MODEL PAPERS-02

 
1. Insurance is a mechanism of
a) Risk retention b) Pooling of risk 
c) Risk transfer d) none of the above

2. Insurance relates to
a) Avoidance of risk b) Pooling of risk
c) Protection of economic value of assets d) Minimisation of risk

3. The insurance products designed by the insurance Companies may not
a) Take care of the needs of individuals in different life stages
b) Provide varied investment options.
c) Provide flexibility and add-on benefits
d) Guarantee capital appreciation.

4. Which of the following statement does not characterize the Professional Insurance market
a) Transparency in its dealings with customers.
b) It keeps the interest of its customers at the forefront of all that it does.
c) That the customers get what they are looking for.
d) Will have profit making as its only motive.

5. The first insurance company to transact life insurance business in India was
a) Oriental Life Insurance Company b) Bombay Mutual Life Insurance Co.
c) Empire of India d) Madras Equitable

6. I.R.D.A was incorporated as a Statutory body in
a) December 1999 b) June 1994
c) April 2000 d) June 2001

7. Bancassurance as envisaged in India means
a) Designing and marketing of insurance products by commercial banks.
b) Guaranteeing the benefits of insurance products of insurance companies by Banks.
c) Banks acting as corporate agents of insurance Companies to cross-sell insurance products to
their own customers.
d) Offering free insurance cover for its customers.

8. Reinsurance means
a) Purchase of additional insurance by an insured person.
b) Bringing into force, a lapsed policy.
c) Insurers seeking transfer of risk to shield themselves from over insurance
d) An individual insuring with different insurance companies.

9. Currently major percentage of insurance sales in India takes place through
a) Insurance Brokers b) Corporate agents.
c) Bancassurance channel d) Individual insurance agents

10. Which of the following does not form part of the regular function of I.R.D.A.?
a) Ensuring smooth running of the insurance sector.
b) Granting of licenses to insurance companies, agents, intermediaries and Loss adjusters/
Surveyors.
c) Monitoring the solvency position of the insurance companies.
d) Fixing up the premium rates for the products of the insurers.

11. Code of conduct for insurance agents are specified in the
a) Insurance Act 1938 b) I.R.D.A. (Licensing of Insurance Agents) Regulation 2000.
c) I.R.D.A. Act 1999 d) Consumer Protection Act 1986

12. Insurance Companies provide cover only for
a) Specified Risks b) Unspecified risks c) Excluded risks d) Speculative risks

13. A hazard can be defined as
a) A specific event which might cause a loss b) The chance of damage or loss
c) A condition that either increases the chance of a peril happening or cause its effect to be worse.
b) Uncertainty of an event happening.

14. Which of the following cannot be insured?
a) Financial risk b) Particular risk c) Pure risk d) Speculative risk

15. Risk transfer provides a sense of
a) Financial instability b) Financial distress c) Financial security d) Financial deficit

16. Level of risk is determined by
a) The probability of the occurrence of a certain event and the extent of losses likely to be
suffered due to the occurrence of the event.
b) Needs of the people for various types of protections.
c) The various types of risks to which the subject matter of insurance is exposed to
d) The experience of a company in a particular region.

17. Human life is exposed to different type of risks. Which of these risks is not currently covered by Indian
insurers?
a) Early death. b) Illness c) Living too long
d) Unemployment not caused by disability

18. Pure risks are those risks where there is
a) Loss or no loss b) Gain or no gain
c) Possibility of any benefits occurring d) Full control over their occurrence.

19. The consideration in an insurance contract flowing from the insured person is called
a) Proposal b) Premium c) Declaration d) Consent

20. An individual cannot enter into a contract because of his incapacity, if he is
a) Of the age of majority b) Of sound mind
c) Not disqualified by law d) Accused of a criminal offences

21. Consensus ad idem means
a) Ethics in advertisements b) Consumers right to knowledge
c) Both parties having the same understanding d) Proper identity of a person.

22. The object of a contract should be to create
a) A mutual relationship b) A natural relationship
c) A legal relationship d) Everlasting relationship

23. The policy document is the
a) Contract of insurance b) Evidence of the insurance contract
c) Consideration for the insurance contract d) Acceptance of the proposal.

24. Insurable interest is
a) The legal right of the person to insure an individual/property.
b) Interest an insured person has to pay for delayed payment of premium beyond the days of
grace.
c) The interest which the proposer evinces in taking up insurance.
d) The interest a policyholder has in the policy which is recongnised by law

25. The relationships in which insurable interest is deemed to exist are narrated in
a) Insurance Act 1938 b) I.R.D.A Act 1999
c) I.R.D.A Regulations d) Already prevailing court judgments.

26. Insurable Interest is deemed to exist in which of the following relationship?
(i) Husband and wife (ii) Parent and children
(iii) Employer and employees (iv) Brother and Sister
a) (i) (ii) and (iv) b) (i) (iii) and (iv) c) (ii) (iii) and (iv) d) (i) (ii) and (iii)

27. In Life insurance insurable interest must exist
a) at the time of taking out the policy b) at the time of claim
c) both at the time of taking out of the policy as well as at the time of claim
d) at the time of taking out of the policy and at the time of payment of every renewal premium.

28. The rule governing the sale and purchase of goods and services is
a) Utmost good faith b) Caveat emptor c) unfair trade practice d) indemnity

29. Utmost good faith envisages a positive duty to disclose accurately all information that are
a) Facts of common knowledge b) Facts which are material to the risk being proposed
c) Facts of law d) Facts already known to the insurer

30. The duty of disclosure as enunciated by the principle of utmost good faith, is imposed on
a) The proposer only b) the insurer only
c) the proposer and the insurer d) neither the proposer nor the insurer

31. Material facts are those
a) That are specified to be so in the proposal b) That are considered to be so by the proposer
c) That would influence the decision of the underwriter in accepting the risk
d) That are specified so in the Insurance Act 1938

32. Even though the insurer may avoid the contract entirely “ab initio” for the reason of misrepresentation
or non-disclosure, the Insurance Act 1938, gives a protection to the policy holder making the policy in
disputable after 2 years (excepting for fraud) as per
a) Sec.131 of the Insurance Act 1938 b) Sec. 38 of the Insurance Act 1938
c) Sec. 45 of the Insurance Act 1938 d) Sec. 41 of the Insurance Act 1938

33. In the case of life insurance the duty of disclosure exists
a) At the time of proposal until the risk is accepted and at the time of revival of a lapsed policy
b) At the time of payment of every renewal premium
c) From the time of proposal till the time of claim
d) At periodical intervals stipulated by insurers.

34. Which of the following types of insurances is not a contract of indemnity
a) Fire Insurance b) Mediclaim (Health Insurance)
c) Motor Insurance d) Life Insurance

35. Which of the following document contains the offer of the insurer:
a) Proposal b) Prospectus c) Policy d) Endorsement

36. Life Insurance contract commences, unless otherwise declined by the Proposer during the ‘free look
period’:
a) From the date of proposal b) From the date of issue of First Premium Receipt
c) From the date of issue of the policy d) From the date of issue of quotation

37. Which of the following does not from part of the sources of the information the underwriter will use to
assess the risk?
a) The proposal form b) Medical Report c) Agent’s confidential Report d) Policy document.

38. The proposal form and the declaration of the proposer are construed as
a) The basis of the insurance contract b) The evidence of the insurance contract
c) Proof of commencement of the contract d) Acceptance of the risk

39. Which of the following is not considered as a standard age proof:
(a) Birth Certificate issued by Corporation/Municipality (b) School/College Certificate
(c) Certificate of baptism (d) Horoscope

40. Alterations in the terms of the policy can be made during the term of the policy through
a) Cover Note b) Slip c) Correction in the Schedule d) Endorsement

41. What happens to bonuses if a with profit policy is made paid up?
a) Bonus is reduced in proportion to the premiums paid
b) The accrued bonus is fully added to the reduced sum assured to arrive at the paid-up value.
c) The accrued bonus will be forfeited d) accrued bonus will be paid immediately.

42. Normally insurance Companies allow a paid up value for lapsed policies, if premiums have been paid
for a minimum period of three years. This paid up value will be
a) Payable immediately
b) Payable on maturity of the policy or on earlier death when claim becomes payable
c) Payable with interest d) Increasing with every subsequent year

43. Under an Endowment Policy for Rs.5,00,000/- in which 5 annual premiums have been paid out of a
total of 10 year premium paying term what will be the paid up value if accrued bonus is Rs.50,000/- ?
a) Rs.2,00,000 b) Rs.2,50,000 c) Rs.3,00,000 d) Rs.2,75,000

44. The Insurance Act does not allow the insurance Companies to keep all the premiums paid when a
policy lapses and makes it mandatory to pay certain minimum surrender value as enshrined in the
policy because
a) Under level premium system premiums collected in the early years of the policy are more than
the required amount.
b) Of the savings element in the premium
c) For both the above reasons d) For none of the above reasons

45. The process of bringing the lapsed policies into full force is called
a) Renewal b) Reinstatement c) Revival d) Paid-up

46. In respect of Nomination under a Life Insurance Policy which of the following is true “?
a) A minor cannot be a nominee
b) More than one person cannot be nominated as nominees
c) Nominee becomes the policy holder
d) Nomination becomes effective only when it is intimated to the insurer

47. Which of the following statement is true?
a) Nominee is rightful owner of the claim amount payable under a policy
b) When an assignment is made, the existing nomination is no longer valid
c) An assignee can make a nomination
d) In case of multiple nomination, the death claim amount will be paid to them in equal proportion

48. Which of the following statement is incorrect in respect of assignment?
a) The assignor should be a major and should have complete title in the policy
b) Assignment can be done by an endorsement on the policy or by a separate deed.
c) Assignee can make a nomination
d) The rights under an assigned policy will revert back to the assignor when it is reassigned to him
by the assignee.

49. Which of the following statement is not correct in respect of foreclosure of a Policy?
a) It is done by the insurer when loan granted under the policy with interest due thereon is likely
to exceed the surrender value available in the policy
b) It is done by the insurer only after giving due notice to the borrower
c) On foreclosure nomination ceases to be operative
d) It is voluntary surrender of the policy by the policyholder.

50. The surrender value of a policy has no relevance to the
a) The paid up value of the policy b) Term of the policy
c) Duration of the policy till surrender d) health of the life assured

ANSWERS:

Q.A

1 C
2 C
3 D
4 D
5 A
6 C
7 C
8 C
9 D
10 D
11 B
12 A
13 C
14 D
15 C
16 A
17 D
18 A
19 B
20 D
21 C
22 C
23 B
24 A
25 D
26 D
27 A
28 B
29 B
30 C
31 C
32 C
33 A
34 D
35 B
36 B
37 D
38 A
39 D
40 D 

41 B
42 B
43 C
44 C 

45 C
46 D
47 B
48 C
49 D
50 D