum insured under a motor policy?
(a.) Fair value of subject matter of insurance
(b.) Agreed value of property insured
(b.) The amount paid when there is a total loss
(d.) Insured’s Declared Value
77. The liability of the owner of the motor vehicle to pay compensation for death claims,
on no fault basis under the Motor Vehicles Act, 1988 is ______________.
(a) Rs 4,000
(b) Rs. 25,000
(c) Rs. 50,000
(d) Unlimited
78. The compensation for death under Solatium Scheme is __________.

(a) Rs. 25,000
(b) Rs. 12,500
(c) Rs. 50.000
(d) Rs. 1,00,000
79. Application for compensation under Solatium scheme has to be made to _____
(a) Corporate office of an Insurance company
(b) Claims enquiry officer nominated by State Government
(c) Nominated divisional office of the insurance company
(d) Claims settlement commissioner nominated by the State Government

80. In which of the following zones, a private car registered in Chandigarh falls for rating
purpose.
(a) Zone A
(b) Zone B
(c) Zone C
81. Under the Motor Vehicles Act 1988, third party claims can be adjudicated upon by
____ set up by the State Government
(a) Legal Aid Board of the State Government
(b) Motor Accidents Claims Tribunal
(c) Lok Adalat
(d) Lok Nyayalaya
82. The purpose of Personal Accident Insurance is to pay:

Statement A: Fixed compensation for death from accidental injury.
Statement B: Variable compensation for death from accidental injury
(a) Both are correct

(b) B is correct
(c) A is correct
(d) None is correct
83. Which of the following contingencies is not covered under personal accident policy?
(a) Permanent total disablement
(b) Temporary total disablement
(c) Permanent partial disablement
(d) Temporary partial disablement
84. Under group personal accident policies, ‘on duty’ cover is available at ____ % of the
normal premium
(a) 60
(b) 75
(c) 25
(d) 50
85. Which of the following statements is true in relation to Standard Personal Accident
Policy?
Statement A: The cover is for 24 hours
Statement B: The cover is on a world-wide basis
(a) Both statements

(b) Neither of the statements
(c) Only statement A
(d) Only statement B

86. The cumulative bonus under a personal accident policy cannot exceed ______ % of
the total capital sum insured.
(a) 50
(b) 25
(c) 60
(d) 40
87. Which of the following statements is true as per conditions of personal accident
policy?
Statement A: Short period premium refund is made if the policy is cancelled by the
insured
Statement B: Short period refund is made subject to being no claim made under the
policy

(d) Both statements

Statement A: The principle of contribution does ‘not’ apply to personal accident
insurance
Statement B: The principle of contribution applies to ‘weekly benefits’ under personal
accident insurance

(d) Both statements
89. The Mediclaim policy is available up to a maximum sum insured of Rs.__ lakh.
(a) 5
(b) 2
(c) 3
(d) 4
90. The insurance under Overseas Mediclaim Policy does not operate beyond______
days of continuous absence from India
a. 120
b. 180
c. 60
d. 90

91. If hospitalization cover applies under Mediclaim policy, relevant medical expenses
incurred during the period of ____________ days after hospitalization treated as part of
the claim.
(a) 30
(b) 45
(c) 15
(d) 60
92. Which of the following expenses are ‘not’ payable under Maternity benefit?
(a) Cesarean
(b) Abdominal operation for extra uterine pregnancy
(c) Miscarriages due to accident
(d) Pre-natal expenses prior to hospitalization
93. Subject to no claim, cost of health check-up is payable under Mediclaim policy once
in every _____ years.
(a) 5
(b) 4
(c) 3
(d) 2
94. Broker’s commission for General Insurance business is

(a) Non Tariff business 17.5%
(b) Statutory Tariff business 4%
(c) Other Tariff business 12.5%
95. Buyers of reinsurance are

(a) Direct Insurers
(b) Reinsurers
(c) Captives
96.In India, the amount donated qualifies for

(a) Tax exemption under section 4 (4D) of Income Tax Act, 1961
(b) Tax exemption under section 80 L of Income Tax Act, 1961
(c) Tax exemption under section 88 of Income Tax Act, 1961
(d) Tax exemption under section 80 G of Income Tax Act, 1961

97. In case of assessment of loss where the assessment is not carried out by licenced
surveyor and loss assessor.
(a) Up to 20000/-
(b) More than 20000/-
(c) None
(d) Both a & b
98. In case of Non-Marine losses insured can exercise/opt for ------ as per policy in case
amount offered by insurer is not acceptable to insured..
(a) Arbitration
(b) Litigation
(c) Grievance Redressal Committee
(d) Ombudsman
99. Which Surveyor’s services are mandatory under section 64UM of Insurance Act 1938
where loss is 25000/-?
(a) Independent Surveyor
(b) In-House surveyor
(c) Both
100. Select the correct option in respect of pecuniary jurisdiction of the National
Commission under the Consumer Protection Act 1986.
(a) Above Rs. 20 lakhs and up to Rs. 40 lakhs
(b) Above Rs. 20 lakhs and up to Rs. 50 lakhs
(c) Above Rs. 40 lakhs
(d) Above Rs. 20 lakhs and up to Rs. 40 lakhs

PART - 6
1In life insurance, insurable interest must exist at the time of …….
(a) Premium payment
(b) Claim
(c) Proposal
(d) Surrender
2 What is a proposal ?
(a) A request for an insurance cover
(b) An offer to enter into a contract
(c) Both statements are correct
(d) Both statements are wrong
3 Key man insurance can be taken on the life of ……………

(a) Child of key man
(b) Wife of key man
(c) Husband of key man
(d) Key employee
4 Policy vests in the child when he / she …………..

(a) Attains majority
(b) Gets married
(c) Dies during the deferment period
(d) On its maturity
5 Persuasion involves tackling an objection by using the …… technique.

(a) No-infact
(b) I know better
(c) Yes-but
(d) Holier than thou
6 With the sale of a life insurance policy, the prospect becomes ……..
(a) Nominee
(b) Policyholder
(c) Proposer
(d) Claimant
7 Under group insurance, underwriting is done ………….

(a) For the entire group
(b) For some persons
(c) For selected persons
(d) On individual basis

8 Which approach is good?
(a) Agent advises his prospect that he need not mention that he is an NRI.
(b) Agent advises his prospect that he need not mention death due to suicide in his
family.
(c) Both approaches.
(d) Neither.

(a) Agent advises his prospect not to mention his previous criminal conviction.
(b) Agent sells term insurance policy to a prospect who wants to provide for his old age.
(c) Both approaches.
(d) Neither.

(a) Agent advises his prospect not to mention his earlier dropped proposal submitted
under a different agency.
(b) Agent advises his client to include all his previous policies in the present
proposal.
(c) Both approaches are good.
(d) Neither approach is good.
11 Sum assured payable on death may be ……… maturity amount.

(a) Equal to
(b) More than
(c) Less than
(d) Any of these
12 Marketing of insurance includes

(a) Maintaining regular contact with policyholders
(b) Finding out about policyholders' experiences
(c) Helping claimants to complete formalities
(d) All the above
13 Insurance advertisements should not …………..

(a) Distort facts
(b) Mislead consumer
(c) Throw competition in bad light
14 Avoiding superfluous and redundant expressions helps

(a) Verbosity
(b) Conciseness
(c) Redundancy
(d) Exaggeration

15 That the policyholder can pay the premium on yearly, half-yearly, quarterly or
monthly basis is ……….
(a) Option
(b) Guarantee
(c) Rider
(d) None
16 Which statement is true with regard to the Children's policy?

(a) Risk will commence on the deferred date automatically.
(b) Risk will commence on the deferred date after satisfactory medical examination.
(c) Risk will commence on the deferred date with enhanced premium.
(d) All are wrong.
17 Which statement is correct?

(a) Life insurance business generates surplus.
(b) Male and female mortality are not the same.
(c) Both statements are correct.
(d) Both statements are wrong.
18 Assets are insured because they may be destroyed due to …… occurrences.

(a) Random
(b) Unintentional
(c) Accidental
(d) All these
19 State which of the following statements is correct

(a) Agent fills up the gaps in the proposal form left by the proposer.
(b) Agent declines to fill the proposal form himself.
(c) Both statements above are correct
(d) Both statements above are wrong
20 Premium is collected …….

(a) In advance
(b) In part
(c) In anticipation
(d) All of these
21 State which statement is correct.

(a) Ombudsman is created by IRDA Act.
(b) Proportional paid up value is guaranteed by the Insurance Act 1938.

22 All the needs of the prospect can be met by
(a) One policy
(b) Two policies
(c) Five policies
(d) Different kinds of policies
23 Employer has insurable interest in the life of his employee ……………

(a) For ever
(b) At no time
(c) During employment contract
(d) During recruitment

(a) The members of a housing society can negotiate for a group insurance policy.
(b) The sports club can get a group insurance policy for its members.
25 Term insurance is ideal for

(a) Risk cover in early ages
(b) Old age provision
(c) Long term investment
(d) Pension
26 Risk on a child's life under CDA plans starts on …………………..

(a) The deferred date
(b) The date of commencement
(c) The date of maturity
(d) The date of vesting
27 Policy document is …
(a) Evidence of the contract
(b) Evidence of risk
(c) Evidence of the company having accepted premiums
28 Medical examination is not at all required under ……… policy.

(a) Partnership insurance
(b) Group insurance
(c) Individual insurance
(d) Annuity

29 Which of the following is correct?
(a) General insurance is some times bought because of compulsions
(b) Marketing is not necessary when there are compulsions to buy
(c) Both are correct
(d) Both are wrong
30 If a person having a policy of 4 lacs is suffering from brain hemorrhage and high BP,
the insurer will pay
(a) Basic SA
(b) 50% of SA
(c) EPDB
(d) Nothing

(a) Advertising is made through media.
(b) The media for advertising has to keep in mind the likely customer.
(d) Both are wrong

(a) Banks are becoming part of the distribution channel for insurance.
(b) Banks and insurers serve the same set of customers.
(d) Both are wrong

(a) The nominee under a policy can transfer his rights to another person
(b) The nominee has no rights under a policy.
(d) Both are wrong
34 A policy that has been assigned will revert to the assignor

(a) If the assignment is conditional.
(b) Whenever the assignor demands it.
(c) When the conditions specified in the conditional assignment assignment happen.
(d) On maturity of the policy.

(a) An indemnity bond is necessary when the heirs challenge the nomination.
(b) Heirs claiming the policy monies must be asked to obtain a court decree
(d) Both are wrong

(a) The insurer should ignore a court order attaching the monies under an MWPA policy.
(b) The insurer should not become a party to a dispute between rival claimants.
(d) Both are wrong

(a) A nomination can be made even before a policy commences.
(b) A nomination can be made only by the insured himself.
(d) Both are wrong

(a) On revival, the relevant SA for underwriting is the original SA.
(b) On revival, the relevant SA for underwriting is the original Sa less paid up value.
(d) Both are wrong

(a) No claim can be paid without either the original or the duplicate policy.
(b) No maturity claim can be paid without the life assured signatures.
(d) Both are wrong

(a) Premiums have to be paid in cash or by cheque.
(b) Premiums can be paid electronically.
(d) Both are wrong

(a) Vested bonus is also reduced along with SA in paid up cases.
(b) Paid up option is effective from the date of FUP.
(d) Both are wrong

(a) Many people think that they do not need life insurance.
(b) Many people think that there is no hurry to buy life insurance.
(d) Both are wrong

(a) Some of the particulars in the proposal form have no bearing on underwriting.
(b) The name of the proposed nominee must be mentioned in the proposal.
(d) Both are wrong
44 Valuation is done by a life insurer because

(a) It is a statutory requirement.
(b) It is necessary to be able to declare dividends to shareholders.
(c) It tells the insurer how well it is managing the business.
(d) All the above.
45 An insurer as a trustee has to ensure that

(a) The life fund is safe.
(b) The life fund earns maximum interest.
(d) Both are wrong

(a) In a limited payment policy, there is a maximum limit to SA.
(b) In a limited payment policy, the term can not exceed a specified limit.
(d) Both are wrong

(a) An SSS policy is an industrial insurance plan.
(b) An SSS policy can be taken for a SA of Rs. 4 lacs.
(d) Both are wrong
48 Insurance compensates losses

(a) By rebuilding the original asset.
(b) To the full extent of lost income.
(c) Only to the extent of the insured amount.
(d) All the above.

(a) A rider modifies an existing condition in the policy.
(b) A rider supplements or adds to an existing condition in the policy.
(d) Both are wrong

(a) A life insurance agent should carry the literature with him.
(b) A life insurance agent should carry his license with him always.
(d) Both are wrong

(a) The underwriter makes his decision only after the medical referee sees the case.
(b) The medical referee usually sees only cases for large SA.
(d) Both are wrong
52 An insured can afford to

(a) Ignore safety precautions.
(b) Be less serious on the packaging of goods.
(c) Be lenient on controls in warehouses.
(d) Do none of these three.
53 A person is an insurance agent because of

(a) The nature of his duties.
(b) His designation.
(c) The training given to him.
(d) All the three mentioned above.
54 What is a proposal?
(a) A request for insurance cover.
(b) An offer to enter into a contract.
(c) Both the request and an offer to enter an insurance contract.
55 Which of the following is correct with regard to children's policies?

(a) They insure minor children.
(b) They insure only school going children.
(d) Both are wrong
56 In a variable insurance policy

(a) The policyholder has an option to modify the benefits from time to time.
(b) The benefits under the policy are not changeable after commencement.
(c) The benefits vary according to the rate of inflation.
(d) None of the above statements are correct.
57 Adjustments are made to tabular premium because of

(a) Recommendations of the agent
(b) Age of the person to be insured
(c) Frequency of premium payment
(d) All the above.

(a) The records of an agent are his main tool for managing himself
(b) Competence is indicated by the time taken to do a job

(a) Convertible plans do not participate in profits
(b) Money back policies are not convertible policies.
60 A policy in which payment to the annuitant begins after one year and is payable there
after annually is called ….. Annuity.
(a) Quarterly
(b) Immediate
(c) Deferred
(d) Monthly
61 FPR is the evidence of the company,

(a) Accepting the risk
(b) Commencing the policy
(c) Deferment of acceptance
(d) Any of the above
62 Life insurance is a ….. Contract.

(a) Long term
(b) Short term
(c) Unlimited period
(d) None of these

(a) No medical examination is required under an annuity policy irrespective of the
amount
(b) A diabetic person can be accepted under group insurance policy up to certain amount

(a) Smoking is a hazard inviting additional premium
(b) Drinking is a hazard inviting additional premium.
(d) Smoking is a hazard inviting additional premium
65 Which approach is correct?

(a) Agent tells his prospect, who is a non-earning housewife, to mention her occupation
as a school teacher.
(b) Agent overstates his client's weight in a non-medical proposal by 4 Kilograms.
(c) Both approaches are right.
(d) Neither approach is correct.

(a) Only one policy is issued under group insurance
(b) Under a joint life insurance each life is underwritten
67 Proper servicing benefits

(a) Agent
(b) Policyholder
(c) Company
(d) All these
68 In a declined case, the insurer …………… the proposal.

(a) Modifies
(b) Accepts
(c) Refuses
(d) Postpones
69 What is meant by claim under an insurance policy ?

(a) Any demand made by policy holder on insurer
(b) A demand to fulfill policyholder obligations
(c) A demand to fulfill insurer obligations
70An agent should report on prospect's agent's ……… status.

(a) Financial
(b) Social
(c) Social
(d) All of these
71State which of the following statements is correct

(a) The minimum business to be done from rural areas is 5 % every year.
(b) The minimum business to be done from rural areas goes up every year.
72 Social sector includes ……

(a) Formal sector
(b) Organized sector
(c) Economically vulnerable sector
(d) None of these
73 Consensus ad idem means parties are of ……….. mind.

(a) Two
(b) Differing
(c) Same
(d) All of these

(a) Nomination can be made in joint life policies.
(b) A joint life policy can be assigned.
75 Under compound reversionary bonus, bonus declared attaches to

(a) Premium paid
(b) Term of the policy
(c) SA and accrued bonus
(d) SA only

(a) A person who vehemently asks for life insurance is likely to be a case of moral
hazard.
(b) People neglect to buy life insurance because of the compulsions of today.

(a) In the case of automatic advance of premiums, policies are entitled to bonus.
(b) Paid up policies are entitled to bonus.

78 Agents' disqualifications are stated in Insurance Act, Section ……….
(a) 40
(b) 41
(c) 42
(d) 45
79 Moral hazard is suspected in cases where

(a) The life to be assured is old
(b) The insurance is for a very large amount
(c) In both the above cases
(d) In neither of the above cases

(a) Underwriting is done only when there is a medical examination.
(b) Medical examination is necessary before a policy can be issued.
81 An insurance agent holds a license to act as an insurance agent for a life insurer and a
general insurer is ………..
(a) Agent
(b) Special agent
(c) Corporate agent
(d) Composite agent
82 Stating all essential facts and anticipating all possible doubts is ………..
(a) Incompleteness
(b) Haphazardness
(c) Shadiness
(d) Completeness
83 Certificate to act as an insurance agent is called a -------------------

(a) License
(b) Permit
(c) Charter
(d) Certificate
84 Person who performs valuation U/S 13 of Insurance Act is …………..

(a) Underwriter
(b) Auditor
(c) Actuary
(d) Valuer

85 Money back policy takes care of aspect of …….
(a) Investment
(b) Risk cover
(c) Bonus
86 Hazard is a factor that …………. The risk.

(a) Doubles
(b) Enhances
(c) Halves
(d) Reduces
87 Of the following which is the basis of the contract?

(a) Proposal form
(b) Agent's confidential report
(c) Occupational query form
(d) Medical report
88 A new insurer in the fifth year of operations should bring in the following percentage
of business from the rural sector:
(a) 7
(b) 12
(c) 15
(d) 16
89 Avoiding complicated imaging and saying a thing directly helps……..

(a) Concreteness
(b) Slipshod
(c) Laxity
(d) Vagueness
90 The insurance that is sold is …

(a) Tangible
(b) Intangible
(c) Definite
(d) Movable
91 Policy document consists of …………………….

(a) Preamble
(b) Schedule
(c) Operative clause
(d) All of these
92 If a policy document is lost, contract …………….

(a) Is not lost
(b) Is suspended
(c) Is cancelled
(d) Is lost
93 License once issued is valid for …………………..

(a) 1 year
(b) 2 years
(c) 3 years
(d) 5 years
94 Insurance brokers, re-insurance brokers, insurance consultants and surveyors are

known as ……………….
(a) Agents
(b) Advisors
(c) Intermediaries
95 Tabular premium charged takes care of …… expected deaths according to a standard

mortality table.
(a) A fraction of
(b) 50%
(c) Some
(d) 40%
96 For a chartered accountant composite agent, the training time for renewal is …….
Hours.
(a) 25
(b) 35
(c) 37
(d) 50
97 IRDA Regulations prescribe ……………………… for agents.

(a) Training
(b) Minimum physical standards
(c) Minimum business
(d) Maximum premium income
98 State which of the following statements is correct.

(a) Organizational structure determines the employee strength of the office.
(b) Organizational structure affects the morale of employees.
(c) Both the statements above are correct.
(d) Both the statements above are wrong.

99 The element which does not figure in the calculation of life insurance premiums is:
(a) Interest
(b) Mortality
(c) GDP
(d) Expenses
100 Policyholder commits suicide on 1 - 1 - 2002 which happens to be the date of

maturity under his endowment policy, what is the amount of claim payable?
(a) Basic plus DAB
(b) Basic only
(c) Surrender value
(d) Nothing

(a) Agent substitutes his own cheque for cash collected from the prospect.
(b) Agent insists that the prospect should give standard age proof.
(c) Both approaches
(d) Neither approach
102…………….. Information means information which, if not disclosed, can nullify the
policy.
(a) Fraudulent
(b) Material
(c) Important
(d) Uncommon
103. Life insurance takes care of family's ….. Needs.

(a) Physical
(b) Spiritual
(c) Financial
(d) Cultural
104 Insurance agent is licensed under Sec ………… of the Insurance Act.
(a) 39
(b) 40
(c) 41
(d) 42
105 Courteous behavior comes from ……. Respect.

(a) Affected
(b) Genuine
(c) Pretended
(d) Selfish

106 U/S 45 of the Insurance Act 1938, a policy cannot be called in question after ……
….. Years from commencement.
(a) One
(b) Two
(c) Three
(d) Five
107 State which one of the following statements is correct

(a) Special agent work only for life insurance
(b) Chief agent work only for Life Insurance

(a) The commission payable to agent is determined by IRDA
(b) The minimum business to be done by an agent is laid down by Insurance act
(c) The function of agent are same, which ever the insurer he is working for
(d) The function of an agent differ, which ever the insurer he is working for

(a) The bonus declared is uniformly appropriate to all plans of Insurance
(b) Interim bonus is paid along with Death Claim

(a) An absolute assignment holds good even after maturity
(b) A nomination holds good only till maturity
111Under a limited payment whole life policy premiums are payable

(a) For a selected term
(b) Up to age 60
(c) Up to age 85
(d) Up to death
112 If a life insured had died a few days before the date on which survival benefit was
due, to whom this benefit to be paid?
(a) Nominee
(b) Surviving heirs
(c) Policy holder’s bank account
(d) To none

113 Insurance works on the principles of
(a) Equal contributions
(b) Proportional contributions
(c) Contributions dependent on affordability

(a) The date of payment of premium is the date of the receipt by insurer
(b) The date of payment of premium is the date on which the cheque is cleared
115 The definition of an insurance agent is given by

(a) Contract act
(b) IRDA Act
(c) Insurance act
(d) Life Insurance Corporation act

(a) The premium collected in the early years is less than what is required
(b) The premium collected in the early years is more than what is required
(c) The premium collected in the early years is exactly what is required
117 Retention of risk can be conveniently done by

(a) Large corporations
(b) Small companies
(c) Single individuals
118 The distribution channel for insurance consists of

(a) The branch offices
(b) The insurance agents
(c) The brokers
(d) All the above
119 Medical examination is not at all required under ……… policy.

(a) Partnership insurance
(b) Group insurance
(c) Individual insurance
(d) Annuity

(a) The limits of business from rural and social sector apply only to new insurer
(b) Existing insurers should do 16% business from rural sector

(a) Marketing is necessary to attract customers
(b) Marketing makes it easier to persuade

(a) The internet is controlled by Government of India
(b) Agents can set up their own websites on the internet.
123 The insurer will not pay claim unless

(a) The event insured against happens
(b) Policy holder himself makes demand
(c) The nominee makes a demand
(d) When all the three above happens

(a) A rural area is defined by the IRDA Act
(b) A rural area is an area outside municipal limits
125 In which of these early death claims will the insurer be more careful
(a) Revival with simple declaration of good health
(b) Revival by simply paying arrears of premium within 6 months of lapse
(c) Revival within maturity date only 4 years from date of death
(d) New policy under non medical scheme
126 Bonus which is attached to the policy and is payable along with the basic SA is
called
(a) Tontine
(b) Cash
(c) Deferred
(d) Reversionary

(a) An individual who is the director of the company can become a chief agent.
(b) A company can become a chief agent if its director obtains a license

(a) Sec 45 of Insurance Act deals with nomination
(b) Indisputability clause does not apply to Children’s policy
129 A life insurance agent should

(a) Persuade the prospects to buy a life insurance policy
(b) Say that life insurance is better than all other avenues for investment
(c) Say that life insurance is meant for young people only
(d) Advise the prospects about the best financial arrangements for a situation

(a) An effective agent must be able to write articles for newspaper
(b) Communication skills includes the ability to listen
131 A missing person will be presumed dead only after

(a) 9 years
(b) 7 years
(c) 3 years
(d) 5 years
132 The principle of Utmost Good Faith will operate in existing policy
(a) If the insured person changes his job
(b) If the policy has lapsed and it has to be revived
(c) Every time the premium is paid
(d) f the insured person falls sick and is admitted to the hospital

(a) An annuity can be taken only on single life
(b) In life annuity the risk of death is covered

(a) If the prospect asks the agent to show his license, it is an insult
(b) The commission paid to an agent is a secret between the insurer and the agent
135 Adjustments are made to tabular premium because

(a) Mode of payment
(b) Size of sum assured
(c) Method of premium payment
136 An agent is known by

(a) The job he does
(b) The license issued to him
(c) The way that he is remunerated

(a) Only participating policies are entitled to benefit of bonus
(b) The bonus is return of additional premium paid by a participating policy

(a) An underwriter charges extra premium for physical hazard
(b) An underwriter charges extra premium for moral hazard
139 Which of the following complaints would be heard by the Ombudsman?

(a) That the insurer is delaying the claim on the grounds of investigation
(b) That the premium was paid on time but accounted by the insurer late
(c) That the policy should not be treated as lapsed
140 Which is true with regard to Children’s policy

(a) Risk cover begins on or after vesting date
(b) Risk cover begins immediately when the policy commences

(a) The first premium receipt is proof of commencement of risk
(b) Risk does not commence till the policy is signed
142 when does a claim arise under a insurance policy?

(a) Whenever the policyholder feels the need for money
(b) When the insured event happen
(c) When premium is not paid
(d) When ever any of the above three happen
143 Price of a deferred annuity is payable in

(a) Lump sum
(b) Quarterly installments
(c) Annual installments
144 Insurers should bring the following lives in the 4th year of their operations
(a) 5000
(b) 4000
(c) 15000
(d) 20000

(a) All maturity claims are paid in one lump sum
(b) All death claims are paid in one lump sum

(a) Recognition happens when the bearer remembers your taste in the restaurant
(b) Recognition happens when your thoughts are taken seriously
147 Which of the following aspects are common to three non-forfeiture options?
(a) They seek to protect the policyholder's interest
(b) Extent of insurance cover on death
(c) The extent of debt on the policy
(d) The amount payable on maturity

(a) Nobody does anything unless he wants to do it.
(b) The primary need of every agent is to earn as much as he can.
149 A person can be given any amount of insurance subject to his capacity ……………..
(a) To pay
(b) To earn
(c) To spend
(d) To save

(a) Revivals are in the interest of the policyholders.
(b) Revivals are in the interest of the insurers.

(a) A policyholder loses his rights on the policy once the assignment is done.
(b) Assignment can be cancelled by crossing / tearing the deed of assignment.
152 U /S 40A of Insurance Act maximum F Y commission which a new insurer can pay
is ……………
(a) 30%
(b) 25%
(c) 35%
(d) 40%
153 Life insurance policy grants Extended Permanent Disability Benefit (EPDB) if
caused by ……..
(a) Accident
(b) Sickness
(c) Attempted suicide
(d) None of these

(a) Alterations are generally allowed if they do not affect the risk.
(b) Alterations are generally allowed if they do not increase the risk.

155 In a variable insurance policy
(a) The amount receivable under the policy is equal to the SA
(b) The sum assured varies according to the fluctuations in the stock market.
(c) The SA varies according to the rate of inflation.
(d) None of the above statements are correct.

(a) Underwriting standards are changing.
(b) The underwriting standards of all insurers are the same.
157 The probability is mentioned

(a) Either as a percentage or a ratio
(b) As a percentage
(c) As a ratio
(d) Neither as a percentage nor as a ratio
158 The responsibility to comply with the principle of utmost good faith rests with
(a) The agent
(b) The proposer
(c) The life to be insured
(d) All the three
159 If the life to be insured falls sick, that fact has to be informed to the insurer
(a) If it happens before the policy is issued.
(b) If it happens before the First Premium Receipt is issued.
(c) If it happens within two years of commencement.
(d) Only if there is a specific query from the insurer.

(a) Consumer behaviour is important for developing marketing strategies.
(b) Marketing strategies are same for life and general insurance.

(a) On revival, the original terms of the policy will not be affected.
(b) On revival, the original terms of the policy may be changed.

162 The addition to the life fund arises because of the
(a) Loading in the premium for bonus.
(b) The practice of charging level premiums.
(c) Not having paid the claims on time.
(d) All the above reasons.

(a) The beneficiaries under the MWP Act can be any member of the family.
(b) A policy can be taken under the MWP Act for the benefit of partners.
164 Marketing of insurance includes

(a) Maintaining regular contact with policyholders.
(b) Finding out about policyholders' experiences.
(c) Helping claimants to complete formalities.
(d) All the above.

(a) An insurance agent is a part of the insurer's organization.
(b) Arrangements for medical examination are part of an insurer's organization.
166 U / S 113 of Insurance Act, a life insurance policy acquires guaranteed surrender
value after ……..of the policy.
(a) 3 years
(b) 1 year
(c) 2 years
(d) 5 years
167 If a policy is kept alive by advancing premiums from surrender value

(a) The death claim will be the full SA less premiums advanced with interest.
(b) The death claim will be the full SA without any deduction.
(c) The death claim will be the full SA less premiums till the current policy year.
(d) All the three above are wrong.
168 Amount paid to an agent for procuring policies is …………….

(a) Honorarium
(b) Commission
(c) Fees
(d) Salary

(a) A policy is specific and relevant only to a particular contract.
(b) A policy is a specimen, applicable to all cases under a specified plan.

(a) The proposal must be signed in the language in which it is printed.
(b) The proposal can be signed in any language.

(a) Policyholders resent agents who keep in touch regularly.
(b) Keeping in touch is the surest way to build relationships with policyholders.
172 Under the Consumer Protection Act, a claim for Rs. 2,00,000 can be referred to
(a) District Forum
(b) State Forum
(c) Supreme Court
(d) National Commission
173 Insurance benefit replaces

(a) The monetary losses, but only to some extent
(b) All physical losses but partly
(c) All physical losses fully
(d) All monetary losses in full

(a) Any policy which promises a payment on a fixed date is an endowment policy.
(b) If the sum assured increases every year, it is a participating policy.

(a) The name given to a plan indicates the benefits available under a plan.
(b) Every plan of insurance is a combination of two basic plans.

176 Communication happens
(a) When something is said by the sender.
(b) When the receiver makes some meaning.
(c) At the end of the sender.
177 Life insurance is arranged because

(a) Some one may die.
(b) Some one may live.
(c) For both the above reasons.
(d) For neither of the above reasons.
178On maturity of the policy, nomination ………………

(a) Ends
(b) Is cancelled
(c) Continues
(d) None of these
179 A material fact is that circumstance that would ………………… an underwriter's

judgment.
(a) Weaken
(b) Influence
(c) Hamper
(d) Not influence
180Arrangements made in order that the activities are carried out smoothly are called
(a) Business
(b) Organization
(c) Company
(d) None of these
181 For a joint life assurance, underwriting is done ……………

(a) On one life
(b) On both lives
(c) On better of the two
(d) None of these

(a) With the availability of the internet, the agent's role in servicing is reduced.
(b) When internet is introduced, satisfactory service is guaranteed.

183 A new Insurer, in his second year of operation, should bring the following percentage
of policies from Rural sector ……………..
(a) 4
(b) 12
(c) 15
(d) 9
184 Parties to a contract must have intention to create ………………. relationship.

(a) Social
(b) Legal
(c) Political
(d) Emotional
185 The premium is loaded because of

(a) Likely claims
(b) Interest likely to be earned.
(c) Age of the insured person.
(d) Likely expenses.

(a) The lay out of an office is part of an insurer's organizational structure.
(b) The internet access facilities are part of an insurer's organizational structure.

(a) It is not necessary to be perfect in what one does.
(b) Every improvement is a step towards perfection.
188 A policy which has been assigned absolutely, will revert to the assignor
(a) When the assignee dies.
(b) When the policy becomes a claim.
(c) Whenever the assignor likes it to happen.
(d) When the assignee reassigns the policy.
189 Life insurance policy can cover Disability arising from ……….
(a) Accident
(b) Sickness
(c) Congenital

190 Bonus is declared as a result of valuation done ………
(a) Every four years
(b) Every year
(c) Every two years
(d) Every three years
191 Life insurance is better than other avenues of saving in respect of

(a) Appreciation
(b) Tax benefits
(c) Usefulness in emergency

(a) Marketing focuses on the needs of the customer.
(b) Marketing focuses on the internal processes of the insurer.
193 An insurance agent, who holds a license to act as an insurance agent for a life insurer
and a general insurer is ……….. Agent
(a) Combined
(b) Composite
(c) Absorbed
(d) Joint

(a) A good organizational structure makes work move faster.
(b) Organizational structures help employees to avoid work.
195 A professional agent should keep in his mind ………………

(a) Maximization of commission earnings
(b) Client's interests
(c) His future prospects
(d) His personal gains

(a) In group policies, each case is separately underwritten.
(b) In group policies, personal histories are not examined.

(a) If the underwriter feels that the risk is more, he will accept at OR.
(b) If the underwriter feels that the risk is more, he may impose a lien.

(a) Maturity claim cheques are paid to the trustees in a MWP Act case.
(b) Maturity claim cheques are paid to the beneficiaries in a MWP Act case.
199 The person for whose benefit Trust is created under the MWP Act is ……….
(a) Nominee
(b) Trustee
(c) Beneficiary
(d) None of these
200 Geographical segmentation of a market differentiates between

(a) Mind sets of people
(b) Needs based on age and family groups
(c) Needs according to income groups

(a) In the case of a missing person, the claim arises from the date he is missing.
(b) In the case of a missing person, premiums have to be paid till the court
judgement.
202 Insurance helps to reduce ………… consequences.

(a) Long term
(b) Short term
(c) Favourable
(d) Adverse
203 FPR is the evidence of the company ……….

(a) Accepting the risk
(b) Commencing the policy
(c) Deferring the acceptance
(d) Any one of the above

204 In the case of life insurance, the risks
(a) Cannot be avoided.
(b) Are avoidable through proper habits.
(c) Can be avoided.
(d) Are avoidable through medical science.
205 The surplus in the life fund represents

(a) The profits of the business.
(b) The excess premium collected by the insurer.
(c) The dues to the shareholders.

(a) Life insurance does not meet the needs of all the people always.
(b) Life insurance is not better than all other investments.
(c) Tax advantage is not the best reason for buying life insurance.
(d) All the above statements are correct.
207 A new insurer in his third year of operation should bring in the following percent of
policies from rural sector.
(a) 15
(b) 12
(c) 7
(d) 4
208A will subsequent to the earlier nomination ……… such nomination.

(a) Overrides
(b) Does not affect
(c) Continues
(d) Extends

(a) An agent who anticipates correctly the thoughts of the prospect is listening.
(b) Silence is a kind of communication
24 Obligations of Indian Insurers to Rural Sector are specified in …..

(a) Insurance Act
(b) IRDA Act
(c) Relevant IRDA Regulations.
(d) None of these

(a) A kiosk is a place where information is made available.
(b) A kiosk works throughout the 24 hours.
(e) Both the statements above are wrong.
212 If the monthly premium was due on 24th February 1996 (Tuesday)
(a) The grace period will end on 4th March( Wednesday).
(b) The grace period will end on 25th March( Thursday).
(c) The grace period will end on 9th March (Tuesday).
(d) The grace period will end on 11th March( Thursday).
213 Management deals with using one's

(a) Money
(b) Time
(c) Material
(d) All these
214 The limits of the authority of an agent are laid down by ………
(a) IRDA
(b) Insurance Act
(c) The Insurer
215 If a life insured has died a few days before date of maturity, but after signing
discharge form, to whom should the claim be paid?
(a) Nominee
(b) Surviving heirs
(c) The policyholder's bank account
(d) Any of the three above.

(a) An agent's license may be cancelled if the code of conduct is violated.
(b) Interference in another agent's business is an offence.
217 Which of the following is not a non-forfeiture option?

(a) Grace period
(b) Policy becomes paid up
(c) Payment of surrender value
(d) Automatic advance of premium

(a) People who believe in fate never buy life insurance.
(b) People rarely volunteer to buy life insurance.
219 Which of the approaches of the agent is / are right?

(a) Agent offers to pay first quarterly premium on prospect's behalf, as an advance.
(b) Agent advises the policyholder to pay the renewal premium by himself.
(c) Both approaches

(a) Ombudsman is created by IRDA Act.
(b) Proportionate paid up value is guaranteed by the Insurance Act.
221 Which of the approaches of the agent is / are right?

(a) An agent tells his prospect to give his consent letter in advance to meet future
requirement.
(b) When the proposal is accepted with heavy extra premium, agent reduces the Sum
Assured without proponent's knowledge.
(c) Both approaches

(a) A professional agent is more concerned with his commission.
(b) A professional agent takes life cycle needs of the prospect into account while
making a sale.

(a) Insurers should inform the agent about a policyholder's death.
(b) A good agent will know about his client's death before the insurer.
224 The agent earns the trust of the policyholder by

(a) Telling him what is wrong in his ways of thinking.
(b) Apologizing for not returning his telephone calls.
(c) Showing him the office bulletin praising his work.
(d) Showing genuine concern for his interests.

(a) The premium of a joint life policy depends on the age of the older person.
(b) The bonus on a joint life policy is calculated on double the Sum Assured.

(a) The premium under a life insurance policy has to be paid every month.
(b) The premium under a life insurance policy has to be paid every year.
227 Which of the approaches of the agent is / are right? Which is the good approach?
(a) Agent advises his prospect to mention cause of death of his brother as accident
instead of suicide.
(b) Agent advises his client that he should mention loss in his weight during last one year.
(c) Both approaches
228 State which of the following statements is correct, with reference to kiosks
(a) A kiosk is connected to the insurer's office.
(b) A kiosk can be used to pay premiums.

(a) The Sum Assured under some policies increases every year.
(b) The Sum Assured under some policies reduces every year.

(a) Every insurer must have a training manager.
(b) Every life insurer must have an underwriting department.

(a) A broker can work for more than one life insurer
(b) A broker is appointed by an insurer.
(c) A broker works only for non-life insurers.
(d) All the above statements are correct.

232 Adjustments are made to the tabular premiums because of
(a) The frequency of premium payment.
(b) The method of premium payment
(c) The occupation of the person insured.

(a) A change of job after the commencement of policy affects the terms of policy.
(b) The life insured can change his job only with the consent of the insurer.
234 In what ways does Group Insurance differ from Salary Savings Scheme?
(a) Number of persons insured under a policy.
(b) Responsibility of employer
(c) Issue of premium receipts.
(d) In all the above respects.

(a) The business plan will include the number of calls to be made.
(b) The pay-off from service calls is not immediate.
236……………….. Means the person who makes the decision to accept the proposal.
(a) Director
(b) Accountant
(c) Underwriter
(d) Actuary
237For repudiating a claim liability U/S 45 of Insurance Act, non-disclosure must be …

……………
(a) Intentional
(b) Material
(c) Fraudulent.
(d) All these.
238 Who is benefited if a policy is under the Salary Savings Scheme?

(a) The policyholder.
(b) The Insurer.
(c) The Agent.
(d) All the three above.

(a) Technology makes it possible to avoid the postal services.
(b) A policy transmitted through e-mail is not evidence of a contract.

(a) Revivals are not done unless the entire outstanding premium is paid.
(b) Revivals are not done unless there is evidence of continued good health.

(a) In Group Insurance, the proposal is made by the employer.
(b) In Group Insurance, proposals are made by each of the insured.
242 Which of the following is true for a group policy?

(a) Copies of the master policy are given to all members.
(b) Entry into the scheme and exit out of it is at the option of the members.
(c) The amount of the cover is determined by the scheme.
(d) The group has to be formed exclusively for the purpose of insurance.
243 A plan of insurance is said to be different from another if

(a) The age of the life assured is different.
(b) The sum assured is different.
(c) The date of commencement of policy is different.
(d) The conditions when the sum assured becomes payable are different.
244 A lien may be imposed by the underwriter if

(a) The additional risk is expected top wear off in course of time.
(b) The proposer is unlikely to agree to pay a higher premium.
(c) In both the above cases.
(d) In neither of the above cases.
245 Insurance benefits

(a) Individuals
(b) The country
(c) The society
(d) All the three.

246 Policyholder dies a day after the date of maturity, but before the receipt of claim
cheque. Who is the person entitled to policy money?
(a) Heirs of the deceased.
(b) Nominee
(c) His wife
(d) His sons

(a) When a nomination is made, the rights to the policy are transferred.
(b) The assignee immediately becomes the policyholder.
248 If agent's morale is not high, he will exhibit …..

(a) Disappointment
(b) Satisfaction
(c) Happiness
(d) Smile
249 For an insurance agent the whole world is ………………..

(a) A potential market
(b) Segment
(c) Shop
(d) None of these

(a) Foreclosure action will be taken only in paid up cases.
(b) Loans will not be given on paid up policies.

(a) Organizational structure includes processing of insurance related papers.
(b) Organizational structure includes ways to maintain cleanliness of the office.
252 Premium is ……………. Charged for running the risk.

(a) Fine
(b) Price
(c) Interest
(d) Penalty

(a) Group Superannuation policies provide pensions to retiring employees.
(b) A Group Superannuation policy can be taken by a company for its mortgages.

(a) The limits for the rural sector are stated in number of policies.
(b) The limits for the social sector are stated in number of policies.

(a) The conditions for payment of Sum Assured are different.
(b) The date of maturity is different.
(c) The amount of premium is different.
(d) The mode of payment of premium is different.

(a) A nomination can be made in favour of a friend.
(b) A nomination can be made in favour of a lover.
257 A policy which has run for 5 years can be called in question if there is …………….
(a) Misrepresentation
(b) Fraud
(c) Mistake

(a) Working women are treated on par with men.
(b) Educated women are treated on par with men.
259 The IRDA Regulations regarding advertisements are meant to

(a) Avoid wasteful expenditure
(b) Prevent agents from advertising on their own.
(c) make insurers take responsibility for all advertisements in their name.
(d) Ensure all the three above.
260 The surplus disclosed in a valuation means

(a) That the interests of the policyholders are safe.
(b) That the funds of the insurer are adequate to meet its liabilities.
(c) That the business is being managed well.

(a) One must find time for attending seminars, reading books, playing games, etc.
(b) Earning maximum commission is not the first priority.

(a) Foreclosure action cannot be taken till a notice is served on the policyholder.
(b) When a foreclosure action is taken, nothing is payable to the policyholder.

(a) Paid up option is effective from due date of first unpaid premium.
(b) Paid up option is effective from policy anniversary after unpaid premium.

(a) A trade union can take out a group insurance policy for its members.
(b) The cover for an employee can be equal to his age multiplied by a fixed number.
265 Under a Term insurance plan, Sum Assured is payable ……

(a) On death
(b) On reaching age 60
(c) On completion of the term
(d) On reaching age 80

(a) In cases of automatic advance of premium, the surrender value increases.
(b) In cases of paid up policies, the surrender value increases.
267 The business of insurance has

(a) Social implications
(b) Impact on economic development of the country
(c) Impact on the economic well being of families
(d) All the above implications
268 First Premium Receipt covers the risk ………………

(a) For one year
(b) For ever
(c) Up to the next renewal date
(d) None of these
269 The proposal form contains information relevant to determine

(a) Premium rates.
(b) Family history
(c) Both premium rates and family history.
(d) Neither.

(a) An MWP Act policy can be assigned.
(b) Loans are not granted under MWP Act policies.

(a) A whole life plan is basically a term insurance plan.
(b) A money back plan is basically a Pure Endowment plan.
272 State which of the following statements is correct with regard to joint life policies.
(a) The premium is the total of the premiums for insuring the two persons separately.
(b) The premium will be less than the cost for insuring the two persons separately.

(a) Errors in the statements made at the time of revival can nullify the policy.
(b) The principle of utmost good faith does not apply at the time of revival

(a) The date of maturity is different
(b) The conditions when the Sum Assured becomes payable are different
(c) The underwriter decides to charge extra premium in one case
(d) The date of commencement of risk is different
275With sale of life insurance policy, the prospect becomes…………

(a) Claimant
(b) Policyholder
(c) Proposer
(d) Nominee

(a) The agent must keep in mind the commission that he may earn from the sale.
(b) The agent's earnings from the sale should not be revealed to the prospect.
(a) Ownership of the policy
(b) Mode of payment of premium
(c) Parties to the contract
(d) In all the above respects

(a) The reserve accumulates under a policy because of level premiums.
(b) The reserve does not accumulate in money Back policies.

(a) Foreclosure can be done only with the consent of the policyholder.
(b) Foreclosure can be done only after informing the policyholder.
(a) Agent helps the clients for settlement of claims on policies not sold by him.
(b) Agent offers to help his clients for the claim settlement, provided they place family
insurance with him.
(c) Both approaches
281 When a certain level of bonus is declared, what does it mean?

(a) That this level will be maintained in future years.
(b) That it is the return on one's investment, viz., premium.

(a) A conversion becomes effective when the policyholder exercises the option.
(b) A conversion option is subject to the insured person being in good health.

(a) A rural area is defined in the Constitution of India.
(b) Business in the rural areas can be done only by rural agents.
284 If death takes place within the days of grace, claim is …………….
(a) Paid in full subject to recovery of unpaid premiums.
(b) Paid for 50 %
(c) Paid in full.
(d) Not paid

(a) When a policy lapses, the agent's prospects for new business improve.
(b) When a policy lapses, the insurer benefits as his liability ceases.

(a) The sum of all the premiums paid will be more than the Sum Assured.
(b) The Sum of all the premiums paid will be less than the Sum Assured.
287 The job of an agent includes

(a) Checking whether the renewal premium has been paid.
(b) Checking about changes in career or family of his clients.
(c) Helping out if there is any problem.
(d) All the three above.

(a) A maturity claim is finally settled on the date of maturity.
(b) A death claim, after admission, may be paid years later.
289 In which respect does non-life insurance differ from life insurance?
(a) Object of insurance (one insures human beings, the other does not).
(b) One is based on indemnity, the other is not.
(c) Length of contract (one issues long term, the other does not).
(d) Nature of cover (one covers sickness, the other does not).
290 Ombudsman scheme is framed U / S ………. Of Insurance Act.

(a) 114
(b) 113
(c) 45
(d) 13
291 A good agent is one who

(a) Decides which plan is best for the policyholder.
(b) Writes out the proposal form for the proposer.
(c) Does the maximum business.
(d) Arranges to inform the insurer of the death of the policyholder.
292 Which of the following segments are potentially good for life insurance?
(a) Working women
(b) Aged persons
(c) Young children
(d) All the above.
293 A new insurer in his first year of operation should bring following percent of policies
from rural sector ……..
(a) 4
(b) 7
(c) 12
(d) 5
294 The IRDA has powers U / S 47A of Insurance Act to decide on disputes relating to
claims not exceeding ………………
(a) Rs. 4,000
(b) Rs. 5000
(c) Rs. 2000
(d) Rs, 3000

(a) When only balance premiums are received, the revival is automatic.
(b) When evidence of good health is required, the underwriter decides on revival.

(a) When a nomination is made, the title of the policyholder is transferred.
(b) When a nomination is made, the rights of the policyholder are transferred.
297 How does Automatic Advance of Premium differ from Extended Term Assurance?
(a) In the amount of SA payable on death.
(b) Likelihood of terminating without any cash payment to the policyholder.
(c) In the duration for which the policy will remain in force.
(d) In the case of reviving the policy on original terms.

(a) The death claim is settled in favour of the nominee in MWP Act cases.
(b) The death claim is settled in favour of the trustee in MWP Act cases.

(a) The SA is always payable in a lump sum.
(b) The SA is always payable in installments.
(c) The SA is always payable in a lump sum unless asked for otherwise.
(d) All the statements above are wrong.
(a) The person who pays the premium.
(b) Responsibility to pay the premium.
(c) Decision to take the policy.
(d) In all the above three respects.

(a) Agency development and business planning may be done by the same person.
(b) The medical referee can be a full time employee of the insurer.

(a) Appointment of agents will be the function of the Investment Department.
(b) The declaration of bonus will be the function of the Actuarial Department.

(a) An assignment is to be notified to the insurer in order to become effective.
(b) A nomination is to be notified to the insurer to become effective.

(a) The limits for the rural sector are stated in terms of number of lives.
(b) The limits for the social sector are stated in terms of number of policies.
305 Which of the following should not be done during an interview?

(a) Let the prospect write down the important and relevant facts.
(b) Attend to a telephone call on your mobile telephone.
(c) Make the prospect talk.
(d) Keep your laptop computer open.
306 For what period is an interim bonus valid?

(a) Till the next valuation date.
(b) Till the next declaration of bonus.
(c) As long as the management wants it to be.
(d) For as long as the policy is in force.

(a) An agent is a professional.
(b) An agent is a businessman.

(a) Moral hazard may be suspected if the proponent is proposing for insurance for the
first time at age 60.
(b) Moral hazard may be suspected if the proponent's address is c/o agent.,

(a) The requirement of business from the rural areas increases every year.
(b) The minimum requirement is in terms of number of policies.
34 Age is material for underwriting because it affects

(a) The amount of premium.
(b) The decision to call medical examinations and tests.
(c) The plan that can be offered.
(d) All the three factors above.
311 In variable insurance policy,

(a) The SA varies from year to year.
(b) The benefits under the policy are not definite.
(c) The amount payable on death and maturity are the same.
(d) The amount paid by the policyholder is the premium for the risk cover.

(a) Personal development includes discussion with senior agents.
(b) An agent can learn from other, even junior, agents.
313 A license for insurance agency will not be given unless the person
(a) Has passed examination prescribed by the IRDA.
(b) Is 21 years of age.
(c) Has undergone training.
(d) Satisfies all the above conditions.

(a) The cover in a group policy could depend on the ages of the life to be insured.
(b) The cover could be a uniform flat rate for all employees of a certain category.

(a) The nomination can only be in favour of one person.
(b) The nomination can be in favour of more than one person.

(a) IRDA Regulations on advertisements apply to visiting cards of agents.
(b) An agent is allowed to have a website on the internet.
(a) Agent collects FP in cash and substitutes his own cheque and pays in the insurer's
office.
(b) Agent collects premium of big cheque and deposits in the office after one week.
(c) Both approaches
(a) Agent declares that he can get a clean policy for any person.
(b) Agent tells his prospect that he will ensure that no extra premium will be charged for
his overweight.
(c) Both approaches
319 In which of the cases listed below will the help of the agent be most useful?
(a) Death claims.
(b) Maturity claims.
(c) Survival benefits
(d) Annuity cases.
320 Medical examination is not at all required under …………….. Policy.

(a) Individual
(b) Partnership Insurance
(c) Group insurance
(d) Annuity
321 Insurance covers situations

(a) When the consequences of the happening are beneficial.
(b) When the consequences cannot be measured in money terms.
(c) When the consequences are harmful.
(d) When the consequences are immaterial.

(a) The number of members covered by a group insurance policy can change every year.
(b) The amount of insurance for any member may change from year to year.

(a) Agents are appointed separately to work in the rural sector.
(b) Any agent can do business from the rural areas

(a) The agent with an internet connection can visit the insurer's office at any time.
(b) Enquiries and clarifications can be sought within moments.
325 The probability of 50% for an event happening means that the event
(a) Will happen 50% of the time over a very large number of trials.
(b) Will happen regularly every alternate occasion.
(c) Happening will become closer to 50 % as the attempts increase.
(d) Will never exceed 50 % however large be the attempts made.
326 For proper listening, agent must have ………..

(a) Sympathy
(b) Apathy
(c) Empathy
(d) Good hearing
327 Special surrender value is ……….. Premiums paid.

(a) Less than
(b) More than
(c) Equal to
(d) None of these
328 The action of foreclosure is complete when

(a) The cheque is sent to the policyholder.
(b) The discharge voucher is sent to the policyholder.
(c) The discharge voucher is received back by the insurer.
(d) The insurer makes a decision in the office.

(a) Salary Savings Scheme policies are Group Insurance policies.
(b) Group insurance policies benefit only employees of big organizations.
330 As the duration elapsed increases, surrender value ………….

(a) Does not change
(b) Decreases
(c) Increases
(d) None of these
331 The asset, which is a human being, perishes when

(a) He dies
(b) He loses his ability to work
(c) He retires from work
(d) In all the above situations
332 What does a premium depend upon?

(a) Religion of the person to be insured.
(b) Income of the person to be insured
(c) Neither the religion nor the income of the person to be insured.
(d) Both the religion and the income of the person to be insured.
(a) In a policy without accident benefit, agent advises his prospect not to mention
previous accident.
(b) Agent advised his prospect to mention his earlier sick leave even though it was
taken on false grounds.
(c) Both approaches
334 Preparing to approach the prospect is …………

(a) Meeting
(b) Interview
(c) Approach
(d) Pre-approach
335 If age proof submitted along with proposal is later found to be false, the insurer
(a) May declare the policy null and void ab initio.
(b) May revise the premium on the basis of actual age from the commencement.
(c) May revise the premium and other terms of the contract.
(d) May do any one of the three suggested above.
336 Insurance companies

(a) Hesitate to invest in speculative ventures.
(b) Freely invest in speculative ventures.
(c) Invest only in government securities.
(d) Totally avoid investing in speculative ventures.

337 Using simple words, short sentences, avoiding technical jargon and uncommon
words helps ………….
(a) Awkward
(b) Confusion
(c) Clarity
(d) Complexity
338 Which of the following statements is true with regard to Children's policies?
(a) The policy vests at age 18 last birthday.
(b) The policy vests at age 18 next birthday.
(c) The policy vests at age 18 nearest birthday.
(d) All the statements above are correct.
339 Which of the following are confidential and will not be given to the proposer?
(a) The medical report.
(b) The agent's confidential report.
(c) Both the medical report and the agent's report.
(d) Neither of the above.
(a) An agent distributes company's leaflets to his clients, adding there in that he was
the company's best agent.
(b) On his personal card, agent states that he is a representative of the best life insurance
company.
(c) Both approaches

(a) When premium is advanced from surrender value, the policy does not lapse.
(b) The premium advanced under the non-forfeiture option remains a debt.

(a) Most people do not know how they spend their time.
(b) Busy agents have no time to keep up with the circulars from office.
343 A new Insurer in his fourth year of operation should bring in the following percent of
policies from rural sector.
(a) 4
(b) 15
(c) 14
(d) 12

(a) The authority of an employee is decided by the insurer's organization.
(b) Arrangements for premium collection are part of an insurer's organization.
345 The FPR is important

(a) Till the claim is settled.
(b) To know the terms of acceptance.
(c) As evidence of contract in case the original policy is lost.
(d) Till the policy is issued.
(a) Agent advertised in local news paper that he had qualified for MDRT membership.
(b) Agent sends birthday greetings to his clients.
(c) Both approaches

(a) In the case of SSS policies, the employer gets the Renewal Premium Receipts.
(b) In the case of SSS policies, FPR's are not issued.
348 A fixed date on which benefits may become payable either absolutely or
contingently, is called ………………
(a) Maturity.
(b) Due date.
(c) Vesting date.
(d) None of these.
349 Premium which takes into account the three elements of mortality, interest and
expenses is …………. Premium.
(a) Office
(b) Tabular
(c) Risk
(d) Net
350 The route by which the product reaches the consumer is …………….
(a) Distribution channel
(b) Market bypass
(c) Trade line
(d) Selling arena

351 For the same age and SA, the premium under an ordinary whole life policy
(a) Will be more than in a limited payment whole life policy.
(b) Will be less than in a limited payment whole life policy.
(c) Will be the same as in a limited payment whole life policy.
(d) Can be more, less or the same as in a limited payment whole life policy
352 A good agent should

(a) Make himself available whenever contacted by a policyholder.
(b) Contact the policyholder frequently to ask whether he can be of help.
(c) Contact the policyholder occasionally and ask whether any friend needs insurance.
(d) Do all the three above.
353 Ombudsman has to pass an award within ……….. Month (s) of the receipt of the
complaint.
(a) One
(b) Two
(c) Three
(d) Four
354 Usual objection to life insurance policy is ……..

(a) Returns are not good
(b) There is no security
(c) Yield is very high
355 The benefits to the insurer from an internet connection are

(a) Faster contact with the agents.
(b) Faster response to public enquiries about offerings.
(c) Avoidance of considerable paper work.
(d) All the above.

(a) Plans of insurance can be compared by reading the names given to the policies.
(b) Plans of insurance can be compared by comparing the premium rates.
357 A life insurance policy becomes invalid if

(a) The statements in the proposal are found to be substantially wrong.
(b) There is a change in occupation after the policy has commenced.
(c) The policyholder is unable to pay the premiums.
(d) If the policyholder changes his residence to another country.

(a) Convertible plans allow whole life plans to be altered to endowment plans.
(b) The option of conversion can be exercised whenever the policyholder chooses.
(a) Agent advises his client to mention his parents' ages at death as 60 each, even though
they had died earlier than age 40.
(b) Agent advises his client to mention death of one of his family members by suicide.
(c) Both approaches
360 A warranty is a condition, which must be complied ……….

(a) In full
(b) If convenient
(c) Substantially
(d) In part

(a) Action will be initiated by the insurer well before the date of maturity
(b) The rightful claimant in the case of maturity is the policyholder or assignee
(d) Both are wrong
362 Agent's advice to the prospect should be in the interest of …..

(a) Agent
(b) Company
(c) Prospect
(d) None of these
363 Before paying a claim, which of the following have to be verified?

(a) Premiums paid till date.
(b) Balance of loan, if any.
(c) Title of claimant.
(d) All the three mentioned above.

(a) All cash transactions must be reported to the Accounts Department.
(b) All cash transactions must be reported to the Investment Department.

(a) In the case of many nominees, the claim will be paid to them jointly.
(b) In the case of many nominees, the claim will be divided among them.

(a) An agent is a manager.
(b) An agent is a businessman.

(a) Reinstatement of a foreclosed policy is like a revival.
(b) Reinstatement of a foreclosed policy requires underwriting.
368 When interest rates fall, the premiums charged by an insurer are likely to
(a) Increase
(b) Decrease
(c) Neither increase nor decrease
(d) Remain the same.

(a) When a policy lapses after 5 years, the insurance cover becomes zero.
(b) If the insured dies during the days of grace, the claim is admissible.
370 Single policy issued as evidence of a group insurance contract is called ………..
(a) Group
(b) Overall
(c) Master
(d) Unit

(a) A clause restricts the benefits under the policy.
(b) A clause is the same as a rider.

(a) The proposal must be signed by a witness.
(b) The policy must be signed by a witness.
373 The premium charged by a life insurance company is on the basis of ………….
(a) Mortality
(b) Interest
(c) Expenses
(d) All these
374 State which one of the following is not a non-forfeiture option.

(a) Payment of cash value
(b) Offering reduced sum assured proportionate to premiums paid.
(c) Using surrender value to keep the policy alive.
(d) The provision of guaranteed surrender value.
375 For a young person who has just started his career, the suitable plan may be ………
(a) Money Back
(b) Convertible whole life policy
(c) Endowment policy
(d) Term Assurance

(a) The organization affects the efficiency of the insurer
(b) Every insurer in India is registered under the Companies Act.
(d) Both are wrong
377 The competition for the life insurance agent comes from those who canvass for
(a) Small savings
(b) Mutual funds
(c) House property
(d) All the three above

(a) An administrator is appointed by IRDA
(b) An administrator manages the administrative department of insurer
(d) Both are wrong

(a) A group insurance contract is between the insurer and the insured person.
(b) The extent of insurance cover is chosen by each individual member.

(a) The FPR acknowledges premium for the first year of the policy.
(b) The second quarterly premium after commencement is called renewal premium.
381 The business of insurance affects

(a) Social security
(b) Employment security
(c) Political security
(d) All these three
382 Financial underwriting is done to evaluate

(a) The probability of the policy lapsing in future.
(b) The possibility of moral hazard.
(c) Both lapse and moral hazard probabilities.
(d) Neither lapse nor moral hazard.

(a) The Insurance Act does not protect those who try to cheat the insurer.
(b) Protection under Sec 45 does not apply if the policy had been revived within a year of
death.

(a) A market consists of several segments.
(b) An agent should operate in the entire market.
385 Prospect's objections should be ………

(a) Removed
(b) Clarified
(c) Answered
(d) All these

386 The insurance product that is being sold is ………..
(a) Definite
(b) Movable
(c) Intangible
(d) Tangible
387 Which of the following factors help to avoid adverse selection in group policies
(a) No option to choose quantum of insurance cover
(b) Minimum number to be included in the cover
(c) Similarity in the nature of the jobs
388 In the business of life insurance, valuation means

(a) An actuarial exercise to determine adequacy of funds
(b) An attempt to determine the correctness of the values of assets
(c) Estimating the values of immovable properties
389 Before paying a claim, which of the following have to be verified?

(a) Age of the life assured
(b) Age of the nominee
(c) Age of the assignee, if any
390 If the LA has died a few days after the date on which SB was due, to whom this SB
should be paid?
(a) Nominee
(b) Surviving heir
(c) Policyholder's bank account
391 Who can make a proposal for insurance on an adult?

(a) The mother of the LA
(b) The father of the life insured
(c) The life to be insured himself
392 In the case of an insured person presumed to be dead

(a) The insurer has to come to a conclusion on the facts as presented to him
(b) The accident benefits will become payable
(c) The policy will be deemed to be paid up from the date he is missing
(d) The insurer has to act on the instructions of a court of law

393 What does premium depend upon?
(a) The decision of the underwriter
(b) The report of the agent
(c) The place of worship visited by the insured
(d) The state of health of the policyholder
394 When new agents are added by an insurer

(a) The distribution channel becomes wider
(b) Business increases
(c) Public awareness of insurer increases
395 It is wrong to terminate an existing policy and take out a fresh one if
(a) It is done with a view to collect higher first year commission
(b) The earlier policy was taken without fully understanding the implications of the
MWPA Act
(c) The agent who had recommended the earlier policy is not active any more
(d) The benefit under the new policy are drastically different from the existing one.
396 Which of the following statements is correct if the insurer started operations on 1 6
2000
(a) It must insure at least 5000 lives in the year 2000-2001 from social sector
(b) It must insure at least 3750 lives in the year 2000-2001 from social sector
(c) It must insure at leat2500 lives in the year 2000-2001 from social sector
(d) All the above statements are wrong
397 The principle of utmost good faith does not apply to

(a) Facts of common knowledge
(b) Facts of law
(c) Facts which are not material for underwriting
398 Which of the following factors are relevant to compare two avenues for saving
(a) Withdrawal facilities
(b) Govt recognition of the fund
(c) The qualifications of the agent
399 When a policy lapses, it can be inferred that

(a) The agent has not been in touch with the policyholder
(b) The agent had not explained the benefits of insurance properly
(c) The agent has failed in his duty

400 In what respect non-life insurance differs from life insurance
(a) Requirement of a written proposal before the contract can be entered into
(b) Avoidance of the contract if material facts are suppressed
(c) The claim amount is fixed in one but has to be assessed in another
(d) Prior inspection or examination of object of insurance
401 The date of commencement of the policy

(a) Cannot be later than the date of issue of the FPR
(b) Cannot be earlier than the date of issue of the FPR
(c) Will be the date on which the FPR is recd by the proposer
(d) Will be the date on which the underwriter accepts the proposal
402 The principle of insurable interest applies to the

(a) Agent
(b) Person to be insured
(c) Person applying for insurance
(d) Proposed nominee
403 The principle of UGF does not apply if the fact relates to
(a) Provision of law
(b) Height or weight in the personal statement submitted to the doctor
(c) Relationship to the nominee
404 If a claim is made in Jan 2003 under a policy which commenced in May 1998 stating
that the LA had died in June 1999
(a) Sec 45 of the Act will not apply
(b) The claim can be treated as an early claim
(c) Foul play must be suspected
(d) All the three statements above are correct
405 If asked by a policyholder to help a friend's insurance problem, the agent should
(a) Find out what has happened to the earlier agent before agreeing
(b) Agree to do so straight away
(c) Refuse on the ground that it is not proper to handle another agent's policy
406 When an agent visits a policyholder after the policy is sold, he communicates that
(a) He is looking for more business
(b) He wants to help if the policyholder has any problem
(c) He has nothing better to do at that time

407 A human being's value is measured by
(a) The income he generates
(b) The value of goods that he produces
(c) The extent to which he is popular among friends
(d) All the above three
408 State Which of the following is correct?

(a) A physical hazard affects the probability of death.
(b) Body measurement may indicate physical hazards
(d) Both are wrong
409 State Which of the following is correct.

(a) When a loan is taken under the policy the nomination is cancelled
(b) A loan will be paid only when the policy is assigned to the insurer
(d) Both are wrong

(a) Loans are not granted under term assurance policies.
(b) Loans are not granted under a whole life policy
(d) Both are wrong

(a) The nominee must be above 18 years of age
(b) The nominee must be a close relative
(d) Both are wrong

(a) The age nearer birthday is always less than the age next birthday
(b) The age nearer birthday is always more than the age next birthday
(d) Both are wrong
413 Limited payment plan policies may be preferred by persons

(a) Whose careers are likely to be short
(b) Who have large families
(c) Who are very wealthy
(d) Who are young and just started the career

414 Personal development affects
(a) One’s life as an agent
(b) One’s life as a family
(c) One’s life as a citizen

(a) Maturity claims are paid to policy holders
(b) Maturity claims are paid to absolute assignees
(d) Both are wrong
416 Who can make a proposal?

(a) A person who is not less than 18 years old
(b) A licensed broker
(c) An agent of insurer
(d) All the above

(a) Group insurance business is growing faster than individual business
(b) Group insurance is socially very relevant
(d) Both are wrong

(a) Creating separate departments slows down the work
(b) Organization is influenced by the consideration of costs
(d) Both are wrong

(a) If the nominee is a minor, the maturity claim can be paid to the guardian
(b) If the nominee dies, the claim can be paid to the heirs of the nominee
(d) Both are wrong

(a) A good organizational structure avoids duplication of work
(b) Procedures are a part of organizational structure

421 Distribution channel ……….. the distance between the producer and the consumer.,
(a) Widens
(b) Bridges
(c) Extends
(d) Destroys

(a) The nomination can be changed after the policy has been assigned.
(b) The assignee can make a fresh nomination.

(a) An excellent product does not guarantee that people will buy.
(b) The needs for life insurance are not the same for every body.

(a) The prospect and the claimant have the same mindset.
(b) Claimants understand the benefits of life insurance better than policyholders.

(a) An objection is to be welcomed.
(b) An objection means that the agent has to explain more.

(a) There is no investment which is perfect.
(b) A safe investment is the best investment.
427 An agent must enjoy the ----------------- of the policyholder

(a) Favour
(b) Satisfaction
(c) Trust
(d) Pleasure

428 The premium actually paid by the policyholder depends upon
(a) The wealth of the person to be insured.
(b) The level of risk as assessed by the underwriter.
(c) The tables of rate printed by the insurer.
(d) All the above

(a) Frauds are more likely in death claim cases than in maturity cases.
(b) If the life insured had died one month before maturity date, it is a death claim.
430 State which of the following statements is correct in connection with a kiosk.
(a) It is managed by advertising agencies.
(b) Information is given manually.

(a) Customer will buy when he sees the advertisement in TV
(b) Insurance is service like hotel or travel
(d) Both are wrong
432 The social sector includes

(a) Salaried workers from industry.
(b) Self-employed agricultural labour.
(c) People living in chawls in cities.
(d) All the above.

(a) The requirement of medical examination varies according to the duration of lapse.
(b) The requirement of medical examination depends on the sum assured.

(a) The best investment is that which suits an individual's needs.
(b) Shares of a good company are better than fixed deposits in banks.

(a) A paid up policy is entitled to further bonuses.
(b) A paid up policy is entitled to further bonuses if it is a with profits policy.

(a) A policy lapses only when the policyholder decides that he does not want it.
(b) A lapse may happen because of temporary financial difficulties.
437 An insurance agent can act at one time for …. Life insurer/s.
(a) 1
(b) 2
(c) 3
(d) any number of
438 Which one of the following should not be done during an interview?
(a) Record the conversation on a tape recorder.
(b) Allow the prospect time to think about the proposal.
(c) Enquire about the prospect's financial situation.
(d) Contradict the correctness of the prospect's ideas.

(a) A group insurance cover is given only if there is a certain minimum number.
(b) A group policy is not granted if the group has been formed only to avail of cover.

(a) The Consumer Protection Act may be violated if an agent has poor knowledge.
(b) The interest of the agent and of the policyholder are mutually supportive.
441 Speech pleasantly worded, requesting instead of commanding is ………..

(a) Disrespect
(b) Discourtesy
(c) Offence
(d) Courtesy

442 A good agent is one who
(a) Does not allow his policyholders to go to the office.
(b) Is contacted by the policyholder whenever he has a problem.
(c) Remembers every important date in the life of his policyholders.
(d) Is all of the above .

(a) Group insurance is the same as Salary Savings Schemes.
(b) Premiums under some group policies are paid by governments.
444 A policy which has been assigned, will revert back to the assignor
(a) When the purpose for which it was assigned is not valid any more.
(b) When the policy becomes a claim.
(c) When the nominee under the policy dies.
(d) When the policy is assigned back by the assignee.

(a) The rates of interest on loans are fixed by the IRDA.
(b) The rates of interest on loans are fixed by the Reserve Bank of India.

(a) There is no death risk cover in an annuity.
(b) Though called annuity, the payment may be paid every month
(d) Both are wrong
447 Which of the following is most effective in building strong relationships?

(a) Sending his peon to the policyholders reminding them of premium due.
(b) Sending letters to the policyholders explaining new plans on offer.
(c) Telephoning policyholders and enquiring of their welfare.
(d) Personally calling on customers and asking them of their welfare.
448 Who amongst the following can take out a group insurance policy?
(a) Office goers who travel in the same compartment in the suburban train.
(b) A group of travelers on a package tour.
(c) A contractor who engages the same people every day on daily wages.
(d) Members of a toddy tappers association.

449 Which one of the following is correct with regard to children’s policy?
(a) On vesting date, the insured person has no option to change the term of the policy.
(b) On vesting, the insured person has no option to increase the Sum assured under
the policy.
450 Insurance is necessary because:

(a) Assets depreciate over time and through usage.
(b) Assets may be destroyed unexpectedly.
(c) Assets may break down as a result of an accident and become non-functional.
451 The proposal form contains information relevant to determine:

(a) Level of risk.
(b) Moral hazard
(c) Insurable interest.
(d) All of the three.
452 State which one of the following is correct

(a) Trustees have to be appointed in all group policies
(b) All group policies need approval of Income Tax department
453 In the case of Life Insurance, the principle of insurable interest operates:
(a) In the same way as in fire insurance.
(b) In the same way as in marine insurance.
(c) In the same way as in motor insurance.
(d) Differently than in other forms of insurance.
454 Which one of the following is correct with reference to Life Insurance?
(a) The claim can be paid only after verification of the income of the deceased person.
(b) The claim amount should not exceed the loss of income to the family.
(c) The claim amount should be determined by a surveyor.
(d) None of the above is true.
455 Under the system of non medical underwriting

(a) Only some towns are covered
(b) There is no restriction on age.
(c) There is no restriction on sum assure
(d) There is restriction on both sum assured and age.

456 State which one of the following is correct?
The Ombudsman’s award is binding on all parties.
The ombudsman is like a judge appointed by the chief justice of India
Both are correct
Both are wrong
457 State which one of the following statements is correct.

(a) The nominee becomes owner of the policy.
(b) The nominee becomes an heir of the insured person.
458 Which one of the following statements is correct?

(a) In a convertible plan, the insurer has necessarily to agree to the conversion asked for.
(b) In a convertible plan, the conversion is done on the request of the policy holder unless
the policy provides for automatic conversion.
459 Which one of the following is correct?

(a) If a person is missing for 7 years the claim is called death claim
(b) A claim can be admitted if the life insured is not heard of for 7 years

(a) Pre -approach is the same as qualifying the prospect
(b) Prospects' likes are not necessary when working among friends

(a) Service calls should be part of the agents routine
(b) Service calls may not be liked by Policy Holders
(c) Both statements are wrong
(d) Both statements are correct

(a) The foreign exchange regulations apply if the life insured is a non resident
(b) The foreign exchange regulations apply if the claimant is a non resident

(a) The premium decreases as the age of the person increases
(b) The premium increases as the age of the insured person increases
(c) The premium is the same for the person aged 30 for all plans of insurance
(d) The premium is the same whatever is the age of the person

(a) Building relationship with policyholder does not produce any income
(b) A policy may lapse even if the agent’s quality of service is very good
465 When court orders that a missing person is presumed to be dead

(a) Suicide clause will operate if a person was missing with in one year of policy
(b) Enquiries will be made as in the case of early death claim
(c) Enquiries will be made as in the case of death claim
(d) The date of death is taken to be the date of court order
466 Personal Development affects one's

(a) Habits
(b) Temperament
(c) Professional Knowledge
467 In which way does the rehearsal help?

(a) It makes sure that the sale will definitely happen
(b) The ideas will flow in logical sequence
(c) it avoids to think afresh at the time of interview
(d) It helps in all the three above
468 Business targets of an agent include

(a) Business to be done during the year
(b) Business to be done during the month
(c) Business to be done during the next week
(d) all the above three

(a) A person whose children are well settled does not require life insurance
(b) A person who has no family does not need life insurance
(d) Both are wrong

470 Which of the following is correct??
(a) If there is no decree from a court, the insurer can pay death claim to nominee
(b) If any dispute is raised, insurer should avoid paying death claim to nominee
(d) Both are wrong

(a) The amount of premium is equal to sum assured divided by the term of the policy
(b) The amount of premium increases as the term of the policy increases
(d) Both are wrong

(a) The policy has to be given to insurer at the time of surrender
(b) The policy has to be given to insurer at the time of loan
(d) Both are wrong

(a) When a policy lapses, the contract comes to an end
(b) When a policy lapses, nothing further is payable under it
(d) Both are wrong
474 Which of the following matters can be referred to ombudsman

(a) A complaint that extra premium charged is not reasonable
(b) Grievances against the decision of a consumer forum
(c) Dispute on the amount offered by the insurer to settle claim

(a) A premium paid within grace period is a payment made on due date
(b) A policy is not considered to have lapsed during the days of grace
(d) Both are wrong
476 Because of the principle of Indemnity

(a) There would be difficulties in settling claim in General Insurance
(b) There are frequent disputes at the time of settling claims
(c) There may be an attempt to exaggerate the claim
(d) All the above 3 may happen

(a) Life insurance is the best saving scheme for all persons
(b) Life insurance is the best investment scheme for young persons
(d) Both are wrong

(a) Industrial assurance is meant only for industrial workers
(b) Industrial assurance is meant for people with low income
(d) Both are wrong

(a) An endorsement may be placed on the policy at the very beginning.
(b) The nomination may be made later by endorsement
(d) Both are wrong
480 The practice of charging level premium has the benefit of

(a) Making it easy for the policy holder to maintain the insurance cover
(b) Increasing the returns to policy holder
(c) Helping the agent in his sales effort
(d) All the above

(a) A medical referee examines the life to be insured
(b) A medical referee only sees the report received by the insurer
(d) Both are wrong
482 Marketing of Insurance includes

(a) Simplifying claims settlement procedures
(b) Reducing premium rates
(c) Increasing agency commission rates

(a) Group policies are popular because of legal compulsions
(b) Group policies give employees benefits better than legally required
(d) Both are wrong

(a) The scope of group policies is limited by the requirement of law
(b) Group insurance policies can be tailor made to suit specific needs
(d) Both are wrong

(a) A claim under the MWP Act policy will be paid to official trustee, if no trustee is
appointed
(b) A claim under MWP Act policy will be paid to the beneficiaries if no trustee is
appointed

(a) A Nomination is automatically cancelled when an assignment is made
(b) A nomination is automatically cancelled when a loan is taken under the policy from
the same insurer.

(a) Life insurance premium paid may lead to saving of taxes.
(b) The rebate available on the premium paid is the same for all taxpayers

(a) Recognition happens when the bearer remembers your tastes in the restaurant
(b) Recognition happens when one’s thoughts are taken seriously

(a) In extended term assurance option the full installment premium is advanced
(b) In automatic premium advance option the full installment premium is advanced
(c) Both statements are wrongs
(d) Both statements are correct

(a) When ever a policy is revived a new policy is issued
(b) When ever a policy is revived endorsements are placed on the policy
(c) Both Statements are right

(a) People in the rural areas are poor
(b) The rural market is a fast growing market

(a) The insurance act stipulates that the insurer must do the minimum business in the
rural areas
(b) The IRDA has stipulated the minimum business that is to be done in rural areas
(d) Both are wrong

(a) Bonus is paid along with the survival benefit in Money Back Policy
(b) Bonus is paid when money back policy matures
(d) Both are wrong
494 An objection is
(a) A blessing in disguise
(b) A flimsy excuse
(c) A means to get rid of the agent

(a) A lien operates for a specific period
(b) A clause excludes specific risks
(d) Both are wrong

(a) Outstanding amount of loans including outstanding interest are deducted from
the claim amount
(b) Fresh loans cannot be taken till the earlier loan is repaid in cash or cheque
(d) Both are wrong
497 Personal development affects one’s

(a) Ability to think clearly
(b) Ability to handle stressful situations
(c) Ability to speak

(a) Life insurance helps when one wants to take a loan for a home
(b) Life insurance helps one to leave a comfortable retired life
(d) Both are wrong
499 The policyholder is concerned with the

(a) Office premium
(b) Pure premium
(c) Net premium
500 In Life insurance Contract, the beneficiary may be

(a) The policyholder
(b) The life insured
(c) The dependents of the life insured

(a) Action is initiated by the insurer well before the date of maturity
(b) He rightful claimant in the case of maturity is the policyholder or assignee
(d) Both are wrong

(a) The underwriter determines the premium to be charged
(b) The underwriter is an employee of the insurer
(d) Both are wrong

(a) Branch offices can be allowed to release TV advertisement
(b) Branch office can correspond with IRDA directly
(d) Both are wrong

(a) An insurer’s organization is determined by the IRDA
(b) An insurer’s organization has to be approved by IRDA
(d) Both are wrong

505 The amount of insurance depends on
(a) Neither the peril nor the risk
(b) Both peril and risk
(c) The risk
(d) The peril

(a) In group policies, the chance of adverse selection is low
(b) In group policies every person is medically examined
(c) Both are wrong
(d) Both are correct
507 In the case of life insurance insurable interest should exist

(a) At the inception of the policy
(b) At the time of claim
(c) At the time of every renewal premium payment
(d) All the above
508 Advertisements include

(a) Hoardings on highways
(b) F lashing neon signs on buildings
(c) Message on visiting cards
509 Personal development makes the agent

(a) Pleasant to deal with
(b) Dependable
(c) Trustworthy
(d) All the above
510 Which one of the following is correct with reference to the Kiosk?
(a) This is useful only to people who do not have computer and internet knowledge
(b) Technical knowledge is necessary to operate the kiosk
(d) Both are wrong
511 The date of the issue of First Premium receipt indicates

(a) The date when the risk officially begins
(b) The date when the next premium falls due
(c) The date when the policy will commence

512 Which of these is not enough to claim policy money?
(a) Probate of will
(b) Succession certificate
(c) An agreement between heirs
(d) A court decree
513Which of the following is correct?

(a) A policy is foreclosed when the loan is not repaid
(b) A policy is foreclosed at the time of claim
(d) Both are wrong
514 A license of insurance agency will not be given unless the person
(a) Is recommended by an insurer
(b) Is a graduate
(c) Is a resident of town where the insurer has an office
(d) Satisfies all the above conditions

(a) Accident and disability benefits are payable along with maturity claims
(b) Accident and disability benefits are payable along with death claims
(d) Both are wrong
516 State which one of the following is correct

(a) Very few people recognize that early death is a possibility for themselves
(b) The service of insurance happens at the time of the claim
(d) Both are wrong
517 The tariff advisory committee

(a) Determines the basic premium for life insurance
(b) Determines the basic premium for motor insurance
(c) Approves the premium rates decided by the actuary
518 which one of the following is correct?

(a) A prospect buys an agent before he buys a life insurance policy
(b) An agent is bought when he is seen to be trustworthy
(d) Both are wrong

(a) A request for a loan is considered a claim
(b) A request for surrender a policy is considered a claim
(d) Both are wrong

(a) An assignee becomes the policyholder
(b) The nominee becomes the policyholder
(d) Both are wrong

(a) It is essential that every insurer should have a branch office
(b) Agent can be looked after by branch manager
(d) Both are wrong

(a) An agent with mobile telephone provides better communication facility
(b) A policyholder needs repeated reassurance that the insurance policy is worth it
(d) Both are wrong
523 Why are enquiries made in the case of early claim?

(a) To confirm that the underwriter's decision was correct
(b) To confirm the validity of the mortality tables used
(c) To check whether underwriting policy need changes

(a) In case of soldiers, the commander’s certificate is proof of death
(b) In case of soldiers, the prisoner of war must continue to pay the premium
(d) Both are wrong

(a) A sale is first made in the mind of the agent
(b) It is always possible to predict the response of the prospect
(d) Both are wrong

(a) Actuary has to certify the valuation report of the insurer
(b) Actuary is responsible for the adequacy of the premium
(d) Both are wrong

(a) Costs are affected by organizational structure
(b) Bonuses are affected by organizational structure
(d) Both are wrong

(a) Foreclosure action is taken when interest is outstanding for 2 years
(b) Foreclosure action is taken when loan and interest equals Surrender Value
(d) Both are wrong

(a) A Statement is required from employers in all death cases.
(b) A coroner's report is required in accident cases
(d) Both are wrong

(a) Bonus is payable along with survival benefits in Money Back Policies.
(b) Bonus is paid along with maturity in Money back Policies.
(d) Both are wrong

(a) A good agent must be a good public orator
(b) A good agent must have command over language and good communication skills
(d) Both are wrong

(a) Customers will buy if there is good product to buy
(b) Marketing increases the awareness about the product
(d) Both are wrong

533 The days of grace
(a) Depend on frequency of premium
(b) Days of grace may be 30 or 31
(d) Both are wrong

(a) Revivals are in the interest of policy holders
(b) Revivals are in the interest of insurers
(d) Both are wrong
535 State which of these persons will not be given license to work as an insurance agent.
(a) A person with criminal record
(b) The executive of corporate
(c) An employee of insurance company

(a) If death claim is intimated after a long period, it may not be genuine
(b) If death claim is intimated after a long period, it must be carefully scrutinized
(d) Both are wrong

(a) a person just retired from a lucrative job does not require insurance
(b) A person who has spent 20 years in Dubai does not require insurance
(c) A person who just joined in a new job does not require insurance
(d) All the above wrong

(a) An annuity policy guarantees a pension
(b) An annuity policy is issued only after medical examination
(d) Both are wrong

(a) Decisions on organizations are based on customer convenience
(b) Decisions on organizations are based on administrative convenience
(d) Both are wrong

540 A probability of 1 in 40 is valid
(a) Only when it happens 40 times
(b) Even when it happens 50 times
(c) When it happens 400 times
(d) Any of the above situations

(a) The schedule of the policy will change when there is change in plan
(b) The change in plan will be made by endorsements
(d) Both are wrong

(a) Ethics are compromised when an agent gives importance to commissions
(b) The agent has to inform to the insurer about all the information he has about the
insured
(d) Both are wrong

(a) A revival is always done without evidence of good health
(b) A revival is as important as a new proposal
(d) Both are wrong

(a) An underwriter acts in the interests of policyholders as a whole
(b) An underwriter acts in the interests of the insurer
(d) Both are wrong
545 Which of the following pairs do not have insurable interest?

(a) Husband-wife
(b) Employer-employee
(c) Creditor-debtor
(d) Financier-fiancee

(a) Paid up value is subject to deduction of unpaid premiums.
(b) When a policy becomes paid up, the surrender value option is lost.

(a) People hesitate to buy life insurance because they are not aware of their needs
(b) People hesitate to buy life insurance because they like to enjoy the present
(d) Both are wrong

(a) In an assignment, property is transferred
(b) When a nomination is made, property is transferred
(d) Both are wrong

(a) Claims may be paid on the basis of indemnity bond if title is not established
(b) Claims may be paid on the basis of indemnity bond if the original policy is lost
(d) Both are wrong

(a) Riders are allowed only if the life insured is first class
(b) Riders are allowed only if the underwriter agrees to the same
(d) Both are wrong
551 The premium printed on the schedule of the policy is worked out from
(a) Net premium
(b) Risk premium
(c) Office premium
552 The principle of utmost good faith is meant to protect the interest of
(a) The insurer
(b) The community of policy holders
(c) The share holders

(a) IRDA is authorized to adjudicate over all claims of insurers
(b) Only claims exceeding 20,000 can be decided by IRDA
(d) Both are wrong

(a) A nominee can make further nomination under the policy
(b) A nominee cannot make a nomination
(d) Both are wrong

(a) A copy of proposal has to be sent to proposer
(b) A copy of medical report has to given to proposer
(d) Both are wrong

(a) The annual premium will be twelve times the monthly premium
(b) The annual premium will be less than twelve times of the monthly premium
(d) Both are wrong
557 Which of the following segments are potentially good for annuities
(a) Women with earned income
(b) Persons over 45 years of age
(c) Young children

(a) Motivation of people is varied
(b) Good agents value reputations more than money
(d) Both are wrong

(a) The IRDA can appoint directors on the board of an insurer
(b) Special agents are issued registration certificates by IRDA
(d) Both are wrong

(a) The prosperity in rural areas is increasing faster than in urban areas
(b) The rural market may be main area for growth in near future
(d) Both are wrong

(a) The rates of premium charged can be less than tabular premium
(b) The rates of premium charged can be more than tabular premium
(d) Both are wrong

(a) An agent who is very busy may appear to be not responsive
(b) An agent who is easy to get in touch provides a lot of satisfaction
(d) Both are wrong

(a) Personal development includes seminars and workshops
(b) Training classes are meant only for agents
(d) Both are wrong
564 Limited payment plan policies may be preferred by persons

(a) Who do not expect to be in active employment for long
(b) Who are not first class lives
(c) Whose careers have just begun
(d) Who are in the best of their health

(a) Bonus will vest in a limited payment plan even after premium stops
(b) The bonus in a joint life policy is calculated on double the sum assured
(d) Both are wrong

(a) Service calls are unnecessary intrusions on the time of policyholder
(b) Service calls require that the agent must meet the policyholder personally
(d) Both are wrong
567 The specialty of group insurance is ……..

(a) Master policy
(b) Individual underwriting
(c) High cost
(d) High premium

(a) A lapse is effectively a case of adverse selection
(b) A lapse should make the agent reflect on his competence
(d) Both are wrong
569 A human being

(a) Is an economic asset
(b) Is an income earning asset
(c) Is a perishable asset
570 A life insurance agent should

(a) Be aware of the plus and minus points of all financial investments
(b) Know the benefits of all life insurance plans
(c) Understand how the income tax laws apply to prospect
(d) Know all the three above
571 State which one of the following statements is correct:

(a) If the premium is paid within the days of grace, there is no penalty
(b) If the premium is not paid within the days of grace, the policy lapses
572 State which one of the following statements is correct:

(a) Pre-approach happens before the prospect list is finalized
(b) A sale has to be made first in the agent's mind
573 Sate which one of the following statements is correct?

(a) The distribution channel is like a bridge
(b) The distribution channel helps the product to reach the customer
574 In the event of the death of the policy holder, which one is correct?
(a) The claim amount, when paid belongs to the nominee
(b) The claim amount, when paid belongs to the heirs of the insured

575 Which of the following statements is true ?
(a) Anybody can become an Insurance Agent
(b) Some people will not be allowed to become insurance agents
576 Which in the following 4 statements is true with regards to children's policies
(a) The deferred date is a policy anniversary
(b) The vesting date is a policy anniversary

(a) Policy holders are part of an Insurance organization
(b) Medical examiners are part of the Insurance organization

(a) When a claimant produces the original will, no further proof is necessary
(b) An affidavit placed before a court by the heir is adequate evidence of title

(a) The premium is the price paid by the policy holder to secure insurance
(b) The amount of premium indicates the better quality of the insurance plan

(a) An underwriter is an Actuary
(b) An underwriter uses financial and medical data
581 Which of the following help to get the attention of the prospect?
(a) Using pictorials and graphs
(b) Using computer based colourful presentations
(c) Taking the prospect right down the relevant figures and facts

582 The system of non-medical underwriting is introduced because
(a) The medical examiners are not available in all areas
(b) Most of the cases are found to be standard lives acceptable at ordinary rates
(c) Of both the above reasons
(d) Of some other reasons
583 The word of mouth publicity from a satisfied claimant endorses

(a) The agent
(b) The insurer
(c) The business of life insurance
584 State which one of the following statements is correct ?

(a) An insurance agent's office is a part of the insurer's organization
(b) The collecting branch is part of a insurer's organization

(a) The pre-approach stage is the preparation for the first meeting
(b) The policy can be sold during the pre-approach stage itself, sometimes

(a) The records of an agent are mainly for income tax purposes
(b) The records of an agent will have much to learn from

(a) Appointment of an agent will be function of the investment department
(b) The declaration of bonus will be the function of Actuarial department
588 State which one of the following statements is correct?

(a) An agent's effectiveness depends only on his knowledge about insurance
(b) Agents has to spend some time everyday on his personal development

(a) An indemnity bond is asked for when there is no clear proof and title
(b) An indemnity bond is not necessary when there is no probate of a Will
590 In life insurance, profit is determined by:

(a) The accountant who prepares the balance sheet
(b) The actuary who makes the valuation
(c) The auditors who certify the annual accounts
(d) None of the above three persons
591 The insurance company will refuse to pay the claim if it is found that
(a) The damage was caused by the striking employees deliberately
(b) The damage was caused by a burglar deliberately
(c) He damage was caused by the owner deliberately
(d) None of the above situations.
592 The principle of utmost good faith is important to ensure

(a) That the premium charged is correct
(b) That the insurance cover is not illegal
(c) That there is no adverse selection
(d) All the three factors mentioned above.
593 Segmentation of a market means

(a) A geographical area
(b) People with a certain profession
(c) People of the same age
594 Knowledge of a plan of insurance means

(a) Details about the benefits available under that plan
(b) Availability of similar plans from competitors
(c) Provisions of the relevant tax laws
595 The amount payable under a non-life insurance policy depends on

(a) The extent of damage that has occurred
(b) The value of the insurance cover mentioned in the policy
(c) The lower of the above two values
(d) The higher of the above two values

596 Insurance reduces the burden on
(a) The society
(b) Individual families
(c) Business houses
(d) All the three
597 Under an MWPA policy, the beneficiaries

(a) May be specified even after the claim has arisen
(b) Must be specified at the commencement of the policy
(c) Are determined by law
(d) Can be specified at any time during the course of the policy
598 The benefits to the agent from an internet connection are

(a) The prospects' list will grow faster
(b) Personal calls on the prospects can be totally avoided
(c) Personal visits to the insurer's office can be reduced
599 An insurer as a trustee is responsible to

(a) The policyholders
(b) IRDA
(c) Government
600 License to work as an insurance agent is given to

(a) Individuals
(b) Companies
(c) Cooperative societies
601 The time for closing has to

(a) Be sensed by the agent
(b) Wait till the moral hazard issues are settled
(c) Wait till the spouse confirms that the insurance can be taken
(d) Wait till the prospect finally says 'yes'
602 Personal developments affects one's

(a) Earning
(b) Reputation
(c) Relationship with people
(d) All the above

603 Bonus becomes possible because
(a) Actual experience is better than expected
(b) The assumptions made in constructing the premiums were conservative
(c) There is a loading for bonus in the premiums
604 Insurance is meant to

(a) Prevent consequences from specified events
(b) Compensate for losses from specified events
(c) Prevent specified events
(d) Rebuild the assets lost because of specified events
605 If a policyholder applies for cancellation of his policy soon after he receives the FPR
(a) Full premium will be refunded
(b) Policy will be treated as lapsed from the nest premium due date
(c) He will be debarred from taking any further insurance policy
(d) Full premium after small deductions will be refundable

(a) Life insurance is bought, not sold
(b) General insurance business is often bought without being sold

(a) The Schedule of the Policy is not altered after the policy is issued
(b) Changes in terms of policy are made through endorsements
608State which of the following statements is correct.

(a) The non-forfeiture clauses are relevant only when the premium is not paid.
(b) The non-forfeiture clauses operate when the loan interest is not paid.

1 Calculate age nearer birthday, age last birthday & age next birthday based on following
data: DOP is 22nd March 2003 and DOB is 8th June 1950.
(a) Age nearer birthday is 53, age next birthday 53 and age last birthday 52
(b) Age nearer birthday is 54, age next birthday 54 and age last birthday 53
(c) Age nearer birthday is 52, age next birthday 52 and age last birthday 51
2 Calculate age nearer birthday, age last birthday & age next birthday based on following
data: DOP is12th Sep 2003 and DOB is 8th March 1972.
(a) Age nearer birthday is 32, age next birthday is 32, age last birthday 31
(b) Age nearer birthday is 33, age next birthday is 33, age last birthday 32
(c) Age nearer birthday is 31, age next birthday is 31, age last birthday 30
3Calculate ages nearer, next and last birthday if DOP is 4th March 2003 and DOB is 3rd
March 1948.
(a) 55, 56, 55
(b) 56, 57, 55
(c) 54, 55, 53
4 Calculate ages nearer, next and last birthday if DOP is 15th Feb 2003 and DOB is 8th
April 1942.
(a) 61, 61, 60
(b) 62, 62, 61
(c) 60, 60, 59
5 Calculate age nearer, next and last birthday if DOP is 6th Sep 2003 and DOB is 8th
June 1971.
(a) 32, 33, 32
(b) 33, 34, 33
(c) 31, 32, 31
6 Calculate age nearer, next and last birthday if DOP is 23rd Sep 2003 and DOB is 8th
Oct 1969.
(a) 34, 34, 33
(b) 35, 36, 35
(c) 33, 34, 33

7 Calculate age nearer , next and last birthday if the DOP is 4th May 2004 and DOB is
8th Oct 1953.
(a) 51, 51, 50
(b) 52, 53, 52
(c) 50, 51, 50
8 Calculate age nearer , next and last birthday if the DOP is 13th March 2002 and DOB is
8th July 1944.
(a) 58, 58, 57
(b) 59, 59, 58
(c) 57, 57, 56
9 Calculate age nearer , next and last birthday if the DOP is 4th May 2003 and DOB is
8th Oct 1952.
(a) 51, 51, 50
(b) 52, 53, 52
(c) 50, 51, 50
10 Calculate age nearer , next and last birthday if the DOP is 13th March 2003 and DOB
is 8th July 1945.
(a) 58, 58, 57
(b) 59, 59, 58
(c) 57, 57, 56
11 Calculate ages nearer, next and last birthday if DOP is 27th Aug 2003 and DOB is 8th
March 1970
(a) 33, 34, 33
(b) 34, 35, 34
(c) 32, 33, 32
12 Calculate ages nearer, next and last birthday if DOP is 4th March 2003 and DOB is
8th Dec 1948.
(a) 54, 55, 54
(b) 55, 57, 56
(c) 3, 55, 54

13 Calculate age nearer, next and last birthday if DOP is 6th Sep 2005 and DOB is 8th
June 1971.
(a) 34, 35, 34
(b) 34, 34, 35
(c) 35, 35, 34
14 Calculate age nearer, next and last birthday if DOP is 23rd Sep 2005 and DOB is 8th
Oct 1969.
(a) 36, 36, 35
(b) 35, 36, 35
(c) 35, 35, 36
15 Calculate IP if SA is 30,000/-, TP is 68.70, Mode is Yearly, Rebate for Yearly mode is

1.5% and Rebate for SA above Rs. 4,000/- is Re/- 1/- per thousand.
(a) 2025
(b) 1985
(c) 2000
(d) 1995
16 Calculate installment premium if SA is 25,000 with DAB, TP is 36.55, Premium for

DAB is Re. 1/- per thousand, Mode is Half-yearly, Rebate for Half-yearly mode is 1.5%,
and Rebate for SA above 4,000/- is Re. 1/- per thousand.
(a) 400
(b) 450
(c) 500
(d) 475
17 Calculate installment premium if SA is 50,000/- with DAB, TP is 48.4, Mode is

Quarterly, Rebate for SA above 20,000/- is 2/- per thousand, Premium for DAB is Re. 1/-
per thousand.
(a) 589
(b) 685
(c) 571
(d) 583
18 Calculate installment premium if SA is 30,000/-, TP is 68.70, Mode is SSS, SA rebate

above 4,000/- is Re. 1/- per thousand.
(a) 158
(b) 178
(c) 169
(d) 162

19 Calculate IP if SA is 30,000/-, TP is 68.70, Mode is monthly, Extra Premium for
Monthly mode is 5% and SA rebate above4,000/- is Re. 1/- per thousand.
(a) 158
(b) 178
(c) 169
(d) 162
20 Calculate Yearly premium if DOP is 3 3 2003, DOB is 28 6 1974, proposal is to be

backdated by 3 months, SA is 50,000/-, TP is 27.46 (age 27), 27.83 (age 28), 28.37 (age
29), YLY Mode Rebate is 1.50 and If SA is 50,000/- or more.
(a) 1241
(b) 1242
(c) 1250
(d) None
21 Calculate HLY premium if SA is 1,00,000/-, DOB is 28 6 1974, DOP is 20 12 2002,

TP for age nearer BD 27 is 27.46, for 28 it is 27.83 and for age 29 it is 28.37. Rebate for
HLY is 1/- and rebate for SA 50,000/- and above is 1.50
(a) 1266.5
(b) 1246.5
(c) 1293.5
22 Calculate premium under SSS if DOB is 28 6 1974, SA is 40,000/-, Term is 35, DOM
is 24 12 2037, SA Rebate for SA 50,000/- and above is 1.50. TP is 27.46 for age 27, 27.83
for age 28 and 28.37 for age 29.
(a) Rs.87.77
(b) Rs.89.57
(c) Rs.97.41
23 Calculate installment premium if SA is 50,000/- with DAB, TP is 48.4, Mode is

Quarterly, Rebate for SA above 20,000/- is 2/- per thousand, Premium for DAB is Re. 1/-
per thousand.
(a) 589
(b) 685
(c) 571
(d) 583
24 Calculate Paid up value with the help of the following data: SA is 4,000/-; Plan &
Term is Endowment for 20 years; DOC is 1st January 1995; LUP is 1st January 1998 and
Mode of payment is Quarterly.
(a) Rs.3000
(b) Rs.1500
(c) Rs.2500
(d) Nil

25 Calculate PV if SA is 2,00,000/-, Term is 25 years, LUP is 1st October 1999, DOC is
1st October 1990 and Mode of payment is Yearly
(a) 72,000/-
(b) 64,000/-
(c) 80,000/-
(d) 88,000/-
26 Calculate PV if SA is 1,00,000/-, Term is 25, LUP is 1st February 2002, DOC is 1st
August 1998 and Mode of payment is Half-yearly.
(a) 12,000/-
(b) 14,000/-
(c) 16,000/-
(d) 18,000/-
27 Calculate PV if SA is2,00,000/-, Term is 25 years, LUP is 1 - 4 - 1998, DOC is 1 - 4 -

1989, Mode is Yearly.
(a) 72,000/-
(b) 64,000/-
(c) 80,000/-
(d) 88,000/-
28 Calculate PV if SA is 1,00,000/-, Term is 25, LUP is 1 2 2002, DOC is 1- 8 - 1998,

and Mode is HLY.
(a) 12,000/-
(b) 14,000/-
(c) 16,000/-
(d) 18,000/-
29 Calculate PV if SA is 20,000/-, Term is 25 years, LUP is 1st October 1999, DOC is 1st
October 1990 and Mode of payment is Yearly
(a) 7,200/-
(b) 6,400/-
(c) 8,000/-
(d) 8,800/-
30 Calculate PV if SA is 1,50,000/-, Term is 25 years, DOC is 1st Sep 1992, LUP is 1st
March 1995 and Mode is HLY.
(a) 21,000/-
(b) 18,000/-
(c) 24,000/-
(d) Nil

31 Calculate PV if SA is 25,000/-, Term is 25 years, DOC is 1st April 1990, LUP is 1st
April 1996 and Mode is QLY.
(a) 4,500/-
(b) 7,500/-
(c) 9,000/-
(d) 6,000/-
32 Calculate PV if SA is 200,000/-, Term is 25 years, DOC is 1st Jan 1998, LUP is 1st
Oct 2001 and Mode is QLY.
(a) 32,000/-
(b) 30,000/-
(c) 28,000/-
(d) Nil
33 Calculate PV if SA is 20,000/-, P & T are Endowment for 20 years, DOC is 1st May
1997, LUP is 1st November 2002 and Mode is Half yearly.
(a) 6,500/-
(b) 5,500/-
(c) 6,000/-
(d) 5,000/-
34 Calculate PV if SA is 23,000/-, End Term is 15 years, LUP is 1st March 1982, DOC is
1st March 1973 and Mode is Qly. Also assume that bonus addition is @ 75/- per thousand
per annum.
(a) 30,858
(b) 28,325
(c) 29,325
(d) 22,192
35 Calculate the PV if SA is 23,000/-, Term is 4 years, LUP is 1 - 4 - 2002, DOC is 1 - 4 -

1998, and Mode is YLY.
(a) 11,500/-
(b) 9,200/-
(c) 13,800/-
(d) None
36 Calculate PV if SA is 30,000/-, Term is 20 years, DOC is 1 - 1 - 1997, LUP is 1 - 7 -

2002 and Mode is HLY.
(a) 9,250/-
(b) 8,250/-
(c) 7,500/-
(d) 9,000/-

37 Calculate PV if SA is 4,000/-, Term is 20 years, DOC is 1 - 1 - 1995, LUP is 1 - 1 -
1998 and Mode is QLY.
(a) 3,000/-
(b) 1,500/-
(c) 2,500/-
(d) Nil
38 Calculate PV if SA is 32,000/-, Term is 16 years, LUP is 1st April 2002, DOC is 1st
(a) 17,600/-
(b) 16,000/-
(c) 14,400/-
(d) 12,800/-
39 Calculate PV if SA is 40,000/-, Term is 12 years, DOC is 1st March 1998, LUP is 1st
March 2002 and Mode of payment of premium is HLY.
(a) 15,500/-
(b) 16,666/-
(c) 13,333/-
(d) 15,000/-
April 1988 and Mode is HLY.
(a) 18,200/-
(b) 16,800/-
(c) 19,600/-
(d) 35,000/-
41 Calculate PV if SA is 50,000/-, Term is 25 years, LUP is 1 - 8 - 2002, DOC is 1 - 2 -

1988 and Mode is HLY.
(a) 9,000/-
(b) 4,000/-
(c) 11,000/-
(d) 12,000/-
42 Calculate PV if SA is 50,000/-, Term is 25 years, DOC is 1st Sep 1992, LUP is 1st
March 1995 and Mode is HLY.
(a) 7,000/-
(b) 6,000/-
(c) 8,000/-
(d) Nil

(a) 21,000/-
(b) 15,000/-
(c) 18,000/-
(d) 12,000/-
44 Calculate PV if SA is 50,000/-, Term is 25 years, DOC is 1st Jan 1998, LUP is 1st Oct
2001 and Mode is QLY.
(a) 8,000/-
(b) 7,500/-
(c) 7,000/-
(d) Nil
45 Find out SV if DOS is 5 - 4 - 2003, Plan & Term is Endowment for 31 years, SA is
40,000/-, due date of the LPP (H) is 25 - 9 - 2001, DOC is 25 - 9 - 1986, VB after
valuation as on 31 - 3 - 2001 is 34,000/- and SV factors for various durations are 22% for
(a) 11,000
(b) 13,500
(c) 16,200
(d) 9,250
46 Calculate SV if DOS is 5 - 4 - 2003, Plan & Term is Endowment for 31 years, SA is

40,000/-, LPP (H) is 25 - 9 - 2001 paid on 22 - 11 - 2001, DOC is 25 - 9 - 1986, VB is
34,000/- and SV factors for various durations are 22% for 14 years, 25% for 15 years a
(a) 13,500/-
(b) 16,006/-
(c) 13,339/-
(d) 16,200/-
47 Calculate SV if DOS is 5 - 4 - 2003, Plan & Tern are Endowment for 31 years, Sa is
40,000/-, LPP (H) is 25 - 9 - 2001, DOC is 25 - 9 - 1986, VB is Nil and SV factors for
various durations are 22% for 14 years, 25% for 15 years and 30% for 16 years
(a) 4,400/-
(b) 6,000/-
(c) 5,000/-
(d) 5,500/-
48 Calculate SV if SA is 50,000/-, Term is 30 years, LPP (H) is 15 12 2000, DOC is 15 6

1986, VB as on 24 6 2000 is @ 750/- per thousand and SV Factor is 52.3%
(a) 30,000/-
(b) 45,000/-
(c) 45,762/-
(d) 32,688/-

49 Calculate SV if DOS is 5 - 4 - 2003, Plan & Tern are Endowment for 31 years, Sa is
40,000/-, LPP (H) is 25 - 9 - 2001, DOC is 25 - 9 - 1986, VB is Nil and SV factors for
various durations are 22% for 14 years, 25% for 15 years and 30% for 16 years.
(a) 4,400/-
(b) 6,000/-
(c) 5,000/-
(d) 5,500/-
50 Calculate Loan Value if Plan & Term are Endowment for 31 years, SA is 40,000/-,
DOC is 25 - 9 - 1986, Mode is HLY, IP due in September 2001 has been paid, VB as on
31 - 3 - 2001 is 34,000/-, SV factors for various durations are 22% for 14 years, 25% for
1
(a) 13,500/-
(b) 16,006/-
(c) 13,339/-
(d) 14,580/-
51 Find out the claim amount to be paid if DOD is 18 - 2 - 2002, DOC is 20 - 7 - 1989,
LUP (Q) is 20 - 1 - 2002, IP is 320/-, SA is 40,000/-, VB is 30,000/- and IB is 70 per
thousand as per Valuation as o 31 - 3 - 2001.
(a) Rs.50,000
(b) Rs.69,360
(c) Rs.72,160
(d) Rs.52,800
52 Find out the claim amount payable if DOD is 18 - 8 - 2002, DOC is 20 - 8 - 1989,
LPP (Q) is 20 - 8 - 2002 paid on 6 - 8 - 2002, IP is 320/-, SA is 50,000/-, VB is 36,000/-,
IB as per valuation as on 31 - 3 - 2001 is 68/- per thousand.
(a) 89,720/-
(b) 89,400/-
(c) 86,000/-
(d) 86,320/-
LPP (Q) is 20 - 2 - 2003 paid on 6 - 2 - 2003, IP is 300/-, SA is 50,000/-, VB is 36,000/-
and IB as per Valuation as on 31 - 3 - 2002 is 68/- per thousand.
(a) 89,700/-
(b) 86,300/-
(c) 86,000/-
(d) 89,400/-

54 Find out the claim value payable if DOD is 18 - 2 - 2002, DOC is 20 - 2 - 1989, LPP
(Q) is 20 - 2 - 2002 ( paid on 6 - 2 - 2002), IP is 300/-, SA is 50,000/-, VB is 36,000/- and
IB as per valuation (31 - 3 - 2001) is 68/- per thousand.
(a) Rs. 89,700/-
(b) Rs. 86,300/-
(c) Rs. 89,400/-
(d) Rs. 86,000/-
55 Calculate Claim Value if DOD is 18 8 2002, DOC is 20 5 1989, LPP (Q) is 20 8 2002
(paid on 6 8 2002), IP is 320/-, SA ia 50,000/- and VB is 36,000/- and IB is 68/- per
thousand as per valuation as on 31 03 2001.
(a) Rs. 85,360/-
(b) Rs. 88,760/-
(c) Rs. 86,320/-
(d) Rs. 89,720/-
LPP (Q) is 20 - 2 - 2003 paid on 6 - 2 - 2003, IP is 300/-, SA is 50,000/-, VB is 36,000/-
and IB as per Valuation as on 31 - 3 - 2002 is 68/- per thousand.
(a) 89,700/-
(b) 86,300/-
(c) 86,000/-
(d) 89,400/-

What is HLV and how do you estimate it?
Under the HLV approach the effort is to estimate the future earnings of an individual and
capitalize them with an appropriate discounting factor (a reasonable rate of interest )
keeping in view the present inflation and bank rate. This present value of the total future
earnings is thus the total economic surplus available to the dependent family (as an
economic unit). The surplus amount, however, does not include the individual's
1. Self maintenance charges

2. Statutory or legal taxes and also the
3. Existing life insurance premium
These expenses need to be deducted from the surplus to determine the net economic gain
in terms of HLV meant for the family. The effort is to protect this estimated future
economic value being contributed to the family through a life insurance policy.
Formula for HLV
H = (E-M) x an
where H = Human Life Value
E = Earnings per annum
M = SELF (Maintenance charges + taxes+ Life Insurance Premium)
an= Annuity factor at a given rate of discount &
n = the working span (Retirement age - Present age)
Example
Jain’s present age is 40 years and wishes to retire at age 60. Present salary is Rs 3,50,000
per annum. Total Life Insurance premiums paid Rs 30,000 p.a. (including children's and
wife's policy). Income Tax amounts to Rs 45,000. Medical expenses are being reimbursed
by the company and self maintenance expenses Rs 36,000 (including entertainment, club
membership, sports)
The calculation as per the above formula would be:

Gross total Income = Rs 3,50,000
Less: Self-Maintenance charges = Rs 36,000
Taxes payabe = Rs 45,000
Life insurance premium on policies = Rs 30,000
Surplus income generated for the family = Rs 2,39,000
where the working span is 20years
Now this income needs to be capitalized through discounting at an appropriate rate ( say
8% p.a.) for the next 20 years is Rs 25,34,260/-
From a financial calculator perspective 239,000 is the payment 20 is n (No. of years for the
payment) 8 is the % (discount factor) You need to calculate for PV (the present value)
The assumption in the calculation is that the present income will continue to remain the same (an
adjustment for inflation and for seen sickness, partial disability or unemployment for a short
term). The above HLV is only a representative economic value of the individual for his family

and needs to be protected with life insurance cover against premature death or permanent
disability
1. Mr. and Mrs. Pagnis , aged 46 and 42 years, both have a life expectancy of 35 years.
Calculate the insurance based on need based and income replacement methods on Mr.
Pagnis life.
You have the following information :-
Current investments Rs 20,00,000

Expenses Rs 3,00,000 ( including 1 lakh of Mr. Pagnis personal expenses)
Mr. Pagnis income post tax Rs 3.5 lakh
Final costs Rs 1 lakh
Post tax, post inflation rate/discount factor is 3%
Under the needs approach there are 3 basic steps to follow:

1stStep
Is to estimate the total economic resources the family needs to maintain their standard of
living
2ndStep
Is to determine all resources that would be available to the family from available
resources
3rdStep
Subtract 2 from 1 and the result is the amount of funds needed to provide for the family
Solution:
1st step:
The expenses are Rs 3,00,000 (including 1 lac of Mr. Pagnis personal expenses)
Resources required by family to maintain the standard of living is Rs 2 lacs (to be
required for the next 35 years)
Rs 2 lacs capitalized through discounting factor of 3% per annum for the next 35 years -
the capitalized value arrived at is:
2,00,000 X 22.1318* = Rs 44,26,360 ( BGN )
(*discounting factor applicable for applied interest rate of 3%)
2nd step:
Resources available to the family - Rs 20 lacs from current investments
3rd step
Subtracting 2 from 1 we have (Rs 44,26,360 - Rs 20,00,000) = Rs 24,26,360 To this
amount we add the final costs of Rs 1 Lacs
THE AMOUNT OF INSURANCE REQUIRED UNDER THE NEED BASED

APPROACH IS Rs 24.26 Lacs

In the Income Replacement method the effort is to produce a level of income in line
with that currently being received - but adjusted for dependents need only. For e.g in the
question:
Mr. Pagnis income post tax is Rs 3.5 lacs. Adjusted for dependent's need only the amount
required is Rs 2 lacs.
To arrive at the capital needed to produce that amount would be Rs 2 lacs divided by .03
which is Rs 66,66,667. To this you add the final costs of Rs 1,00,000
THE TOTAL INSURANCE REQUIRED UNDER THE INCOME REPLACEMENT

METHOD IS Rs 67,66,667 or Rs 68 lacs

1. A type of risk with high frequency but low severity is probably best handled by:
a) Self-insurance
b) Insurance
c) Avoidance
d) Transfer
2. 'Consideration' under the law is a return promise to:
(1) Do certain things

(2) Abstain from doing certain things
(3) Forbear some acts
(4) Accept an offer
a) (1), (2), and (3) only

b) (1), (2), and (4) only
c) (1), (3), and (4) only
d) (2), (3), and (4) only
3. Frank has an indemnity policy in respect of his house. The house was valued when he
first took out the policy three years ago at 80,000 and insured for that amount. The policy
has been renewed each year since, without alteration. If the house is destroyed by fire and
the cost of re-building it would be 110,000, how much is Frank likely to recover?
a) 58,182
b) 80,000
c) 88,000
d) 110,000
4. A client explains that she only wants a life insurance policy that will cover her family
against financial risk over the next five years, while she still has dependent children and a
large mortgage. It is unlikely her income will increase over this period. What type of
insurance is she looking for?
a) Pure endowment assurance

b) Term insurance with a level premium
c) Single premium life insurance
d) Whole of life assurance to be made paid up after five years

5. The 'principle of subrogation' means:
a) An insurer may bring an action against a third party in the name of the insured
after satisfying a claim
b) An insured may not take legal action in respect of a matter which is the subject of a
claim
c) An insurer undertakes to take legal action on behalf of its insured and to pay to the
insured the net proceeds of such legal action
d) An insurer which has satisfied a claim may recover from the insurer of a third party
who admits liability
6. During retirement, a person would maintain a high level of life insurance protection to:
(1) Pay estate duty

(2) Provide succession or dependent income
(3) Repay outstanding debt
(4) Build cash value
a) (1) and (2)

b) (1) and (3)
c) (1), (2) and (3)
d) None of the above
7. Which of the following is true regarding the ownership of life insurance?
a) A policy can only be issued to the insured

b) Generally, assigning a policy requires proof that the insured is still ‘insurable’
c) Only a person with an insurable interest can be named as a beneficiary
d) The owner can assign the policy to whomever he or she chooses, even if the
assignee has no insurable interest
8. Steven has a premium due on a motor insurance policy. He calls the agent and requests
for an extension. The agent assures him that the insurer usually gives a grace period of
one week for such payment. Steven has an accident. The insurer cannot deny liability for
the loss on the grounds that the premium was not paid because of the doctrine of:
a) Waiver
b) Estoppel
c) Agency
d) Utmost good faith

9. A reversionary bonus is:
a) Any profit distributed to holders of life policies who cash in those policies
b) Generally profit that will be distributed on the same terms as the sum assured
c) A distribution of income to shareholders
d) Profit distributed to holders of unit-linked policies
10. Professional indemnity insurance protects a financial advisor who has been negligent
in giving investment advice:
a) Only if the advisor is liable under statute

b) Only if a contract exists between the advisor and the investor
c) Only if the investor relies on the advice
d) Only if the advisor has not included a disclaimer of liability in the contract with the
investor

Mock Test :-
Ques1. The money insurance policy is designed to cover the Riot & Strike
(a) Loss of money in transit in the hands of insured's employee bill collectors.
(b) Loss during payment of wages.
(c) Loss due to “hold up” risks
Ques2.Which type of the following fidelity guarantee policies is suitable to an insured

who fears that more than one employee may act in collusion and cause a loss?
(a) Floating
(b) Collective
(c) Individual
(d) Group
Ques3. Under which of the following extensions is 'not' provided for Workmen's
Compensation Tariff?
(a) Contractor's Workmen

(b) Damage to personal effects of workmen kept in the factory
(c) Diseases specified in the Act
(d) Medical expenses
Ques4 which of the following contingencies is 'not' covered under personal accidental
policy?
(a) Permanent total disablement

(b) Temporary total disablement
(c) Permanent partial disablement
(d) Temporary partial disablement
Ques5. Claim forms are not compulsorily used in ___________
(a) Fidelity guarantees

(b) Marine cargo (exports/imports)
(c) Machinery breakdown
(d) Bankers blanket
Ques6. Which of the following documents is not relevant to bodily injury claims for
processing third party claims under motor policies?
(a) Medical certificate

(b) Coroner's (post-mortem) report
(c) Driving license
(d) Police report
Ques7.The Mediclaim policy is available upto a maximum sum insured of Rs____lakh

(a) 5
(b) 2
(c) 3
(d) 4
Ques8. The premium under Mediclaim policy is not related to_____
(a) Age
(b) Job
(c) History of previous surgery
(d) Sex
Ques9. Under group personal accident policies, 'on duty' cover is available at ___% of the
normal premium.
(a) 60
(b) 75
(c) 25
(d) 50
Ques10. Which of the following is correct meaning of sum assured under majority of
policies?
(a) Fair value of subject matter of insurance

(b) Agreed value of property insured
(c) The amount paid when there is a total loss
(d) The maximum limit of liability under the policy
Ques11. The insurance under Overseas Medical policy does not operate beyond ____
days of continuous absence from India
(a) 120
(b) 180
(c) 60
(d) 90
Ques12. Under the personal Accident Policy, weekly benefits are paid subject to a
maximum period of ______ weeks.
(a) 100
(b) 104
(c) 52
(d) 75

Ques13. In case of a Fire Declaration Policy, if sum insured-Rs 1 crore, Rate of
premium-- Re.1 per mille, and average of Monthly Declaration –Rs 60 lakh. Calculate
provisional Premium and refund of Premium.
(a) Rs.9,000, Rs.5,000

(b) Rs.10,000, Rs.4,000
(c) Rs.7,000, Rs.7,000
(d) Rs.8,000, Rs.6,000
Ques14. Which of the following statements is true?
Statement A: Electronic Equipment policy covers electrical or mechanical breakdown of

the insured item.
Statement B: Electronic Equipment policy covers damage caused by failure of electricity
supply.
(a) Neither of the students

(b) Statement A only
(c) Statement B only
(d) Both Statements
Ques15. Out of 400 houses, each valued at Rs.20,000/-, 4 houses get burnt (on an
average) every year. What should be the contribution of each owner to pay for the losses
of 4 houses?
(a) Rs.800
(b) Rs.200
(c) Rs.400
(d) Rs.600
Ques16 Calculate the total premium payable under the Collective fidelity Guarantee
Policy for. A Cashier-Rs. 1 lakh-Rate 0.75% and an accountant -Rs.2 lakh- Rate 1.00%
(a) Rs.2,750
(b) Rs.3,000
(c) Rs.1,700
(d) Rs.2,500
Ques17. A policy with a sum insured of Rs 1 lakh is subject to a 'franchise' or

Rs.10,000.What is the amount of claim payable, if the loss is Rs.8,000?
(a) Rs.2,000
(b) Rs.10,000
(c) Rs. 18,000
(d) Nil

Ques18. Which of the following statement is true in relation to Group Mediclaim Policy?
Statement A: Cumulative Bonus is not available

Statement B: Health checkup expenses are not payable
(a) Neither of the statement

(b) Statement A only
(c) Statement B only
(d) Both statements
Ques19. The Standard Fire and Special perils Policy covers works of art for an amount
'not' exceeding Rs._________________
(a) 20,000
(b) 10,000
(c) 5,000
(d) 15,000
Ques20.What is the amount of claim payable if loss is Rs15,000 in case of a policy with
sum assured Rs. 1 lakh and excess clause Rs.10,000?
(a) 2,000
(b) 5,000
(c) 3,000
(d) 4,000
Ques21. Calculate the extra premium payable on expiry of the policy in case Money in
transit Policy, if estimated amount as per proposal is 10 lakh, actual amount as per
declaration is 12 lakh and rate of premium is Re. 1 per mille.
(a) Rs.200
(b) Rs.1000
(c) Rs.1200
(d) Rs.500
Ques22 Out of 1000 pedal cycles, each valued at Rs.2000, 5 are stolen on an average
every year. The rate of premium for each pedal cycle in % may be indicated.
(a) 5
(b) 10
(c) 50
(d) 0.5

Ques.23 Which of the following fidelity guarantee policies is automatically cancelled on
payment of loss.
(a) Floating Policy

(b) Individual Policy
(c) Position Policy
(d) Blanket Policy
Ques24. Which of the following is 'not' considered as a material fact?
(a) The Insured had cancelled his policy.

(b) The previous Insurer had cancelled the policy.
(c) The previous Insurer had rejected the proposal.
(d) The previous Insurer had refused to renew the proposal.
Ques25 Which of the following cover is suitable for regular export/import shipments?
(a) Open cover

(b) Annual policy
(c) Duty insurance
(d) Special Declaration Policy
Ques26. According to Fire Tariff, which of the following cannot be covered under valued
policy?
(a) Obsolete machinery

(b) Work of art
(c) Brand new machinery
(d) Curios
Ques27 Which of the following risks is not covered under Bankers Blanket policies?
(a) Dishonesty of appraisers

(b) Trading losses
(c) Fire
(d) Criminal acts of employees

Ques28. As per law premium collected by an agent shall be deposited with the
insurer_________.
(a) The same day

(b) Within 24 hours
(c) Within 48 hours
(d) Within 7 days
Ques29 Calculate the refund payable on expiry of the policy in case Money in Transit
Policy, if estimated amount as per proposal is 20 lakh, actual amount as per declaration is
12 lakh and rate of premium is Re. 1 per mille.
(a) Rs.800
(b) Rs.1000
(c) Rs.1200
(d) Rs.500

Solution
1 B 16 A
2 A 17 D
3 B 18 D
4 D 19 B
5 B 20 B
6 B 21 A
7 A 22 D
8 D 23 B
9 B 24 A
10 D 25 A
11 B 26 C
12 A 27 B
13 B 28 B
14 D 29 A
15 B
Q13 Hint: Per mille means per thousand. Provisional premium= 1cr x 1/1000= 10000
Refund of premium= 10000- (60 lac x 1/ 1000)= 4000
Q15. Hint: 20000 x 4 / 400=200
Q16.Hint: (100000 x .75)+(200000 x 1)
Q21. Hint: (12lac-10lac) x 1/ 1000
Q22. Hint: Premium per cycle= 2000 x 5 / 1000= Rs. 10
Rate of premium= 10/2000= 0.5
Q29. Hint: (20 lac- 12 lac) x 1/ 1000.


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FINANCIAL PLANNING ACADEMY

Insurance Planning and Risk Management

2 Insuring your house is an example of which of the following?

4 What is the third step in the risk management process?

Financial Planning Academy 1

7. What does the insured's duty of disclosure mean?

8. Anti-discrimination and equal opportunity legislation prohibits discrimination on the

9. A lender requires a particular insurer’s product to be in place before they grant a

Financial Planning Academy 2

12. Which of the following occupational classifications would be considered more

13. The income of a client is used to determine:

Financial Planning Academy 3

Financial Planning Academy 4

Financial Planning Academy 5

32. Which of the following are all general insurances?

Financial Planning Academy 6

Financial Planning Academy 7

Q2. A house owner contends that he is exposed to the following risks:

Q3. Gambling losses are uninsurable for the following reason/s:

Financial Planning Academy 8

Financial Planning Academy 9

Financial Planning Academy 10

Q14. Investment related risks arise primarily due to:

Financial Planning Academy 11

Financial Planning Academy 12

(a) (C) only

3) Speculative risk can have following outcomes ________.

5) For risk to be insurable which one of following is not correct?

Financial Planning Academy 13

8) Which of the following is type of pecuniary insurance?

9) Participating policies are those where _____________.

10) In Unit-Link policy, market risk is with ______.

Financial Planning Academy 14

12) Minimum age at entry for Medi-claim is ___________.

Financial Planning Academy 15

Financial Planning Academy 16

Financial Planning Academy 17

Refer Belth method

Financial Planning Academy 18

1 (A)Death of the family’s breadwinner is a “financial risk”

(a) Both statements A and B are correct.

4 Which of the following statements is true?

Financial Planning Academy 19

7 The decision to retain risk should be based on

9 In insurance, the contingency insured against is usually the

(a) Both A and B statements are true

(a) Statement B alone is correct.

Financial Planning Academy 20

(a) Statement A alone is true

14 An owner of a large group of privately owned residential property units is seeking

15 (A) Gambling or wager creates the risk by its act of betting on it

(a) Statement A alone is correct

Financial Planning Academy 21

(a) Statements A and B are true

18 In controlling risks, the overwhelming consideration will be

(a) A-3, B-1,C-2

20 Generally speaking, high severity of losses will be accompanied by

21 The demand for insurance tends to be inelastic because of

22 Highly refined risk classification systems enable insurers to

Financial Planning Academy 22

24 The length of the insurance industry’s business cycle is shortened because of

25 Reserve management practices result in extending the period of business cycle by

(a) Both A and B statements are correct