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7. The amount of insurance depends on

The peril

The risk

Neither the peril nor the risk

Both the peril and the risk *

8. The amount payable under a life insurance policy depends on

The income of the insured person at the time of the claim

The income of the insured person when he took the insurance

The amount of the sum assured *

None of the above

9. State which of the following statements is correct

Risk is uniform for all assets

Life insurance improves standards of living *

Both the above statements are correct

Both the above statements are wrong

10. An insured person can afford to

Ignore safety precautions

Be less serious on the packaging of goods

Be lenient on controls in warehouses

Do none of these three *

11. Insurance works on the principle of

Sharing

Probabilities Large numbers

All of the above *


Trust

Sharing

Randomness

All of the above *


Mutual help *

Charity

Both of the above

Neither of the above


Equal contributions

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Proportional contributions *

Contributions dependent on affordability

None of the above

15. Micro insurance can be transacted by

Life insurers only Non-life insurers only

Both life and non-life insurers *

Only by specially created insurers


Risk, if certain, cannot be insured.

Risk refers to the loss that happens

Both the above statements are correct *


17. A human being

Is an economic asset

Is an income earning asset

Is a perishable asset

All the above *

18. A human beings value is measured by

The income that he generates *

The value of the goods that he produces

His academic qualifications

All of the above

19. The asset, which is a human being, perishes when

He dies

He becomes disabled to work

He retires from work

In all the above situations *

20. Which of the following events are insurable in a life insurance policy?

The child to be a born is not a male child

The child, when born, has physical deformities Neither of the above situations *

Both the above situations

21. The insurer, being a trustee, has to ensure that

The claim paid is genuine

The premium charged is fair and reasonable

A suspicious claim is not paid

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All of the above *

22. An insurer, as a trustee, has to ensure that

The life fund is safe

The life fund earns the maximum interest

Both of the above * Neither of the above

23. An insurer, as a trustee, is responsible to the

The policyholders *

The IRDA

The Government

All the above

24. An insurer, as a trustee, has to give priority to

Policyholders, as a class *

An individual policyholders difficulties

The claimants financial condition

All of the above

25. The probability of 50% for an event happening means that the event

Will happen regularly every alternate occasion

Will happen 50% of the time over a very large number of trials

Will never exceed 50%, however large be the attempts made

Will become closer to 50% as the attempts increase *

26. The probability of an event is mentioned As a ratio

As a percentage

Neither as a percentage nor as a ratio

Either as a percentage or as a ratio *

27. A probability of one in a hundred is valid

When it happens once in a hundred trials

Even when the event happens fifty times in a thousand trials

When the event does not happen even once in a hundred trials

In all the above situations *

28. Insurance is legitimate

When an adverse happening is likely *

When an adverse happening is unlikely

When an adverse happening is certain

In all the above three situations

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29. Insurance covers situations

When the consequences of the happening are beneficial

When the consequences are harmful *

When the consequences are immaterial

When the consequences cannot be measured in money terms

30. Life insurance is arranged because

Some one may die

Some one may live

Of both the above reasons *

Of neither of the above reasons

31. In a life insurance contract, the beneficiary may be the

The policyholder

The life insured

The dependents of the life insured

All the three mentioned above *

32. Which one of these principles does not apply in the case of a life insurance contract?

The principle of indemnity *

The principle of good faith

The principle of insurable interest

The principle of large numbers

33. Insurance benefits

Individuals

The country The society

All the three *

34. Insurance reduces the burden on

The society

Individual families

Business houses

All the three *

35. The business of insurance has

Social implications

Impact on economic development of the country

Impact on the economic well being of families

All the above implications *

36. The business of insurance affects

Availability of capital for business *

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The life span of individuals

The safety of equipments in factories

All these three

37. The competition for the business of life insurance is

Non-life insurance Small savings

House property

None of these three *

38. The competition for the life insurance agent comes from those who canvass for

Small savings

Mutual funds

House property

All the three above *

39. Life insurance is better than other avenues of savings in respect of

Marketability

Liquidity

Transferability


40. Life insurance is better than other avenues of savings in respect of

Appreciation

Tax benefits

Usefulness in emergency *

All of the above


Insurance is related to probable loss. *

Perils are avoidable




Premium is based on expectation of losses

Living too long is a risk Both the above statements are correct *



The strength of a wrestler can be insured

The losses are shared equally by all the policyholders


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Both the above statements are wrong *


Insurance prevents the risk

Insures compensates losses in full

Both the above statements are correct Both the above statements are wrong *

45. Reinsurance is the name given to

An individual taking insurance for the second time

An insurer placing insurance with another insurer *

Both the above situations

Neither of the above situations

46 State which of the following statements is correct

Living too long is a blessing, not a risk

Living too long is a risk *



47 State which of the following statements is correct

Perils are avoidable

Perils are not avoidable *




Probabilities of death and of survival are mutually exclusive

There are no substitutes for life insurance



CHAPTER 2

PRINCIPLES OF LIFE ASSURANCE

TEST QUESTIONS

1. Which one of the following statements is correct?

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A life insurance policy is a contract, enforceable in a court of law *

A life insurance policy is not required to be stamped

Both the statements are correct

Both the statements are wrong

2. Which one of the following statements is correct? The principle of utmost good faith applies only to life insurance

The principle of utmost good faith applies only to non-medical cases

The principle of utmost good faith is operative only for two years

All the above statements are incorrect *

3. The principle of utmost good faith is meant to protect the interests of

The insurer

The community of policyholders *

The shareholders

None of the above

4. The principle of utmost good faith is important to ensure

That the premium charged is correct

That no one gets an undue advantage

That there is no adverse selection

All the three factors mentioned above *

5. The responsibility to comply with the principle of utmost good faith rests with

The agent

The proposer *

The life to be insured All the three

6. The principle of utmost good faith does not apply to

Facts of common knowledge

Facts of law

Facts which are not material for underwriting

All the three kinds of facts mentioned above *


Capacity to contract applies to both parties. Consent to the contract can b e implicit

Both the statements are correct *


8. Which one of the following statements is correct in life insurance?

The principle of good faith continues to operate till the policy becomes a claim

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Facts which happen after the policy has commenced, need not be reported *

Illnesses after the policy has commenced must be informed to the insurer

All the above three statements are correct.

9. A life insurance policy becomes invalid if

There is a change in occupation after the policy has commenced If the policyholder changes his residence to another country

The statements in the proposal are found to be substantially wrong *

The insured person becomes sick after issue of policy.

10. The principle of utmost good faith will operate in an existing policy

Every time the premium is paid

If the policy has lapsed and it has to be revived *

If the insured person falls sick and is admitted to hospital

If the insured person changes his job

11. If the life to be insured falls sick, that fact has to be informed to the insurer

If it happens within two years of commencement of risk

If it happens before the first premium receipt is issued *

If it happens before the policy document is issued

Only if there is a specific query from the insurer

12 Which one of the following statements is correct?

Duty to disclose applies till the claim arises in life insurance

Insurers are responsible for adverse selection


Both the statements are wrong *

13. The existence of insurable interest is decided by

The interest which the proposer has in the asset being insured

The relationship between the proposer and the object of insurance

The legal decisions on these matters

All of the above *

14. Which of the following risks are insurable?

Speculative

Economic * Sure to happen

All of the above

15. Insurable interest is

Defined in the Insurance Act

Defined in the Contracts Act

Defined by the IRDA

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Not defined in any written law *

16. In the case of life insurance, insurable interest should exist

At the inception of the policy *

At the time of a claim

At the time of every renewal premium payment All the above occasions

17. In the case of life insurance, the principle of insurable interest operates

In the same way as in marine insurance

In the same way as in fire insurance

In the same way as in motor insurance

Differently than in other forms of insurances *

18. Which of the following statements is correct?

The principle of indemnity does not apply to life insurance policies *

The principle of indemnity does not apply to insurance on human beings

The principle of indemnity does not apply to third party motor insurances

All the above statements are wrong

19 Which one of the following statements is correct?

Declaration at the end of the proposal form has no legal sanctity

Declaration at the end of the proposal is a warranty *



20. Because of the principle of indemnity, There would be difficulties in settling claims in general insurance

There are frequent disputes at the time of settling claims

There may be attempts to exaggerate the claims

All the above three may happen *

21. Which one of the following statements is correct, with reference to life insurance?

The claim payable is subject to the principle of indemnity

The claim payable will depend on the Sum Assured *

The claim payable will depend on the income of the deceased person

The claim payable will depend on the size of the family left behind

22. Which one of the following statements is correct, with reference to life insurance?

The claim can be paid only after verification of the income of the deceased person

The claim amount should not exceed the loss of income to the family

The claim amount payable should be determined by a surveyor.

None of the above statements is true *

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23. An insurance contract is valid because

It is not a wagering contract *

It promotes socially desirable causes

It takes care of the destitute

It provides Government with large funds

24. Retention of risk may be done conveniently by Large corporations *

Small companies

Single individuals

None of the three

25. In the case of life insurance, the risks

Can be avoided

Cannot be avoided *

Are avoidable through medical science

Are avoidable through proper food habits


It is difficult to accurately value a human life.

It is possible to reasonably estimate the value of a human life.




The needs of people are different

The needs of people vary according to life styles

The needs of people depend on their upbringing All the three statements are correct *


A person who has just retired from a lucrative job may not need life insurance

A person who has spent twenty years in Dubai may not need life insurance

A person who has just taken up his first job needs life insurance *

All the above statements are wrong

29. Which is the right time for taking life insurance?

When you are about to get married

Soon after you have got married

Just when you are joined a new job

All the three times are right *


A person whose children are well settled does not need life insurance

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A person who has no family does not need life insurance

Both these statements are correct

Both these statements are wrong *


Life insurance helps when one wants to take a loan for a house Life insurance helps one to retire a comfortable retired life

Both these statements are correct *

Both these statements are wrong

32. In which of the following situations will a life insurance policy come in handy?

When you want to set up an independent business

When you want to buy a new house

In neither of the above situations

In both the above situations *


People hesitate to buy life insurance because they are not aware of their needs

People hesitate to buy life insurance because they prefer to enjoy the present




A person with an established business does not need life insurance

Life insurance is necessary to save income tax



35. Which of the following needs can be met though life insurance?

Providing for family in the event of sudden death

To lead a comfortable life in ones old age

Completing ones investment plans

All the above *


Many people think that they do not need life insurance

Many people think that there is no hurry to buy life insurance Both the above statements are correct *



Life insurance helps people to get loans for car or house

Life insurance helps policyholders to save income tax


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People do not see the need for life insurance as top priority

People are unwilling to set aside immediate pleasures to secure life insurance

Both the above statements are correct * Both the above statements are wrong


Term insurance policies are suitable for elderly adults

A nominee must have insurable interest in the life insured


Both the statements are wrong *


Retention of risk is an alternative to insurance

Insurable interest exists between partners



Workbook

1. A town has 4000 houses. Experience of past ten years shows that over a period ofone year, one in every thousand houses gets burnt by fire. If the expected loss is

Rs.2,00,000 per house, what would be annual premium to cover each house ?

a) Rs.200 * b) Rs.300 c) Rs.400 d) none of these

.2 10 persons are expected to die in a year out of a group of 10,000 persons aged 50,

who are normal healthy lives. If each persons family is to be given a sum ofRs.1,00,000 as death claim amount, what would be the share of each person

towards this loss.

a) 100 * b) 150 c) 250 d) 200

.3 There are ten thousand employees aged 50 and have similar prospects of

longevity. Experience shows that over a period of one year, ten persons out ofthousand persons die. If the economic value of a deceased person is assumed to be

Rs.50,000/-, what would be the share of loss of each person.

a) 500 * b) 1000 c) 750 d) 1500

CHAPTER 3

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PREMIUMS AND BONUSESPREMIUM CALCULATION

20 The following illustrations are based on certain assumptions with regard to practices

of insurers. These assumptions are specified at the appropriate places. While makingcalculations for any policy, the practices of that insurer must be conformed to.

Step 1: Find out tabular premium i.e. premium quoted in published premiumrates, for given age (nearer, next or last birthday as the case may be) for the

relevant plan and term. This premium is usually stated as Rs. per thousand SA.

Assume that the figure is Rs. 45.60

Step 2 : Deduct adjustment for large sum assured, if applicable. Assuming that

the insurer allows rebates as follows

Sum Assured Rebate per thousand S.A

Rs.25,000 Rs.49,999 Re.1/-Rs.50,000 Rs.99,999 Re.1.50/-

Rs.1,00,000 and over Rs. 2/-

and that this is a policy for Rs.75000 SA, the premium would be Rs. 44.10 (45.60

less 1.50)

Step 3 : Make adjustment for mode of payment of premium. Assuming that the

insurer provides rebates of 1% for yearly mode and that the mode proposed in this

case is yearly, the premium would decrease by 1% of 44.10 or Rs.0.44, makingthe premium Rs. 43.66

Step 4 : Add Extras. Assuming that the Extras in this case are Rs.1.50 per

thousand for occupational hazard and Rs.2 per thousand for supplementarybenefits, the total addition is Rs. 3.50 making the total premium Rs. 47.16

Step 5 : Multiply by SA (Rs.47.16 X 75) equals Rs. 3537.00

NOTE: If the adjustment of 1% for mode is made before the adjustment for SA,

the deduction would have been 0.46, instead of 0.44. The difference can be

significant, if the insurance is for a large SA. Insurers would clarify how theywant it to be done

21 The above calculation was made for yearly mode of premium. Therefore, the figure of3537 is the premium to be charged. If however, the mode was quarterly, then the annual

premium worked out by the above method, without the rebate of 1% for yearly mode,

will have to be divided by 4 to determine the quarterly instalment premium.

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22 In the calculation shown in the earlier paragraph, the final figure arrived at has no

paise. If there are paise in the final figure, they may be (i) ignored or (ii) rounded off to

the next higher integer, or (iii) rounded off to the nearest integer or (iv) rounded off to thenearest 50 paise or any other adjustment, as the insurer may practice.

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23 A few examples are given below

Plan term S.A. Age Mode Other riders

1. 14-30 Rs.25,000/- 35 Hly DAB + EPDB

2. 5-35 Rs.50,000/- 30 Yly Health extra Rs.3%3. 75-20 Rs.30,000/- 30 Mly (SSS) DAB + EPDB

NOTE : DAB stands for Double Accident Benefit and EPDB stands for Extended

Permanent Disability Benefit. Most insurers combine these two benefits together

1. Tabular premium is Rs.36.55 (1)

Less adjustment(a) for * SA 1.00 - (2)

(b) for Hly mode 1.5% 0.55

Balance Rs.35.00 - (3) (per thousand SA.)

=======

Balance x SA = 35 x 25 = Rs.875.00 - (4)

Add DAB + EPDB + 25.00 - (5)Rs.900.00 - (6)

Half yearly premium Rs.450.00 - (7)

2. Tabular premium Rs.28.40

Rebate for large SA Rs. 1.50Adjustment for Qtly. Mode nil

Balance Rs.26.90Balance x SA. In thousands

i.e.26.90 x 50 = 1345.00Add : health extra Rs.3 x 50 150.00

----------

1495.00

Quarterly instalment premium Rs.373.75

3. Tabular premium Rs. 66.80

Less adjustment for SA 1.00

------------Adjustment for mode nil Rs. 65.80

=======

Annual premium 65.80 x 30 = Rs.1974

Add for DAB + EPDB + 60----------

Rs.2034

Monthly instalment premium

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(SSS) (divide by 12) Rs. 169.05

i.e. Rs.169.00

TEST QUESTIONS


The premium is the price paid by the policyholder to secure insurance

The amount of premium varies according to the insurance plan




The premium under a life insurance policy may be paid monthly

The premium under a life insurance policy may be paid annually




The sum of all the premiums paid will be equal to the Sum Assured

The sum of all the premiums paid will be more than the Sum Assured




The sum of all the premiums paid will be more than the Sum Assured

The sum of all the premiums paid will be less than the Sum Assured Both the above statements are wrong *



The annual premium must be twelve times the monthly premium

The annual premium may be less than twelve times the monthly premium *



6. Which of the following statements is correct?

The annual premium is equal to the SA divided by the term of the policy The annual premium increases as the term of the policy increases




The annual premium for a long term policy is more than for a short term policy

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The annual premium for a long term policy is less than for a short term policy *




The premium increases as age of the insured person increases *

The premium decreases as the age of the insured person increases

The premium is the same whatever be the age of the person

The premium is the same for a person aged 30 for all plans of insurance

9. Which one of the following statements is incorrect?

The premium depends on the age of the policyholder *

The premium depends on the age of the insured person

The premium depends on the health of the insured person

The premium depends on the occupation of the insured person

10. What does a premium depend upon?

Age of the person to be insured

Family history of the person to be insured

Medical history of the person to be insured

All of the above *


Religion of the person to be insured

Income of the person to be insured Both the religion and the income of the person to be insured

Neither the religion nor the income of the person to be insured *

12. The premium actually paid by the policyholder depends upon

The wealth of the person to be insured

The level of risk as assessed by the insurer *

The tables of rates printed by the insurer

None of the above


The place of worship visited by the person to be insured

The state of health of the policyholder

The decision of the underwriter *

The report of the agent


The rate of premium charged can be less than the tabular rates

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The rate of premium can be more than the tabular rates *




The premium collected in the early years is less than what is required

The premium collected in the early years is more than what is required *

The premium collected in any year is exactly what is required

All the above statements are correct

16. The pure premium will be

Less than the office premium *

More than the office premium

Either more or less than the office premium

Neither more nor less than the office premium

17. The net premium will be

Less than the risk premium *

More than the risk premium

Calculated by adding expenses to the risk premium

More than the pure premium

18. When interest rates fall, the premium charged by an insurer are likely to

Increase *

Decrease Remain the same

Neither increase or decrease

19. The premium is loaded because of

Interest likely to be earned

Likely expenses *

Likely claims

Age of the insured person

20. The policyholder is concerned with the

Office premium *

Pure premium

Net premium

Risk premium

21. The premium rates printed in the promotional literature are

Risk premiums

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Net premiums

Office premiums *

None of the above

22. The premium printed on the schedule of the policy is worked out from Net premiums

Risk premiums

Office premiums *

None of the above

23. The reason for charging level premiums is

Risk increases as age increases

It is convenient to the policyholder

It is convenient to the insurer

All the above reasons *

24. The practice of charging level premiums

Makes it convenient to the policyholder

Reduces the likelihood of lapses

Adds to the reserves of the insurer

Has all the above benefits *

25. The practice of charging level premiums has the benefit of

Making it easy for the policyholder to maintain the insurance cover *

Increasing the returns to the policyholder

Helping the agent in his sales effort All the above

26. Adjustments are made to the tabular premiums because of

The health of the person insured

The frequency of premium payment

The occupation of the person insured

All of the above *


All insurers charge same premium rates.

Premium rates are determined by the IRDA

Premium rates are determined by the actuaries of insurers *

All of the above statements are correct


The age next birthday is always higher than the age nearest birthday

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The age next birthday may be sometimes less than the age nearest birthday




The premium calculated on mortality alone is called risk premium Insurers collect premium in advance




The age last birthday can never be the same as the age nearest birthday

The age last birthday is always less than the age next birthday *




The age nearest birthday is always less than the age next birthday

The age nearest birthday is always more than the age last birthday


Both the above statements are wrong. *

32. In life insurance, profit is determined by

The accountant who prepares the balance sheet

The actuary who makes a valuation *

The auditor who certifies the annual accounts

None of the above three persons

33. In the business of life insurance, valuation means

An actuarial exercise to determine adequacy of funds *

An attempt to determine the correctness of the values of assets

Estimating the values of immovable property

All of the above

34. The addition to the life fund in a year represents

The profits made by the insurer in that year

The moneys set aside by the insurer for the policyholders * The extra premium charged by the insurer to its policyholders

All of the above

35. The addition to the life fund arises because of the

Loading in the premium for bonus

The practice of charging level premiums *

Not having paid the claims on time

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All the above reasons

36. A valuation is done by a life insurer because

It is a statutory requirement

It is necessary to be able to declare dividends to shareholders

It tells the insurer how well it is managing the business All of the above *

37. The surplus in the life fund represents

The profits of the business

The excess premium collected by the insurer

The dues to the shareholders

None of the above *

38. The surplus disclosed in a valuation means

That the interests of the policyholders are safe

That the funds of the insurer are adequate to meet its liabilities

That the business is being managed well

All of the above *


The life fund belongs to the policyholders *

The life fund belongs to the shareholders

Both the statements above are correct

Both the statements above are wrong

40. Which one of the following statements is correct? In a valuation, the actuary calculates the fund that the insurer must have

In a valuation, the actuary calculates what the liability of the insurer is

Both the statements above are correct *

Both the statements above are wrong.


Bonus is declared out of the surplus declared by the actuary *

The S.A is automatically increased when a bonus is declared

All bonuses are reversionary bonuses

All the statements above are correct


The bonus declared is uniformly applicable to all plans of insurance

Bonus may vary between plans *



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43. The minimum percentage of the surplus to be set aside for policyholders is

Ninety five

Ninety *

Eightyfive

Nil (there is no minimum)

44. For what period is an interim bonus valid?

For as long as the policy is in force

Till the next declaration of bonus *

Till the next valuation date

As long as the management wants it to be


Bonus is paid along with the survival benefit in a money back policy

Bonus is paid when the money back policy matures *


Both the statements above are correct.

46. A bonus becomes possible because

Actual experience is better than expectations

The assumptions made in constructing the premium were conservative

There is a loading for bonus in the premium

Of all the above reasons *

47. What does a surplus in the life fund signify?

That the premium rates must be revised downwards

That the premium rates are appropriate That the company is too miserly in expenditure

None of the above three *

48. When a certain level of bonus is declared, what does it mean?

That this level will be maintained in future years

That it is the return on ones investment, viz., premium

Both the above meanings can be made

Both the above meanings will be wrong *

WORK BOOK

1. Given the following data.

Tabular premium Rs. 55 No rebate for mode. Rebate for SA above Rs. 50000 Rs.2.00 per thousand. DAB @ Rs. 1.50 per thousand. DAB granted upto Rs.

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8,00,000 only. Occupation extra Rs. 2.50 per thousand, what would be the half

yearly premium for SA Rs. 1,50,000.

(a) 4025 * (b) 4175 (c) 4250 (d) 4350

2. On the basis of the following dataS.A. Rs. 1,00,000/- tabular premium.. Rs. 33.10

Rebate R. 2/- per thousand for yearly mode. Re 1/- for half yearly, none for

quarterly.Rebate Rs. 3/- per thousand for Rs. 1,00,000 and above.

DAB Re. 1/- per thousand

Occupation extra Rs. 4/- per thousand.

Calculate the yearly premium for Rs 1 lakh SA.

(a) 2810 (b) 3110 (c) 3310 * (d) 3360

3. Calculate quarterly premium (rounded off to the next higher rupee) on the basisof the following data.

S.A Rs. 50,000/- , Date of maturity Rs. 24.12.2036.- Term 30 years.Date of birth 28.06.1979., mode rebate yly Rs 1.50 per thousand, hly Rs. 1.00,

quarterly, nil and monthly 5 % extra. SA. rebate Rs. 1.50 per thousand for Rs.

50,000/- and above.

Tabular premium. For age nearer birthday 26 Rs. 26.4627 Rs. 27.08

28 Rs. 28.15

(a) 312 (b) 320 * (c) 331 (d) 339

4. Calculate half yearly premium on the basis of the following data

Date of birth 28.06.1978. Date of maturity 24.12.2041., SA Rs 1,00,000/- , term35 years. Tabular premium for age next birthday- age 27 Rs. 27.46, for age 28,

Rs. 27.83 and for age 29, Rs. 28.37. Rebate 5 % extra for monthly, less Rs. 1/- for

hly Rs. 1.50 for yearly, SA Rs. 1.50 for SA Rs. 50000/- and above.

(a) 1266.50 (b) 1267 (c) 1293.50 * (d) 1294

5. Calculate monthly premium (rounded off to next higher rupee)S.A Rs 60,000/-, endowment 39 years, date of maturity 28.09.2045, large sum

assured rebate Rs. 1.50 for Rs. 50,000 and above. Dat ofbBirth 26.12.1976

Premium per thousand SA For age next birthday 29 Rs 27.4630 Rs 28.83

31 Rs 29.37

(a) 139 (b) 140 * (c) 141 (d) 142

6. Calculate monthly premium (rounded off to next higher fifty paise)

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S.A Rs. 30,000/- with DAB for Rs. 1/- per thousand and occupational extra of Rs.

1.75 per thousand. Date of Birth 21.10.1980 5% extra for monthly mode of

payment. Tabular premium Rs. 32.81

(a) 93,00 (b) 93.50 * (c) 94.00 (d) 94.50

7. A proposal for SA of Rs. 10 lakhs with DAB for monthly mode under SSS.

Proposer had a previous policy of Rs. 5 lakhs with DAB. Proposal was accepted

with health extra of Rs. 2.75 per thousand SA premium for DAB Re 1 perthousand 5% extra for monthly mode large SA rebate of Rs. 2/- per thousand for

1 lakh and above . Tabular premium Rs. 48.20 maximum total SA. on which

DAB is allowed is Rs. 10/- lakhs.

Find monthly premium, rounded off to the next higher rupee

(A) 4102 (B) 4121 * (C) 4183 (D) 4195

8. A policy for Rs.12 lakhs taken on 14.7.2007 under endowment plan for 20 years

with DAB. Date of Birth is 12.11.1980. Proposal is accepted with [email protected] per thousand (maximum Rs.10 lakhs) and occupational extra of Rs.2.75

per thousand. No rebates for high SA However for yearlymode a rebate of Rs. 2

is given. Calculate yearly premium

Tabular premium for age nearer birthday, as follows :

Age 25 - Rs.48.20Age 26 - Rs.48.40

Age 27 - Rs 49.10

Age 28 - Rs.49.80

(a) 60480 (b) 60980 (c) 61080 * (d) 61380

9. Given the following information, indicate which of the four options given below would

be the correct half-yearly premium for an endowment policy for rs. 1 lakh, on the life of a

person born on 28.6.1974.

Term 35 years

Date of maturity 24.12.2037

Tabular premium for age nearest birthday 27 - Rs.27.46 per thousand

Tabular premium for age nearest birthday 28 - Rs.27.83 per thousandTabular premium for age nearest birthday 29 - Rs.28.37 per thousand

Premium adjustment 5% extra for monthly mode, Rs. 1 less for half yearly modeand Rs. 1.50 less for yearly mode

S.A. rebate Rs. 1.50 less for Rs. 50000 and above

Options

1266.50 *

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1246.50

1293.50

None of the above

10. Given the following information, indicate which of the four options given below

would be the correct premium to be deducted from the salary of a person born on28.6.1974, who has taken an endowment policy on his life.

Sum assured Rs. 40000Term 35 years




Premium adjustment 5% extra for monthly mode, Rs. 1 less for half yearly modeand Rs. 1.50 less for yearly mode

SA. Rebate Rs. 1.50 less for Rs. 50000 and above

Options

87.77 *

89.57

97.41

None of the above

11. . Given the following information, indicate which of the four options given below

would be the correct annual premium (rounded off to the nearest rupee) for an

endowment policy on the life of a person born on 28.6.1974.

Sum assured Rs. 50000

Policy taken on 3rd March 2003, to be back dated by three months



Premium adjustment 5% extra for monthly mode, Rs. 1 less for half yearly mode

and Rs. 1.50 less for yearly modeSA. Rebate Rs. 1.50 less for Rs. 50000 and above

Options

1241.00

1241.50

1242.00 *

None of the above

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12. . Given the following information, indicate which of the four options given below

shows the monthly premium (rounded off to the nearest rupee) to be paid by a personborn on 28.6.1974, who has taken an endowment policy on his life.

Sum Assured Rs. 40000Term 35 years




Premium adjustment 5% extra for monthly mode, Rs. 1 less for half yearly mode

and Rs. 1.50 less for yearly modeSA. Rebate Rs. 1.50 less for Rs. 50000 and above

Options

97.00 * 97.40

97.50

None of the above

CHAPTER 4

LIFE INSURANCE PRODUCTS

TEST QUESTIONS

1. A plan of insurance is said to be different from another if

The sum assured is different

The age of the life to be insured is different

The date of commencement of policy is different

The conditions when the sum assured becomes payable are different *


The mode of payment of premium is different The amount of premium is different

The conditions for payment of sum assured are different *

The date of maturity is different


The date of maturity is different

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The date of commencement of risk is different

The underwriter decides to charge extra premium in one case

The conditions when the sum assured becomes payable are different *


Every plan of insurance is a combination of two basic plans * The name given to a plan indicates the benefits available under the plan


Both the statement s above are wrong


Plans of insurance can be compared by reading the names given to the plans

Plans of insurance can be compared by comparing the premium rates


Both the statements above are wrong *


A whole life plan is basically a term insurance plan *

A money back plan is basically a pure endowment plan




A marriage endowment policy is taken on the life of ones daughter

A childrens deferred insurance policy is taken on the life of ones child *




A marriage endowment policy insures the father and daughter together

A term insurance plan can be for a long period *




The sum assured under some policies increase every year

The sum assured under some policies reduce every year



10. Which one of the following statements is incorrect?

The SA payable on death can be more than the SA payable on maturity

The SA payable on maturity can be more than the SA payable on death

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Both the statement above are wrong


The SA is always payable immediately on death or survival

The SA payable on death may be paid long after the death of the insured * Both the statements above are correct



The SA is always payable in a lump sum

The SA is always payable in instalments

The SA is always payable in a lump sum unless asked for otherwise

All the statements above are wrong *


There is no difference between a term assurance plan and a Whole Life plan

A Whole Life plan is a term assurance plan with an indefinite term *




In a limited payment policy, there is a maximum limit to the SA

In a limited payment policy, there is a maximum limit to the term




In a limited payment policy, the premium is paid as long as the policy is in force.

In a limited payment policy, the premium stops before the end of the term *



16. For the same age and SA, the premium under an ordinary Whole Life policy

Will be more than in a limited payment Whole Life policy

Will be less than in a limited payment Whole Life policy *

Will be the same as in a limited payment Whole Life policy

Can be more, less or the same as in a limited payment Whole Life policy

17. For the same age, SA and term, the premium under an Endowment policy

Will be the same as in a limited payment Endowment policy

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Will be more than in a limited payment Endowment policy

Will be less than in a limited payment Endowment policy *

Can be same, more or less than in a limited payment Endowment policy

18. For the same age and benefits, the premium under a limited payment policy

Will be more than in a non-limited plan * Will be less than in non-limited plan

Will be the same as in a non-limited plan

May be more, less or same as in a non-limited plan

19. Limited payment plan policies may be preferred by persons

Whose careers are likely to be short *

Who are young and have just started their careers

Who have large families

Who are very wealthy

20. Limited payment plan policies may be preferred by persons

Who are not first class lives

Who are in their best of health

Who careers have just begun

Who do not expect to be in active employment for long *


The educational annuity policy is an annuity policy

The educational annuity policy is meant for persons having young children




Any policy which promises a payment on a fixed date is an Endowment policy

If the SA increases every year, it is a participating policy




Only participating policies are entitled to the benefit of bonus *

A bonus is the return of additional premium paid by a participating policy




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In a convertible plan, the insurer can refuse the conversion on medical grounds

In a convertible plan, the conversion is done on the request of the policyholder *



25. Which one of the following statements is correct? Convertible plans allow whole life plans to be altered to endowment plans *

The option of conversion can be exercised whenever the policyholder chooses to




If the option of conversion is not exercised, the policy will come to an end

If the option of conversion is not exercised, the policy will continue as before *




A conversion becomes effective when the policyholder exercises the option *

A conversion option is subject to the insured person being in good health




Convertible plan policies do not participate in bonuses

Money back policies are not convertible plan policies *

Both the statements above are correct Both the statements above are wrong


A joint life policy may cover two brothers under one policy

A joint life policy may cover a married couple under one policy *




A joint life policy may cover partners in business under one policy

A joint life policy may cover a married couple under one policy




The premium of a joint life policy depends on the age of the older person

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The bonus on a joint life policy is calculated on double the SA




Double endowment policy has no maturity benefit The bonus on a joint life policy is calculated on double the SA



33. Which one of the following statements is correct with regard to joint life policies?

The premium is the total of the premiums for insuring the two persons separately

The premium will be less than the cost for insuring the two persons separately *



34. Which one of the following statements is true with regard to Childrens policies?

They insure minor children *

They insure only school going children



35 Which one of the following statements is true with regard to Childrens policies?

Risk cover begins on or after vesting date

Risk cover begins immediately after the policy commences




The insured child becomes the owner of the policy on vesting date *

The insured child becomes the holder of the policy only when it is assigned




The deferred date is a policy anniversary

The vesting date is a policy anniversary




The policy vests at age 18 last birthday *

The policy vests at age 18 next birthday

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The policy vests at age 18 nearest birthday

All the statements above are correct


Risk will commence on deferred date automatically *

Risk will commence on deferred date after satisfactory medical examination Risk will commence on deferred date with enhanced premium

All the statements above are wrong


On the deferred date, the insured child has to be at least 15 years old

On the deferred date, the insured child need not be a major *

On the deferred date, the policy must have been in force for at least ten years

All the statements above are wrong


An assignment has to be done on the deferred date

An assignment has to be done on the vesting date




The ownership of the policy changes on the deferred date

The ownership of the policy changes on the vesting date *


Both the above statements are correct.


On vesting, the insured person has an option to change the term of the policy

On vesting the insured person has an option to increase the SA




A money back type of policy is a variable insurance policy

A convertible policy is a variable insurance policy




A variable insurance plan combines an insurance plan with an investment plan *

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A variable insurance policy guarantees a return or yield




A variable insurance plan is good when investment conditions are favourable A variable insurance plan is good when the stock market is booming




Industrial assurance is meant only for industrial workers

Industrial assurance is meant for people with low incomes *




A salary savings scheme policy is an industrial assurance plan

A salary savings scheme policy can be taken for a SA of Rs.10 lakh *




In industrial assurance the lapse rates tend to be high. *

In salary savings scheme policies, the lapse rates tend to be high




In industrial assurance plans, the premium is deducted from the pay roll

In salary savings scheme plans, the premium is deducted from the pay roll *



51. Who is benefited if a policy is under the salary savings scheme?

The policyholder

The insurer The agent



The premium under a SSS policy is paid monthly

The premium under a SSS policy is one twelfth the annual premium


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In a SSS policy, the policyholder has to ensure that premium is paid *

In a SSS policy, the responsibility to pay premium is with the employer



In life insurance, the word rider means the person taking part in horse races

In life insurance, the word rider refers to additional clauses *




A rider modifies an existing condition in the policy

A rider supplements or adds to an existing condition in the policy *




Riders provide supplementary benefits to the basic plan *

No rider is allowed unless the underwriter agrees to the same

Both the statements above are correct.

Both the statements above are wrong.

57. Which one of the following statements is correct? A premium waiver option is allowed as a rider *

The premium on all riders depend on the age of the insured person




The premium on a rider varies according to the basic plan

The premium on riders cannot exceed specified limits of the basic premium *




There is no death risk cover in an annuity

Though called an annuity, the payments may be paid every month



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An annuity is paid only to the person who takes out the annuity policy

An annuity is paid only till the death of the person taking out the annuity policy




An annuity policy guarantees a pension *

An annuity policy is issued only after a medical examination




Under an annuity certain policy, the annuity stops after the certain period

Under a deferred annuity policy, the annuity commences immediately




An annuity can be taken only on a single life

In a life annuity, the risk of death is covered




In a deferred annuity policy, the premium has to be paid in a lump sum

Annuities purchased during different years may all commence on the same date * Both the statements above are correct



Physically handicapped persons may be given annuities at ordinary rates

The amount of annuity depends on the age at which the annuity commences



66. State which one of the following statements is correct?

In group insurance, a single policy is issued covering many persons *

A master policy covers servants of a master




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In group insurance, there is only one proposal to insure many

In group insurance, there is only one policy covering many



68. State which one of the following statements is correct? In group insurance, the proposal is made by the employer *

In group insurance proposals are made by each of the insured



69 State which one of the following statements is correct?

Group insurance covers a large numbers of persons in one policy

Group insurance is relatively cheaper than individual insurances




Salary savings schemes policies are group insurance policies

Group insurance policies benefit only employees of big organisations




In group insurance the premium changes every year *

In group insurance the premium is paid by the persons who are covered



The members of a housing society can negotiate for a group insurance policy

A sports club can get a group policy for its members




A bank can take out a group policy for its account holders A finance company can take out a group policy for those taking loans from it




The amount of cover in a group policy is chosen by individual members

The amount of cover for each member is fixed by the terms of the policy *

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A master policy is issued in a group insurance policy *

Each member in a group policy pays the premium directly to the insurer Both the statements above are correct


76. Which of the following is true for a group policy?

Copies of the master policy are given to all members by the insurer

The group has to be formed exclusively for the purpose of insurance

Entry into the scheme and exit out of it, is at the option of the members

The amount of the cover is determined by the scheme *


Group insurance business is growing faster than individual business

Group business is socially very relevant




A trade union can take out a group insurance policy for its members

The cover for an employee can be equal to his age multiplied by a fixed number




A group insurance contract is between the insurer and the insured persons

The extent of insurance cover is chosen by each individual member




The members covered by a group insurance policy changes every year

The amount of insurance for any member may change from year to year

Both the statements above are correct * Both the statements above are wrong


Group insurance is the same as salary savings schemes

Premiums under some group policies are paid by governments *



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82. In what respect does group insurance differ from salary savings schemes?

The person who pays the premium

Responsibility to pay the premium

Decision to take the policy

In all the above three respects *

83. In what ways does group insurance differ from salary savings schemes?

Number of persons insured under a policy

Responsibility of employer

Issue of premium receipts


84. In what ways does group insurance differ from salary savings schemes?

Ownership of the policy

Mode of payment of premium

Parties to the contract


85. Who amongst the following can take out a group insurance policy?

Office-goers who travel in the same compartment in the suburban train

A contractor who engages the same people every day on daily wages

A group of travelers on a package tour

Members of a toddy tappers association *


In group policies, the chance of adverse selection is low * In group policies, every person is medically examined




In group policies, each case is separately underwritten

In group policies, personal histories are not examined *




Entry into and exit from group cover, is controlled by the terms of the policy

The extent of cover is not decided by the life to be insured




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A group insurance cover is given only if there is a certain minimum number

A group policy is not granted if the group has been formed only to avail of cover



90. State which one of the following statements is correct? The cover in a group policy could depend on the ages of the lives insured

The cover could be a uniform flat rate for all employees of a certain category



91. Which of the following could be the basis of the cover in a group policy?

Amount of annual income

Level in the hierarchy

Age of the person


92. Which of the following could be the basis of the cover in a group policy?

Height of the life insured

Age of the life insured *

Size of the insureds family

All the three above

93. Who pays for the premium in the group policy?

The insured persons only

The person who has the master policy only

Both the insured persons and policyholder jointly Any one of the three ways above *


The amount of cover under the master policy does not change

The premium under the group policy is the same every year



95. Which of the factors below help to avoid adverse selection in group policies?

No option to choose quantum of insurance cover * Minimum number to be included in the cover

Similarity in the nature of the jobs

All the above three factors

96. Which of the factors below help to avoid adverse selection in group policies?

Reputation of the employer

Records of the employer

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No option to choose entry or exit *

All the above three factors


Group superannuation polices provide pensions to retiring employees *

A group superannuation policy can be taken by a company for its mortgagees Both the statements above are correct



Group gratuity policies require that trustees be appointed

Group superannuation policies require that trustees be appointed




Trustees have to be appointed in all group policies

All group policies need approval of the income tax department




Employers are required by law to take out group gratuity policies

Employers have different options to fund their pension liabilities *




Group policies help employers to avoid fluctuations in gratuity outgoes

Employees have less anxiety if employers have taken group policies




Group policies are popular because of legal compulsions

Group policies give employees benefits better than legally required *



The scope for group policies is limited by the requirements of the law

Group insurance policies can be tailor made to suit specific needs *



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Members of a group will get certificates showing details of cover

Profit sharing, in group insurance, is worked on actuarial bases



CHAPTER 5

UNDERWRITING TEST QUESTIONS

1. What is a proposal?

A request for an insurance cover

An offer to enter into a contract

Both a request and an offer to enter an insurance contract *

None of the above


Selection is the same as underwriting *

The underwriter guarantees that the policy monies will be paid




The underwriter assesses the risk

No policy can be issued without the underwriters decision




For a first class life, the premium charged is less than in the tabular rates

For a first class life, the vested bonus will be more than in other cases

Both the statements above are correct Both the statements above are wrong *


The underwriter determines the premium to be charged

The underwriter is an employee of the insurer



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An underwriter acts in the interests of the policyholders as a whole

An underwriter acts in the interests of the insurance company




An underwriter charges extra premium for physical hazards *

An underwriter charges extra premium for moral hazards




A physical hazard affects the probability of death

Body measurements may indicate physical hazards



9. Financial underwriting is done to evaluate

The probability of the policy lapsing in future

The possibility of moral hazard *

Both lapse and moral hazard probabilities

Neither lapse nor moral hazard

10. The underwriters assessment will include

The genuineness of the need for insurance The intentions of the proposer in applying for insurance

Both genuineness and intentions *

Neither genuineness nor intentions

11. Moral hazard may be suspected in cases where

The life to be insured is old

The insurance is for a very large amount

In both the above cases *

In neither of the above cases


Moral hazard exists if the proposed SA is ten times or more of the annual income

It is possible to quantify the extent of moral hazard and charge extra premium



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An underwriter is an actuary

An underwriter uses financial and medical data *




A medical referee is an underwriter

The medical examination at the stage of the proposal is done by a medical referee




A medical referee examines the life to be insured

The medical referee only sees the reports received by the insurer *




The underwriter makes his decision only after the medical referee sees the case

The medical referee usually sees only cases for large SA *




A medical referee is an employee of the insurer A medical referee is an underwriter




In some cases, the underwriter consults the reinsurers before deciding *

The numerical method of underwriting is the best method




If the underwriter feels that the risk is more, he will accept at OR

If the underwriter feels that the risk is more, he may impose a lien *


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20. A lien may be imposed by the underwriter if

The additional risk is expected to wear off in course of time *

The proposer is unlikely to agree to pay a higher premium

In both the above cases In neither of the above cases


A clause restricts the benefits under the policy *

A clause is the same as a rider




A lien operates for a specific period

A clause excludes specific risks




Underwriting is done only when there is a medical examination

Medical examination is necessary before a policy can be issued



24. The system of non medical underwriting is introduced because Medical examiners are not available in all areas

Most of the cases are found to be standard lives acceptable at OR

Of both the above reasons *

Of some other reasons

25. Under the system of non-medical underwriting

There is no restriction on age

There is no restriction on SA

There is restriction on both the SA and age *

Only some towns are covered


Working women are treated on par with men

Educated women are treated on par with men

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Underwriters are more cautious while considering cases on female lives *

Underwriters are more cautious while considering cases of educated women Both the statements above are correct



The agent is expected to make his report commenting on the risk factors

The agents report is important for the underwriter




By writing a truthful report, the agent is helping the insurer

By writing a truthful report, the agent is helping the life to be insured




Smoking is a hazard inviting additional premium

Drinking is a hazard inviting additional premium




Underwriting standards are changing *

The underwriting standards of all insurers are the same




Underwriting is the process of verifying the level of risk of each new entrant *

Working ladies are charged extra premium, even if there are no impairments



Standard life, normal life, average life, all mean the same thing *

The underwriter can definitely detect all attempts at adverse selection



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A clause restricts the benefits under the policy

A lien operates for a specific period




In the case of a lien, the amount payable on death will vary from year to year *

A lien operates till the policy matures



CHAPTER 6

INSURANCE DOCUMENTS

TEST QUESTIONS


The policy is the basis of the insurance contract

The proposal is the basis of the insurance contract * Both the statements above are correct



The proposal must be signed by a witness *

The answers in the proposal form should be written in English




The proposal must be signed in the language in which it is printed

The proposal can be signed in any language *




The proposal must be written by the proposer himself / herself

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The proposal can be written by the agent




The declaration in the proposal must be signed by the proposer * Anybody can sign the proposal form on behalf of an illiterate proposer




The declaration in the proposal makes the principle of good faith operational *

The declaration in the proposal establishes insurable interest




The information in the proposal form is used for underwriting

Wrong information in the proposal form can nullify the insurance contract



8. If the proposal form is filled up in a language not known to the proposer

The person who filled up the form has to sign a declaration *

The agent has to declare that he had explained the questions and answers

All further correspondence must be only in that language

The life to be insured must be medically examined


Some of the particulars in the proposal form have no bearing on underwriting *

The name of the proposed nominee must be mentioned in the proposal




The personal statement must be witnessed by the agent

Personal statements are required only in medical cases Both the statements above are correct



A copy of the proposal has to be given to the proposer *

A copy of the medical report has to be given to the proposer


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A copy of the personal statement is to be given to the proposer

A copy of the proposal has to be given to the proposer

Both the statements above are correct * Both the statements above are wrong


The proposer will not be shown the agents report to the insurer

The proposer will not be shown the medical examiners report



14. Which of the following are confidential and will not be given to the proposer?

The medical report

The agents confidential report to the insurer

The medical referees advice

All of the above *

15. The proposal form and personal statement contain information relevant to determine

Level of risk

Moral hazard

Insurable interest All the three *


FPR is the evidence of the insurance contract

The medical report is the basis of the insurance contract




The statements in the medical report form part of the insurance contract

The medical examiner depends upon the statements in the personal statement *




The FPR is proof of commencement of risk *

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Risk does not commence till the policy is signed



19. The FPR is issued when

The first premium is adjusted in the

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