131 Points English

Important points for Life Insurance Sector and related questions and answer

1. Insurance : Insurance is compensation of financial loss caused due to unpredictable, unexpected and unwanted event.

Que 1. Mr. Amit wants to accumulate 10 lakhs for his daughter's

marriage but he is afraid that if he dies before her marriage then

It will cause problem in her marriage arrangements. What

arrangements should he make?

Ans: He should have Insurance cover equivalent to his

needs. That means he should have insurance to meet his

responsibilities.

2. Proposer : A person who proposes to buy a policy. Que 1. Firoz buys a policy for Jasmine. Firoz will be called as..

Que 2. Zainab takes insurance in the life of Jasmeet. Zainab will be

called as..

Ans: Proposer

3. Proposal Form : This is a form to be filled by a person who wishes to buy a policy. (all his information is filled in this form)

Que 1. Underwriter can get the required information related to

proposer from..

Ans: Proposal form

4.Policy Holder : A person in whose name policy is taken. That means a person who pays for policy.

Que 1. Firoz buys a policy for Jasmine. Firoz will be called as..

Ans: Policy Holder

5. Life to be Insured : A person on whose life is covered or protected. (If husband buys policy for his wife then husband is policy holder and wife is life to be

insured)

Que 1. Firoz buys a policy for Jasmine. Jasmine will be called as..

Ans: Life to be Insured

Prepared By ;- Jyotsna Bhandare

6. Insurer : One who gives the policy, one who settles the claim. e.g. Reliance, Tata, Birla etc.

Que 1. Valuation is done by..

Ans: Insurance Company

Que 2. According to 2002 IRDA regulation which insurer should have

Grievance Redressal system.

Ans: All Insurance Companies

7. Agent : Agent is the intermediate between Insurance company and the policy holder.

Que 1. Who is the primary underwriter while taking the policy?

Ans: Agent

8. Premium : Amount paid to buy a policy or Installment Que 1. What does Consideration mean in any Insurance Contract?

Ans: Premium

9. Sum Assured : The limit of policy amount or the amount payable to nominee in case of unwanted event occurs.

Que 1. If Naresh wishes to take the tax benefit of the full premium

paid which is 60000, what amount of sum assured should he avail in

ULIP plan?

Ans: 3 Lacs

10. Maturity : The lump sum amount received at the end of the term on survival. Que 1. Who initiates the process of settlement of Maturity Claim?

Ans: Insurance company initiates the process

11. Rider : It can be taken along with normal policy for extra benefit. Accidental Benefit Rider or Critical Condition Rider etc can be added to policy. It

is extra benefit over the actual Sum assured by paying small amount.


Que 1. If a Accidental Benefit Rider is added to a Term Plan, how

much extra amount should the person pay for the rider benefit?

Ans: 30% of the basic premium

12. Underwriting : To examine the proposal to decide whether to give the policy or not. Que 1. Vishal and sandeep applied for a health plan in XYZ Life

Insurance Company. Vishal is asked to undergo a medical checkup

but Sandeep is not asked to do so. What will be most possible

reason?

Ans: Vishal is older than Sandeep

Que 2. An insurance agent sold two policies to two different persons

having the same policy term. He declares the commission to each of

them. The commission of one of the policy is more than the other.

What should be the reasons for this difference?

Ans: Both have chosen different types of policies

13. Underwriter : He is the employee of company who decides whether to accept or reject the proposal after examining the level of risk faced by

particular individual.

Que 1. Varun wishes to pursue a career in insurance and wishes to

be in a department which examines the level of risk. In which

department should he join?

Ans: Underwriter

14. Risk, Hazard & Peril : Risk is Economic loss i.e. death, hazard is reason for risk i.e. disease and Peril is the Natural calamity.

Que 1. How are perils and hazards normally distinguished under

term insurance policies?

Ans: Perils are risks that policyholders will die before a

specified date and hazards are factors which could influence

that risk.


Que 2. According to insurance terminology which of the following

is correct?

Ans: 2. Smoking is a hazard and lung cancer is a peril

15. Investigator : A person who investigates in case of mishap or during settlement of higher claims. He collects information from external source.

Que 1. Investigators are appointed mainly to settle which kind of claim

Ans: The claims which are doubtful according to company

and the claims whose Sum Assured is high. Or in case of

Early claim (claims raised within 3 years are considered as

early claims)

16. Medical refree :This is team of Doctors who prepare a confidential report of medical checkup in case of individuals with high risk. They are not employee

of the Insurance Company.

Que 1. Vishal and sandeep applied for a health plan in XYZ Life

Insurance Company. Vishal is asked to undergo a medical checkup

but Sandeep is not asked to do so. What will be most possible

reason?

Ans: Vishal is older than Sandeep

17. IRDA : Insurance Regulatory and Development Authority was formed in 1999 and is followed since 2000.

Que 1. As per the IRDA regulations the decisions on the proposal

must to convey to the proposer within......

Ans: 15 days

Que 2. According to IRDA guidelines, how long does an insurance

company have to complete its investigation of a claim?

Ans: 180 days or 6 months


18. Nominee : Legal heir of insured. A person who gets the Sum Assured on death of Life Assured.

Que 1. Which of the following statement is not true in connection with

nomination?

Ans: A person having a policy on the life of another should

make a nomination.

19. Truste : A individual who is appointed nominee through a special law. Maturity or death claim are given in his/her name only.

20. Married Woman : According to this act a married man can appointee his wife and children Property Act as trustee, that means the money will be given only to his wife and (MWP Act 1874) children in both maturity and death claim cases. ( for Hindu people 1 wife

and 2 children can be appointed as trustee and for Muslim people 2 wives

and 4 children can be appointed as trustee.

Que 1. Under Married Womens Property Act, 1874 a policyholder is...

Ans : Trustee

Que 2. In MWP act 1874 there is a provision made regarding Life

Insurance policy and is applicable to..

Ans : Married Man

21. Endorsement : It is a process to make changes in the Policy documents, e.g. name, address, mobile number, mode etc.

Que 1 . If a customer has mentioned he is a drinker in the proposal form,

the insurance company can exclude this hazard and mention it in which

part of the policy document?

Ans: Endorsement

Que 2. Which part of the policy document are the locations of Ombudsman

Courts mentioned?

Ans: Endorsement


22. Assignment : A process to transfer the rights or title of the policy. (gift/loan). One who transfers the title is called Assignor and the one who accepts it

is Assignee. There are two types of Assignment 1) Absolute

Assignment and 2) Conditional Assignment

Que 1. Which of the following statements in correct in connection with

assignment?

Ans: Assignee cannot make fresh nomination in the policy

Que 2. Manish took a loan from Pankaj of Rs.10 lac, Manish transferred his

Insurance policy of 10 lac to Pankaj as a security with the agreement of when

Loan is fully paid, policy title will be revert back to name of Manish is called

Ans: Conditional Assignment

23. Contract : As policy is a asset a Legal Contract/Agreement is formed between Company and Policy holder. There two type of contracts

1) Life Insurance Value Contract and 2) Health Insurance Indemnity Contract

Que 1. An individual is said to be competent to enter into a

contract if they are

Ans: 18 years

Que 2. If a contract is signed by a 15 years old boy, this contract

will be considered as..

Ans: Invalid

24. Clause : It is a condition which is applicable to the individual with high risk, e.g. job profile, disease/disorder, etc. Once this condition is applied it

works for whole policy term.

Que 1. Vikas is 35 year old and is posted as a soldier in Indian

Army. He wants to buy a policy for himself. His risk will be

categorized according to which regulation of Insurance Act?

Ans: According to Clause (as he is in Army the risk for loss of

life is more, hence Life Insurance company will not pay any

claim if he dies during war/on duty)


25. Lien : This condition is applicable where the risk is reducing. It is applicable for certain period of the policy term not for the whole

term. Underwriter wil decide the term for Lien (5 years is the

maximum Lien Term)

Que 1. In certain case if Underwriter feels that the risk associated

with the individual is is reducing, he will accept the proposal with....

Ans: Lien

Que 2. Lien is imposed on a policy when underwriter feels that.....

Ans: the risk associated might decrease

26. Indemnity : This Principle states that you cannot make profit out of Insurance. It is the amount paid as per actual loss occurred. It is applicable to General Insurance

and not to the Life Insurance as Life Insurance is a Value Contract.

Que 1. The concept of indemnity is based on the key principle that

policyholders should be prevented from

Ans: Making profit out of Insurance

27. Utmost Good : This principle is concerned with Faith between Insurer and Insured. Faith Declaration by client that all the information filled in proposal form are correct and true. If the information filled is incomplete or is false, then settlement

of death claim will not take place. Period for this is 24 months from inception.

Que 1. Principle of utmost good faith will operate in existing policy

Ans: If the policy has lapsed and it has to be revived

28. Insurable : This Principle means that you can insure the things/people which you own, Interest i.e. its presence causes profit and absence causes loss. Que 1. In case of life insurance, Insurable interest must exist

Ans: At inception of policy

Que 2. What amount of insurable interest does an individual have in his

own life?

Ans: Unlimited


Que 3. If Insurable interest does not exists at the time of inception of the life

Insurance policy then, life insurance contract is

Ans: Invalid

29. Surrender : After paying premium for 3 full years, policy holder willingly returns the policy. Que 1. Available Loan amount under life Insurance policy is generally based on

Ans: Surrender Value

30. Physical Risk : Physical Characteristics, Job Profile and Gender. Que 1. If both parents of proposer died in their thirties due to heart attack

what is the kind of peril or hazard the proposer has?

Ans: Physical Risk

Que 2. In the personal statement, Harish declares that he consumes alcohol

twice every week. This is a...

Ans: Physical Risk

31. Moral Hazards : Risk caused due to habits, untruthfulness, carelessness, and greed. Que 1. A person with a criminal background due to Financial fraud would

come under which hazard

Ans: Moral

Que 2. Manish being a sole earning member of his family not Insured himself

But looking for insurance for his son who is student there is possibility

Ans: Moral hazard

32. Foreclosure : Loan+interest=surrender value, when this situation occurs the policy is foreclosed by Insurer.

Que 1. On foreclosure, if Death claim arises before the payment of the

surrender value, the payment would be payable to:

Ans: Legal heir of Life Assured

33. Ombudsmen : It is a platform where the disputes between Company and Policy Holder are resolved. Ombudsman can resolve cases upto 20 lacs Sum Assured.


Disputes are resolved in 10 days. Decision given by Ombudsman is obligatory

to the Company but not for the Policy Holder. Policy holder can approach

only one forum at a time.

Que 1. If a case is already before the consumer forum, then the ombudsman

should

Ans: Dismiss the case

Que 2. The Ombudsmans powers are restricted to insurance contracts of

value not exceeding?

Ans: 20 Lacs

Que 3. What is the period of award passed to the customer decided by

ombudsman?

Ans: 3 months

Que 4. How many Ombudsman offices are situated in India?

Ans: 12

34. Risk Retension : To bear the Risk on our own. No Insurance bought to cover the risk. Que 1. Vinay doesnt want to take insurance on himself. He feels that his

family will survive with the funds available in the bank and monthly rentals

received from village. This comes under Risk

Ans: Retaining (Risk retention)

35. Risk Transfer : Transfer the risk faced by us to the someone else, i.e. Insurance Company. Que 1. Mr. Mahesh is a software engineer. He has taken a term insurance

for Rs. 30,000,00/- for 30 years. This is an example for-----------------

Ans: Risk Transfer

Que 2. Which is the best option to transfer risk?

Ans: Transfer

36. Human Life : Human Life is actually the annual income of the individual but as far as Value (HLV) Insurance is considered HLV is 20 times of the annual income. Que 1. While calculating the HLV, individual's future income, total period in

the services, hike in monthly take home salary and________ is considered.

Ans: Discount Rate


37. Paid up value : (No. of premium paid * Sum Assured)+ bonus (Total no. of premium payable) Que 1. Mr. Shailesh has an endowment policy with 30 years policy term, he has paid for eight years. The sum assured Rs.8,00,000/- and accumulated bonus Rs.60,000/-. What is the paid up value? Ans: 273333

38. Loan : Loan amount given is 90% of the Surrender value. Loan is not given over ULIP policies.

Que 1. Available Loan amount under life Insurance policy is generally based on

Ans: Surrender Value

39. Lapse : If the revival period of the policy comes to an end and the policy is still not revived, then it gets lapsed.

Que 1. Ramesh has bought one policy and has paid only one premium. He is

unable to pay further premiums. He wishes to revive the policy after 5 years

of commencement date. What will happen to this policy?

Ans: Policy will get lapsed (revival period is 5 years)

40. Actuary : He is the officer in the Insurance company who calculates the profit, premium rates and bonus rates.

Que 1. In life insurance business if a person is working in calculating premium

rates of insurance products, then he is

mostly likely a member of

Ans: Institutes of actuaries of India

Que 2. Kunal works for Insurance company to decide the

Insurance amount which institute do he belong to....

Ans: Institutes of actuaries of India

41. First Premium : This is proof given by company on commencement of risk. Receipt Que 1. When is the First premium receipt considered as proof?


Que 2. Mr. A has submitted the proposal form, when does the risk commences

for the company?

Ans: On generation of First Premium Receipt

42. Renewal Premium : All future receipts received after first premium receipt. Receipt Que 1. Amit buys a pure Endowment plan on half yearly mode. What

would be the receipt called when he pays 2nd installment of his half

yearly premium?

Ans: Renewal Receipt

43. Pooling of Risk : To pool all the people facing same kind of risk together. Que 1. Law of large numbers is worked out by which of the following?

Ans: Pooling of Risk

Que 2. With pooling of risks an insurance company pools the premium

collected from several individuals to insure them against similar risks.

At what circumstances will the insurance companies pool the risk

of a life insurance and health insurance together?

Ans: Under no circumstances

44. Income Tax Act 1961 : 1. 80 C tax exemption over 1 Lac invested in life Insurance 2. 80 D tax exemption of 15000/- extra for investment in health

insurance for himself and 20000/- if he buys health

insurance for parents

3. 10 (10) D All the returns from Life Insurance are tax free

4. 80 E interest paid over education loan is deducted from taxable

income

5. 24 (b) interest paid over home loan is deducted from taxable

income

Que 1. What's the limit of tax benefit that can be availed under

Section 80C.?

Ans: 100000/-

Que 2. Under which section of Income tax Act 1961 a person can


acquire tax benefit over the premium paid for Health Insurance Policy?

Ans: 80 D

45. Term Insurance : If the policy holder dies within the policy term then the nominee will receive the Sum Assured.

Que 1. In case of a term plan the maximum premium of the

accidental rider can be.

Ans: 30% of Base Premium

Que 2. In term insurance if Critical illness rider claim happens then

what will happen to existing policy

Ans: Critical Illness benefit will ceases. After taking

benefit of CI Sum Assured if the policy holder dies

within 6 months, nominee will not receive basic sum

assured. But if he dies after 6 months nominee will get

basic sum assured as well.

Que 3. Mr.Baskar had taken a Term plan for a sum assured of

Rs. 7 lakhs. He also has an ADB rider worth Rs. 4 lakhs.

Unfortunately Baskar died in a car accident. How much will be

the death claim settlement?

Ans: Total 11 lakhs will be paid

Que 4. Pure Term Insurance is example of

Ans: Non-participating Plan

46. Pure Endowment Plan : Policy holder gets the sum assured only on survival. Que 1. Prashant bought a policy of sum assured of 75Lacs for 30

years.

According to document if Prashant survives for 30 years then he will

get 75 lacs, but if he dies during policy period his family will not

receive sum assured. Which policy is this?

Ans: Pure Endowment plan

47. Endowment Plan : Both Maturity and Death benefit are given in this kind of plans Que 1. Mr. Shailesh has an endowment policy with 30 years policy term,


he has paid for eight years. The sum assured Rs.8,00,000/- and

accumulated bonus Rs.60,000/-. What is the paid up value if bonus

accumulated and if not bonus accumulated?

Ans: 213333 or 273333

Que 2. Endowment plan is combination of.......

Ans: Pure Term plan and Pure Endowment plan

48. Group Insurance : One policy is bought and covers many individuals, e.g. employer can buy one policy and cover all employees. This policy is called Master Policy

Que 1. Group Insurance is opted in which case?

Ans: Employee and Employer

49. Joint Life Policy : One policy covers 2 individuals. This policy is available for husband wife or business partners.

Que 1. Who can opt for Joint Life Policy?

Ans: Husband Wife or Business Partner

Que 2. Suresh has asthama, but he has taken joint life policy. There is no

need of nominee. Why is it so?

Ans: Because it is Joint Life Policy

50. Industrial Policy : This policy is for the low income group. The minimum premium is Rs.15/- per week.

Que 1. Radheshyam is an auto rickshaw driver, his income is very less.

Which Life Insurance policy can he buy?

Ans: Industrial Policy

51. Micro Insurance : A policy for low income group. They can opt for sum assured of 5000 to 50000 for Life Insurance and 5000 to 30000 for Mediacal Insurance.

Minimum premium for this type of Insurance is Rs. 15/- per week.

Two types of agents can sell insurance:

1) Agent who has IRDA license (an immature, unsound mind

and individual with criminal background cannot become agent)


2) NGO, Co-operative Banks, Rural Corporate Agent, etc.

Que 1. What is the range of sum assured offered in the Micro Insurance?

Ans: 5000 to 50000

Que 2. Micro insurance is made specifically for people from........ group

Ans: Low income

Que 3. How much maximum Sum Assured can be taken under micro

insurance for any Health policy bought?

Ans: 30000

52. Insurance History : 1) Indian Life Insurance Regulation was formed in 1912 2) Insurance Act was formed in 1938

3) Life Insurance Corporation was formed in 1956

4) Insurance Regulatory and Development Authority (IRDA)

was formed in 1999 and was implemented since 2000

5) Married Woman Property Act 1874

6) Anti-Money Laundering Act was formed in 2002

Que 1. Mr. Avas has passed the IRDA exam in 2010 and got a license but

he has not worked. He wants to apply to renew his license once again,

in which year he can apply for the same?

Ans: 2013

Que 2. To ensure that the premiums are paid out of a legitimate source

of funds cash is accepted

Ans: 50000

Que 3. Which one of the section deals with the licensing of an agent?

Ans: Insurance Act 1938 section 42

Que 4. The guidelines for annual assumed growth rate are given by

Ans: IRDA

Que 5. Who has the authority in insurance company to issue/cancel the

agents license

Ans: Designated Person


53. Life Cycle ; 1) Childhood (0-17 yrs) 2) Young unmarried (18-25 yrs)

3) Young married (26-30 yrs)

4) Married with kids (31-35 yrs)

5) Married with elder children (36-45 yrs)

6) Pre-retirement (46-59 yr)

7) Retirement (60 yrs and above)

Que 1. The sole focus during a clients fact-find session was healthcare

requirements and estate planning. Which main life stage is he most

likely to fall into?

Ans: Retirement

Que 2. For which age group is the Life insurance most important?

Ans: Pre-Retirement

Que 3. One couple want to buy a policy best suitable for their 7 years kid.

Which is the best option for them?

Ans: Child Plan, Term plan, Money Back Plan, ULIP

Que 4. Now a days life expectancy is increasing consistently and it is

above 60. Although there are many challenges to be faced, how can

these challenges be covered?

Ans: Health Insurance Policy

Que 5. Which is the special feature of ULIP that handles risk profile of the

individual for long term?

Ans: Capital Appreciation

54. Investment : 1) High Priority (Immediate investment required) Priority 2) Medium Priority (Little investment to start with)

3) Low Priority (Think of investment in future)

Que 1. Manish and Manisha is a married couple with one child. They want

to plan for savings, child education/marriage and their retirement and

protection of income. Which should be their lowest priority?

Ans: Marriage

Que 2. For his investment need, Ravi has parked funds in equity. The


returns from this form of investment can be categorized as

Ans: High Risk

Que 3. Vijay, aged 30 years and married, is the sole bread winner for his

family. He is saving enough with banks. As an agent, which need

you prioritize first?

Ans: Financial Security Need

55. Priority of Life Cycle : 1) Protection of self life 2) Protection of Income

3) Protection of Self and Family's health

4) Protection of Child Education

5) Protection of Child's Marriage

6) Investment to protect the Responsibilities

7) Investment for post Retirement Life

Que 1. Manish and Manisha is a married couple with one child. They

want to plan for savings, child education/marriage and their retirement

and protection of income. Which should be their lowest priority?

Ans: Marriage

Que 2. Mr. Shyam is 20 years old and has started earning recently,

he has no responsibilities over him. Which policy should he buy?

Ans: Term Insurance, ULIP

56. Kinds of Insurance : Types of Insurance 1) Life Insurance

2) Non-life Insurance

a) Fire, b) Marine, c) Miscellaneous I) Vehicle, ii) Travel, iii) Health,

iv) Assets v) liabilities

3) Miscellaneous

Que 1. Insurance market is divided into

Ans: Life Insurance and Non-life Insurance

Que 2. Following are the types of Insurance.

Ans: Life Insurance, Non-Life Insurance and


Reinsurance

Que 3. ............. are the clients of reinsurance.

Ans: Insurance Company

57. Bonus : Extra amount received with the Sum Assured while claiming the Maturity Claim or Death Claim. There are four types of bonus:

1) Simple Revisionary bonus bonus received over Sum Assure every year

2) Compound Bonus bonus received over Sum Assured and previous

year's bonus every year

3) Terminal Bonus Bonus received over long term policies

4) Interim Bonus - 31st March is the date of valuation

Insurance sector, returns for the same are declared in September Any

claim (Death/Maturity) which arises within March to September

are settled with different bonus and it is Interim bonus.

Que 1. Which one of the following bonuses is given by insurer

as an incentive to the insured to for long term:

Ans: Persistency Bonus/ terminal Bonus

Que 2. Interim bonus is valid till which period?

Ans: Till declaration of next bonus

58. Loading : Extra amount charged over the premium by the company due to various reasons, e.g. increase in expenses, bonus given, unpredictable

and uncertain Maturity Claim.

Que 1. If the annual premium for a plan is 32000 and a frequency

loading of 4% is added in a quarterly premium what is the amount that

needs to be paid.

Ans: 8320

Que 2. If bonus is given under a plan the additional premium added

is known as

Ans: Loading


59. ULIP : This are the policies which are linked with Share Market. The person bears the risk for money (capital appreciation or loss). NAV Net Asset Value

In ULIP give and take of money is in the form of NAV.

The price used to buy NAV is called Offer

Price and the price at which NAV is sold is Bid Price.

Que 1. A 25 year youngster, is employed in a MNC recently. His salary is

30000 p.m.. He has no responsibilities to face. Which policy can he buy?

Ans: ULIP (Unit Linked Insurance Plans)

Que 2. Switching is not a rite suggestion in case of ULIP policies. As this

increases

Ans: Investment of Risk

60. Saving Products : These are the options where individual can save funds for their future. 1) Banks RD, FD, Saving Account, etc.

2) Post Office Savings RD, FD, KVP, NSC, Time Deposit etc.

3) Mutual Fund Dependant on share market

4) Corporate Bond It is a kind of FD, with fixed interest rate

5) Share Market Risk involved

6) Metal Gold, Silver, etc.

7) Life Insurance

Que 1. Gautam wants to buy Kisan Vikas Patra or Time Deposit, where

should he go?

Ans: Post Office

Que 2. Who manages Mutual Fund?

Ans: Asset Management Company (AMC)

61. Kinds of Premium : 1) Net Premium There are two parts of the premium one for maturity claim and other for death claim. Company invests this premium after

deducting the charges. The interest received from the investment

is deducted from the loading added to premium. Such premium

is called Net premium.

2) Risk Premium Premium charged for Death Claim.


3) Gross Premium Net Premium + Loading (charges)

4) Level Premium Average Premium calculated for the complete policy

term.

Que 1. If the sum assured remains the same, what will be impact of net

premium if the age of the policyholder increases

Ans: It remains constant

Que 2. Level Premium is calculated based on

Ans: Risk Premium

62. IRDA/SEBI/RBI : 1) IRDA sets all the regulations related to Insurance company and agent's eligibility and code of conduct.

2) SEBI (Securities and Exchange Board of India) regulates the securities

market in India and protects the interests of the investors

3) RBI is regulator, supervisor and monetary authority on Indian Financial

system. It also sets guidelines for banking operations

Que 1. Who is a regulator, supervisor and monetary authority of the

financial system in India?

Ans: RBI

Que 2. As per the IRDA regulations the decisions on the

proposal must to convey to the proposer within......

Ans: 15 days

Que 3. Who act as an intermediary by offering a trading platform for

buying and selling of shares?

Ans: Bombay Stock Exchange

63. E-Sales : Online sale of Policy Que 1. Which type of sale is done through internet?

Ans: Direct Sale

Que 2. Which of the following ways is easier for a person to take a saving

product?

Ans: Internet (E-sales)


64. Mutual : There are two parties involved in the Insurance contract. Same kind of understanding over the terms in the contract.

Que 1. Both the parties to a contract must agree and understand the

same thing and in the same sense which is called .....

Ans: Consensus ad idem

65. Free Look Period : Policy holder can cancel the policy within 15 days after receiving policy document if he/she wishes to.

Que 1. Mr. Kumar is taken one life insurance policy with ABC Company.

But he is not satisfied with the policy benefits. What Mr. Kumar

can do under this situation?

Ans: He can send back the policy document to insurance company

with in 15 days from policy receiving date.

Que 2. How many days does the Free Look Period last?

Ans: 15 days

66. Inflation : If the price of goods & services increase & value for money fall. Que 1. Anand received post taxation 5% return on his fixed deposit

in a bank. If his net return is 3%, what can be the reaso

Ans: Inflation

67. Health Insurance : Individual Health Plan covers a single person. Family Floater Health Insurance covers whole family (wife, children, parents). Group Health

insurance covers group of people. Daily Hospitalization Cash Benefit

Rider A certain fixed amount is paid irrespective of actual expenses (ICU

expenses given). members also. We will call these plans as..

Ans: Family Floater Health Insurance Plan

Que 2. In what situation Waiting Period is applicable in a health

insurance?

Ans: Pre-Existing Illness


68. Fact Finding : Identifying the Insurance need of the client by knowing his responsibilities, assets, marital status, no. of children, age, liabilities, etc

Que 1. In the context of financial planning, how is the difference between

real needs and perceived needs best described?

Ans: Real needs are actual needs and perceived needs are based

on a clients thoughts and desires.

69. Churning : Ask the client to invest in the existing policy again and again or convince client to shift from existing policy to new policy for earning high

commission.

Que 1. If the agent recommends the client to terminate an endowment

plan and take a whole life in order to earn higher commission its termed as

Ans: Churning

Que 2. Varun, aged, 32, had a Insurance cover of 10,00,000/- . He was

approached by an advisor who made some analysis and told him that his

Insurance need is higher than 10, 00,000 and suggested that he surrenders

the existing policy and buys a new one. This is example of

Ans: Churning

70. Participating Plan : Client has the right to participate in the profit (Bonus) of the company. The Endowment Plan, Money Back Plan, Whole Life Plan are the

participating plans. Non participating plans donot provide this benefit

(no bonus eg Term, ULIP)

Que 1. During a fact finding process the need analyzed were income

replacement and childrens education. But the customer insists on only

a child plan for the time being and asks the agent to give him a child

plan. The agent should.

Ans: Give a child plan and revisit the client on a later date

Que 2. Mr. Shanth has taken an endowment policy of 20 years. He has

paid premium for 10 years and now the policy is in force. At this point

of time can Shanth take loan?

Ans: Mr. Shanth can take loan which should be certain

percentage of the surrender value of the policy.


71. Indisputability : In the first 2 years of the policy, if the insurer comes to Clause section 45) know that some material fact has not disclosed by the proposer, it can

declare the policy to be null and void.

Que 1. Which of the following falls under voidable contract?

Ans: Misinterpretation

Que 2. Indisputability clause can be enforced by the insurance

company during the

Ans: First Two years of policy

72. Role of Financial : Where the Agents help the policy holder to maintain a stable life. They Services & also help the Govt. for smooth

Insurance functioning.

Que 1. Mrs. Sheela received some amount out of her

husbands death. In such a situation what will be her prime focus?

Ans: Investment Management

73. Indirect Channels : These are the channels who sell insurance on behalf of the Insurer (Agents, Bancassurance, Broker, etc. )

Que 1. If a client wants to compare between all financial products then

the best person he can approach is

Ans: Broker

74. Code of Conduct ; Duties and Responsibilities of Agents as per IRDA for agent Que 1. If the license of an agent has been disqualified by a designated authority in 2010 then the person can apply for a license in which year.

Ans: 2015

Que 2. If a policy holder buys a policy from the advisor and lodges a

complaint, it should be treated as :

Ans: Same for all policies sold by advisor

Que 3. If the advisor license has terminated then what he has to do?

Ans: 50 hours training to be attended once again along with

renewal fee Rs. 250.

Que 4. After how many years the License of the agent can be renewed?


Ans: 3 years

Que 5. Agent should apply for renewal of his license how

many days before the expiry of his license?

Ans: 30 days

75. Phases of Insurance : First Phase Pre-Liberalization 1956 formation of Life History Insurance Corporation

Second Phase Liberalization 1999 IRDA was formed.

Foreign Direct Investment in Indain Insurance sector was allowed

upto 26%

Third Phase 23 Insurance companies work in India till date.

Bancassurance and Micro Insurance were also introduced.

Que 1. Under current regulations what is the maximum stake that

the Foreign Partner in Insurance Company hold?

Ans: 26%

76. Financial Risk / : The economic loss is called as Financial Risk, e.g. if a single person Pure Risk is income source of family and he dies then family faces financial loss.

In Pure Risk there is no chance of making profit, i.e. No person can

earn through Insurance.

Que 1. Which of the following Risk is associated with those events

which are not in control of an individual and also no possibility of

making profit.

Ans: Pure Risk

Que 2. On 6th August there was a typhoon. Mr.Augustin who had insurance died in typhoon. Now how will the insurance company will categories this particular risk ? Ans: Under the category of Pure risk

77. Insurer collects : Name, Age, Address, Marital Status, Weight, Height, Medical History, following details who is proposer, who is life assured. If the proposer is illiterate left

through Proposal hand thumb impression.

form


Que 1. When an illiterate person wants to have a policy.....

Ans: an impression of the left thumb is taken and third party

has to attest it

Que 2. The underwriter can get the required information (name, age,

address, marital status, weight, height, nominee, etc.) about the proposer

Ans: Proposal Form

78. The Agent Role : Agent is directly in contact with the proposer, due to this he knows the in Underwriting actual risk faced by proposer i.e. his habits, life style,financial status. Hence agent can submit Agent Confidential Report. Agent is also called

Primary Underwriter.

Que 1. What is the basic role of the Insurance Agent?

Ans: Primary Underwriter

79. The Agent Role : Insurance agent has information regarding various products available in in Financial market. He also has information regarding tax benefits which can be Planning availed. He can use his knowledge of Financial solutions and guide

the Investor.

Que 1. An agent was explaining to his customer the guaranteed benefits

of the product. Which one of the following documents he would have

used to explain the same?

Ans: Benefit Illustration Document

Que 2. Amit & Rashmi are newly married. Both are working couple.

They want to invest their savings of 100,000 annually to build corpus

to make down payment for their house 5 years from now. An adviser sold

than a unit link product to meet their requirement. This results in...

Ans: Opportunity of new business for adviser

80. Recurring Deposit : Plans offered by Banks where interest & principal is paid at the time of Plan Maturity. Interest is calculated on quarterly basis in compounded form. Client invests the amount on monthly basis.

Que 1. In Cumulative bank deposit the interest that in normally

compounded on what basis.


Ans: Quarterly

Que 2. With this type of deposit the bank pays the principal and the total

interest at the end of the term.

Ans: Cumulative Deposit

81. Effect of Interest : Reserve Bank of India decides the interest rates. When interest rates Rates drop down people invest less and take more loan, buy more shares, that means people will invest in Equity and Mutual Funds. Similarly if

interest rates raise then they will save in saving instruments and will not

take loan and shares.

Que 1. Mukesh buys shares at lower price and sold at higher price, the

Difference between the two prices is known as:

Ans: Capital Appreciation

Que 2. If RBI increases the interest rates then what will be the effect on

share prices.

Ans: Shares will be less attractive.

82. Annuities : Annuity works in completely opposite manner as that of Life Insurance as Life Insurance amount is received after death of individual where as

Annuity stops when the individual dies. It is also called as Pension Plan.

Client can get the annuity in 4 modes as per their wish monthly, quarterly,

half yearly and yearly.

Que 1. A person wishes to earn a certain amount after retirement, the

amount which is invested yearly depends on...

Ans: 1. Accumulation Phase, 2. Amount which is required,

3. Instruments used for investment

Que 2. Which is the best saving option for senior citizen?

Ans: Pension Plan

Que 3. Customer has opted for a 5 yrs guaranteed annuity option. What

will happen to annuity, if the customer survives for 5 years after the end

of guarantee period?

Ans: Till he dies


83. Commutation : If a person has taken a annuity plan, before getting his annuities he

receives a 1/3rd of invested amount as a commutation and remaining

2/3rd part is used to buy annuity. The important factor of annuity is

annuity lasts till death.

Que 1. A lump sum withdrawal allowed as commutation in annuity plan is

Ans: 1/3rd part of Accumulated amount

84. Identifying Client : Collect all the below given data from the client to identify his needs. Needs Client's assets, responsibilities, marital status, no. of dependants, income, insurance cover, health insurance cover, present protection, savings and

requirement after retirement is the basic information which is collected.

Depending on this information agent can suggest the solution.

Que 1. In the context of financial planning, how is the difference

between real needs and perceived needs best described

Ans: Real needs are actual needs and perceived

needs are based on a clients thoughts and desires.

85. Suggestion by : 1) If the client is unmarried and has no dependant members, agent can Insurance Agent suggest ULIP and Tax beneficial plans.

2) If the client is unmarried and has parents dependant on him then

agent can suggest him income protection plan (Term Plan)

3) If the client is married with kid, then the agent can suggest a Term

plan for both husband and wife, Child plan for child's secure future and

health plan / family floater.

4) If the client is in the stage of pre-retirement then agent can suggest a

Health Insurance Plan, Pension Plan, and after retirement he can enjoy

Annuity.

Que 1. During a fact finding process the need analyzed were income

replacement and childrens education. But the customer insists on only

a child plan for the time being and asks the agent to give him a child plan.

The agent should.

Ans: Give a child plan and revisit the client on a later date


86. Fact Finding Form : This form consist of all the information regarding the client so that agent can suggest correct solution which will satisfy his needs. The details

include information regarding personal information, present insurance

cover, monthly income and expenses.

Que 1. Which process does the agent follow while fact finding process?

Ans: Identify client needs, Quantify the needs and Prioritize

them

Que 2. What is the objective of Fact Finding?

Ans: Identify client needs and gather the information

Que 3: The fact finding process doesnot include..

Ans: Ask client to surrender previous policy to get a new policy

87. Documents for : 1) Identity Proof Driving License, passport, voter id, pan card, Insurance government certificate.

2) Address Proof Driving License, passport, light bill, telephone bill,

rationcard, bank passbook, insurance receipt.

3) Non Standard proof Astrology, self affidavit, village panchayat certificate

Que 1. Mr. Ram Prakash stays in avillage, and he donot have any age

proof to be handed over for insurance policy. Insuarance company had

asked him to attach a Gram Panchayat Certificate as a proof for age. What

will be this certificate called?

Ans: The Certificate attested by Surpanch will be considered as

Non Standard Age proof but he will get the insurance policy.

88. Responsibilities of : Identify the prospect insurance client, identify client needs, acquire Insurance agent knowledge about various saving products, provide the solution to the

client as per his needs. Check whether the information filled in proposal form

is accurate. Collect all the required documentation e.g. Age proof, Identity

card, Address proof, Medical report, the documents required for

underwriting. Agent should disclose the commission amount only if the

client asks for the same. If the client denies to buy a policy then he should

ask the reason for rejection.


Que 1. If the client does not wish to proceed with the recommendations

right at the moment the agent should

Ans: Should ask for the reason for not going with the

recommendation

89. Fraudulent Claims : If the client buys a insurance policy solely to make economic profit by hiding the necessary facts and if the claim arises, then this claim is called

Fraudulent Claim. Normally claims are of two types: 1. Maturity Claim,

2. Death Claim Death certificate and claimant's statement are the

documents required during Death Claims. The claim amount will be settled

only if the policy is in force. If a person is missing for last 7 years then he

is considered dead and the death claim is processed.

Que 1. A person is presumed to be dead if he is missing or not heard of

from for how many days?

Ans: 7 years

Que 2. What is the maximum Time in which The insurer should settle a

claim when all documents are submitted

Ans: 30 days

Que 3. Mr. Kumars wife is suffering from blood cancer. Doctors lost their

hope on her live. Mr. Kumar would like to take Life Insurance policy on

wifes name in order to get monitory benefit. Insurance company rejects this

proposal on the grounds of.

Ans: Legality of object or purpose

Que 4. Aman has taken a term plan for 20 years. In the 3rd year he

suffered financial crisis due to which he was unable to pay premium within

grace period and died after 1 month. The nominee files a claim and is

rejected because

Ans: Policy was not in force

Que 5. Rakesh purchased a life insurance policy. While writing a proposal

form he hide that he practices mountaineering. Sadly he died in an accident

while climbing Mount Everest. The insurers rejected the claim. What is the

reason for rejection?

Ans: Non - disclosure


90. Insurance Act : This act has provisions regarding agent commission, renewal, investment 1938 of the premium, appointment of the employees, policy transfer, assignment, nomination. Regulations for agent, their commission, protection of policy

holder's interests. An agent giving concession in his commission is illegal

according to section 41(1). Any foreigner can become a agent and

earn commission.

Que 1. Issuance of a license to a person has been stipulated in.........Act

Ans: Insurance Act 1938 section 42

91. Anti Money : This is the process in which the illegal money earned is invested in such a Laundering way that it is converted to legal earning, e.g. money invested in Life

2002 Insurance is easily converted into legal income. To curb this process of Money

Laundering, Government has passed this Act, no cash payment will be accepted

above Rs.50000/-, all the amounts above 50000/- will be accepted through

cheque and drafts along with PAN card.

There are three steps of Money Laundering 1. Placement 2. Layering

3. Integration

Que 1. How much maximum cash payment is accepted in the Insurance

policy?

Que 2. According to AML what is the maximum limit for cash premium

payment

Ans: 50000

Que 3. Which is the second stage in converting illegal income to legal income

Ans: Layering

Que 4. What is the second stage in Money laundering?

Ans: Layering

Que 5. State the no. of stages involved in Money laundering

Ans: Three stages Placement, Layering, Integration

Que 6. When was the Anti-Money Laundering Act passed for Insurance

sector?

Ans: 2006


92. K.Y.C./COPA : Know Your Customer This means that the insurance company should know the information about their customer. Company should ask for the required

documents.

COPA Consumer Protection Act Customer can approach various forums if

he has some disputes with the company.

The disputes are heard in following manner District level 20 Lacs,

State level 1 Cr, National level 1 Cr and above.

Que 1. When was the Consumer Protection Act passed?

Ans: 1986

Que 2. The Authority of COPA is limited to what amount at the district level.

Ans: 20,00,000/-

93. Qualification of : If the agent resides in a rural area (population min 5000) he should be 10th an Insurance pass, 50 hrs training and clearing the exam. Renew license after every 3 years Agent by paying Rs. 250/-. If the agent resides in a urban area (population above

5000) he should be 12th pass, 50 hrs training and clearing the exam. Renew

license after every 3 years by paying Rs. 250/-. If the agent has composite

license he should undergo 75 hrs training. The important criteria is he should

be sound mind, no criminal background, and a mature person.

Que 1. Basic qualifications of agent

Ans: Graduate and sound mind

Que 2. Basing on which criteria the qualification of Agent is determined?

Ans: Domicile status

Que 3. After undertaking financial planning exercise, the prospective client

said that he does not have funds for investments. To resolve this query, which

skill of an agent would be tested?

Ans: Handling Objection

Que 4. If the agent has to undergo training for more than 50 hours, what is it

called?

Ans: Composite Agency / Composite License


94. Protection of : Policy holder can appeal to Ombudsman for grievance redressal. IRDA has Policy Holder's also started a redressal call center (IGCC), where a policy holder can give a Interest phone call or mail their complaint. The toll free no. is 155255. IRDA will give

Regulation the decision in 15 days. Insurance company will give the decision in 10 days.

2002 Ombudsman will give the decision in 90 days.

Que 1. As per Regulation for protection of Policyholders interest 2002 (IRDA),

Which insurer will have a grievance redressal System

Ans: All Insurers

95. E.T.F.S. (Gold) : Buy Gold through internet. Here gram of a Gold is treated as units. Hence if a person has 100 ETF units then he has 50 - 100 grams gold. 1 unit ETF = 0.5

gms or 100 gms gold.

Que 1. What is the advantage of converting physical gold assets to gold ETFs.

Ans: Liquidity

Que 2. If we hold 100 units in gold ETF, It means that how much grams we

have in physical

Ans: 50 gms or 100 gms

96. Whole Life Plan : In this policy premium is paid for the limited term but the policy continues for Whole Life.

Que 1. If a client has a surety that he would survive till 100 years. Which plan

will the Agent suggest him?

Ans: Whole Life Plan

97. Return of : In this policy if the policy holder survives for entire term then the paid Premium premiums would be returned. Que 1. Suresh has adequate reserve capital with him and he wishes to

protect his income, moreover he feels that if he does not die then he would

need the amount. What type of plan should he opt for?

Ans: Return of the Premium

Que 2. Rakesh wants to buy a policy primarily for Risk Cover but at the end

of

the term he wants to get at least some return. Under which policy he will get


these benefits

Ans: ROP Plan

98. Money back Plan : In this policy the sum assured is returned to policy holder in regular intervals, i.e. 25% of sum assured at each interval.

Que 1. Harshs policy matured, however he was paid only 25% of the sum

insured in spite of all his premiums been paid on time. This indicates that his

policy is a

Ans: Money Back Plan

Que 2. A customer gets periodic benefits without any claim and then when he

dies during the term of the policy, his nominees gets the sum insured. What

type of policy is this ?

Ans: Money Back Plan

99. Numerical : 1) If a person wants to avail tax benefit, then he should have sum assured 5 Questions times of premium he is paying. e.g. if he pays 60000/- premium he should have 3 lacs sum assured.

2) In Life Insurance there is option of 5% increase every year.

3) The maximum EMI would 40% of the income, i.e. if a person's monthly

income is 80,000, then the EMI amount will be 32000/-

100. Deferred : Deferred annuity is paying a specific premium for certain period and after a Annuity certain period start the pension. Que 1. Mr. Ramakant is 35 years old. He has bought retirement plan for 20

years. This type of pension plan is known as..................

Ans: Deferred Annuity

101. Immediate : To pay a lump sum amount to the company at one time and start getting Annuity pension immediately. Que 1. A person is going to retire in 3 months, he wants the returns in the form

of pension, which kind of policy he should buy?

Ans: Immediate Annuity


102. Grace : It is the extra time given by the insurance company after the due date of Period renewal premium. 30 days grace period for yearly/half yearly/quarterly premium mode and 15 days grace period for monthly premium mode.

Que 1. What is the extra time given to pay the due premium called?

Ans: Grace Period

103. Lapse : The benefits of the policy ceases if the premium is not paid even after grace period is over.

Que 1. Mr. Radheshyam had bought a policy in 2010. Due to some financial

crisis he couldnot pay the premium in 2012. Grace period for the premium is also

over. What will happen to the policy?

Ans: Policy will lapse. If Radheshyam dies within the policy term then his

nominee will not receive any policy benefit.

Que 2. If a person buys a Endowment plan with the CI rider. He just pays the

first premium and unable to pay further premium. Suddenly he came to know

that he has cancer. Now he wants to revive his policy, what conditions will

company apply?

Ans: Company will conduct medical examination and will accept the

premium with late charges, and the policy will be revived. But during

medical examination company comes to know that he has cancer, then

his policy will be rejected. If the client donot disclose the detection of

cancer and company revives the policy without examination, then the

principle of Utmost Good Faith applies. After revival if the person dies

d

131 Points English

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