213d - Principles of Insurance - i

Dr.G.R.Damodaran College of Science(Autonomous, affiliated to the Bharathiar University, recognized by the UGC)Re-

accredited at the 'A' Grade Level by the NAAC and ISO 9001:2008 CertifiedCRISL rated 'A' (TN) for MBA and MIB Programmes

I B.COM(AM) [2014-2017]Semester II

Core: PRINCIPLES OF INSURANCE – I – 213 DMultiple Choice Questions.

1. A certain percentage of sum assured is paid periodically according to the terms of the policy is known as___________.

A. Term PolicyB. Endownment Policy.C. Money back PolicyD. Group insurance policy.

ANSWER: C

2. The principle of indemnity does not apply to ___________.A. burglary insurance.B. fire insuranceC. marine insurance.D. life and personal accident insurance.

ANSWER: D

3. Transfer of rights and remedies of the insured to the insurerafter indemnity has been effected iscalled_________-.

A. Insurable interest.B. Subrogation.C. Proximate clause.

D. Money back policy.ANSWER: B

4. Guarantees for employer for the loss out of employee's dishonest is_____________.A. burglary insurance.B. fidelity insurance.C. third party insurance.D. medical insurance.

ANSWER: B

5. Motor insurance has its beginning in the__________.A. USAB. USSR.C. UK.

http://172.16.2.20/printqp.php?heading=I B.COM(AM) [2014-2017], S...

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D. UAE.ANSWER: C

6. Fidelity guarantee insurance does not guarantee ______A. the death of the employer.B. the employee honesty.C. the employee honesty.D. the employer honest.

ANSWER: C

7. Insurance is based on the principle of _______A. co-operation.B. democracy.C. equality.D. welfare.

ANSWER: A

8. This policy covers all risks to the ship and its cargo while the ship is at a particular port ___________.A. a.Voyage policy.B. b.floating policy.C. c.time policy.D. d.port risk policy.

ANSWER: D

9. Fire insurance can be taken in respect of_____.A. movable property only.B. immovable property only.C. both movable and immovable properties.D. persons only.

ANSWER: C

10. The principle of indemnity is applicable to _______ only.A. life insurance.B. personal accident insurance.C. proximate cause.D. property insurance.

ANSWER: D

11. Except life assurance the maximum term of other insurance is _________A. 12 months.B. 24 months.C. 6 months.D. 36 months.

ANSWER: A

12. The person whose risk is insured is called __________A. Insured.B. Assured.


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C. Indemnity.D. Both 1 and 2.

ANSWER: D

13. The person who agrees to compensate the loss arising from the risk is called the _____A. Insurer.B. Assurer.C. Underwriter.D. All the above.

ANSWER: D

14. __________ policy matures on the assured death or on his attainment of a particular age whicheveroccurs earlier.

A. Endowment.B. Money back.C. Joint life.D. Single premium.

ANSWER: A

15. In marine insurance insurable interest is enough at the time of ________A. claim.B. maturity.C. insurance.D. loss.

ANSWER: B

16. In fire insurance insurable interest is enough at the time of _______A. effecting the policy.B. Loss.C. Maturity.D. both 1 and 2.

ANSWER: D

17. _______ is an agreement where by the insurer agrees to indemnity the insured against marine losses.A. Life insurance.B. Fire insurance.C. Marine insurance.D. Public liability insurance.

ANSWER: C

18. ______ are those terms, which are implied in every contract of marine insurance unless they areexpressly excluded.

A. Guarantee.B. Express warranties.C. Implied warranties.D. Waiver clause.

ANSWER: C


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19. _______ are those terms, which are written on the policy.A. Express warranties.B. Implied warranties.C. Memorandum warranties.D. Valuation clause.

ANSWER: A

20. Notice of abandonment is necessary in the case of ______A. actual loss.B. constructive total loss.C. partial total loss.D. minimum loss.

ANSWER: B

21. When the subject matter insured is destroyed wholly refers to ________A. partial loss.B. actual total loss.C. constructive total loss .D. maximum loss.

ANSWER: B

22. _______ policy issued on the basis of the number of persons assured.A. Annuity policy.B. Multiple life policy.C. Single life policy.D. Level of premium policy.

ANSWER: B

23. Assignment of life policy means _________A. transferring rights to the assignee.B. policy holder is entitled to the paid up value.

C. paid up value is always higher than surrender value.D. value payable on assured death or maturity.

ANSWER: A

24. ________ means a willful and intentional act on part of the self-destroyed.A. Death.B. Suicide.C. Murder.D. Accident.

ANSWER: B

25. The central office of Life Insurance Corporation of India is located at ________A. New Delhi.B. Kolkata.C. Mumbai.D. Chennai.

ANSWER: C


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26. A person employed to do any act for another or to represent another in dealing with a third personrefers to ________

A. Principal.B. Employee.C. Agent.D. development officer.

ANSWER: C

27. The person for whom such act is done or who is so represented is called ________A. Principal.B. Worker.C. Agent.D. Development officer.

ANSWER: D

28. Marine perils is also called as _______A. Perils of the sea.B. Moral hazards.C. Marine clause.D. Marine laws.

ANSWER: A

29. _______ policy in which the limits of the risks are determined by place of particular voyage.A. Valued.B. Time.C. Voyage .D. Unvalued.

ANSWER: C

30. _______ policy is which covers the risk during all situations.

A. Floating .B. Wagering.C. Valued.D. Mixed.

ANSWER: D

31. The term run off or fully declared refers to ___________A. Floating policy.B. Wagering policy.C. Builders risk policy.D. Open cover policy.

ANSWER: A

32. Wagering policy is otherwise termed as _________A. Policy proof of interest.B. Open policy.C. Builders risk policy.


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D. Port risk policies.ANSWER: A

33. Risk insured against death is a contract of ________A. assurance.B. agreement.C. indemnity.D. caveat emptor.

ANSWER: A

34. Which of the following contract is not legally enforceable?A. Contract of insurance.B. Wagering contract.C. Contract of sale of goods.D. Contract of business.

ANSWER: B

35. Insurance contract is sort of contract which is approved by ____________A. The Indian Contract Act.B. Indian Factory Act.C. Indian Companies Act.D. The Indian finance Act.

ANSWER: A

36. ________ is a document which provides evidence of the contract of insurance.A. Proposal form.B. Policy form.C. Cover note.D. Certificate of insurance.

ANSWER: B

37. ___________ provides evidence of insurance to the policies and Registration Authorities under MotorVehicle Act.

A. Cover note.B. Endorsements.C. Certificate of insurance.D. Policy form.

ANSWER: C

38. General Insurance Corporation was established during the year ________.A. 1956.B. 1972.C. 1955.D. 1971.

ANSWER: A

39. General Insurance Business was nationalized under _________A. General Insurance Business Nationalisation Act, 1971.


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B. General Insurance Business Nationalisation Act, 1972.C. General Insurance Business Nationalisation Act, 1973.D. General Insurance Business Nationalisation Act, 1974.

ANSWER: B

40. The head office of New India Assurance & Co Ltd., is _________A. New Delhi.B. Kolkata.C. Chennai.D. Mumbai.

ANSWER: D

41. New Delhi is the head office of ______A. New India Assurance & Co Ltd..B. United India Assurance & Co Ltd..C. Oriental Insurance Co Ltd..D. National Insurance Co Ltd..

ANSWER: C

42. The subscribed capital of GIC contributed by the Central Government is ________A. Rs. 5 Crore.B. Rs. 10 Crore.C. Rs. 15 Crore.D. Rs. 20 Crore.

ANSWER: A

43. The Head office of National Insurance Co, Ltd, is ________A. Mumbai.B. Kolkata.C. Bangalore.D. Hyderabad.

ANSWER: B

44. The Head office of United India Insurance co, Ltd, is _______A. Chennai.B. Bangalore.C. New Delhi.D. Mumbai.

ANSWER: A

45. Life insurance in its present form came to India from ______A. The United Kingdom.B. The USA.C. Canada.D. Germany.

ANSWER: A

46. Life Insurance Company was setup in ________


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A. 1824.B. 1823.C. 1822.D. 1821.

ANSWER: B

47. Life Insurance Corporation was nationalized in _______A. 1951.B. 1952.C. 1954.D. 1956.

ANSWER: D

48. Life Insurance Corporation was formed with a capital contribution of ______A. Rs. 10 Crore.B. Rs. 15 Crore.C. Rs. 5 Crore.D. Rs. 20 Crore.

ANSWER: C

49. The term Assurance refers to ________A. Life Insurance Business.B. Marine Insurance Business.C. Fire Insurance Business.D. Motor Vehicle Business.

ANSWER: A

50. The Oriental Life Insurance Company came to India during ______A. 1919.B. 1818.C. 1899.

D. 1888.ANSWER: B

51. The policies where the premium is payable through out the life of the assured is called ___________A. Whole life policies.B. Renewable term policies.C. Sinking fund policies.D. Annuity policies.

ANSWER: A

52. With profit policy is also termed as _______A. Multiple life policy.B. Participating policy.C. Level premium policy.D. Lump sum policy.

ANSWER: B


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53. The Insurer who grants a guarantee from the direct insurer is called as _________A. Direct Insurer.B. Ceding Insurer.C. Re-Insurer.D. Double Insurer.

ANSWER: C

54. The proportion of the risk which the direct insurer holds on his own account refers to ___________A. Line.B. Retention.C. Retrocession.D. Ceding insurer.

ANSWER: B

55. A reinsurance of insurance refers to ________A. Line.B. Retention.C. Retrocession.D. Cession.

ANSWER: C

56. Reinsurance also termed as __________A. Insurance of insurance.B. Reinsurance of insurance.C. Double insurance.D. Over insurance.

ANSWER: A

57. When the same risk and subject matter is insured with more than one insurer is called as_______A. Double insurance.B. Over insurance.

C. Reinsurance.D. External insurance.

ANSWER: A

58. When the amount for which a subject matter is insured is more than its actual value is called__________

A. Double insurance.B. Over insurance.C. Reinsurance.D. Crop insurance.

ANSWER: B

59. IRDA refers to_________A. Insurance Regulatory Development Authority.B. Indian Regulatory Development Authority.C. Institute of Regulatory Development Authority.D. Insurance Regulatory Development Association.


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ANSWER: A

60. Committee of reforms in insurance sectors during 1993 headed by ________A. R.N. Malhotra.B. S. Narashiman.C. Manmohan Singh.D. P.Chidambaram.

ANSWER: A

61. The danger of loss from the unforeseen circumstances in future refers to ______A. Risk.B. PerilsC. Hazards.D. Damage.

ANSWER: A

62. ________ involved those losses that occur even if there were no changes in the economic environment.A. Dynamic risk.B. Static risk.C. Fundamental risk.D. Particular risk.

ANSWER: B

63. Risks are not suited to treatment by insurance refers to ____________A. Static risk.B. Property risk.C. Dynamic risk.D. Liability risk.

ANSWER: C

64. Fundamental risk is also termed as _________

A. Particular risk.B. Speculative risk.C. Group risk.D. Pure risk.

ANSWER: C

65. Unemployment, war, inflation, earthquakes etc., are the examples of ________A. Pure risk.B. Particular risk.C. Personal risk.D. Fundamental risk.

ANSWER: D

66. Any risk involved a situation where there is a possibility of gain refers to ________A. Liability risk.B. Personal risk.C. Pure risk.


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D. Speculative risk.ANSWER: D

67. Direct or Consequential losses refer to _________A. Dynamic risk.B. Particular risk.C. Property risk.D. Pure risk.

ANSWER: C

68. Spreading of risk otherwise termed as _________A. Shifting of risk.B. Acceptance of risk.C. Reduction of risk.D. Spreading of risk.

ANSWER: D

69. The principle of prevention is better than cure refers to __________A. Avoiding of risk.B. Reduction of risk.C. Transferring of risk.D. Shifting of risk.

ANSWER: A

70. When the subject is partially lost by a peril insured against, it is called ___________A. General average loss.B. Constructive total loss.C. Actual total loss.D. Particular average loss.

ANSWER: D

71. An international code of York Antwerp Rules applied to__________A. marine losses.B. losses of fire.C. losses of crop.D. losses of human life.

ANSWER: A

72. Cargo ship caught by fire is an example of __________A. particular average loss.B. general average loss.C. constructive total loss.D. actual total loss.

ANSWER: B

73. ___________ policy is granted only in respect of stock of inventories of the insured under fireinsurance business.

A. Floating.


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B. Declarations.C. Replacement.D. Valued.

ANSWER: B

74. Under Fire insurance, loss of profit policy is also called as___________A. Average policy.B. Consequential loss policy.C. Specific policy.D. Adjustable policy.

ANSWER: B

75. Rashtriya Krishi Yojana of Crop Insurance Scheme came into India during _________A. 1999.B. 1888.C. 1988.D. 1977.

ANSWER: A

76. Corpus fund is created with contributions from the Central Government and State Government on____________

A. 75:25 basis.B. 50:25 basis.C. 60:40 basis.D. 70:30 basis.

ANSWER: B

77. Motor Vehicle Insurance is compulsory under the Motor Vehicles Act, which was enacted in__________

A. 1988.B. 1998.

C. 1939.D. 1978.

ANSWER: C

78. Motor Vehicle Insurance has its beginning in ___________A. The U.K.B. The USA.C. India.D. Canada.

ANSWER: A

79. The organisation structure of LIC refers to ___________A. Two tier structure.B. Three tier structure.C. Four tier structure.D. Five tier structure.

ANSWER: C


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80. The constitution of the IRDA consists of not more than _________ members.A. 10 members.B. 7 members.C. 9 members.D. 8 members.

ANSWER: C

81. Insurance business is based on ___________A. Parkinsons law.B. Newtons law.C. The theory of probability and law of large numbers.D. Boyle law.

ANSWER: C

82. The doctrine of Caveat Emptor governs ________A. Commercial contracts.B. Marine insurance contracts.C. Group insurance contracts.D. All general insurance contracts.

ANSWER: A

83. The doctrine of contribution is a corollary of _________A. the principle of insurable interest.B. the principle of indemnity.C. the principle of subrogation .D. the principle of utmost good faith.

ANSWER: B

84. What is floating policy?A. Policy covering the fixed sum assured stock.

B. A policy that covers stocks located in various godowns under a single policy.C. A standard fire policy.D. A renewable marine policy.

ANSWER: B

85. Can a marine policy be assigned?A. Can be assigned before the loss.B. Can be assigned after the loss.C. Cannot be assigned.D. Both (1) and (2).

ANSWER: B

86. Constructive total loss in marine insurance means ________A. same a total loss.B. a partial loss.C. the loss caused is so huge that the cost of repairs would exceed the actual amount. so it is adjudged as

a total loss.


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D. a loss which is not covered.ANSWER: C

87. In Marine Insurance, loss due to a rats and vermins is ____________A. a covered loss.B. a general exclusion.C. a statutory exclusion.D. unexpected loss.

ANSWER: C

88. According to Insurance Act, 1938, the joint stock companies can distribute ______ percent of the profitamong shareholders.

A. 5.B. 10.C. 8.D. 12.

ANSWER: A

89. Group insurance is ideally suited for coveringA. affluent person in the society.B. weaker sections of the society.C. employer-employee groups.D. both (2) and (3).

ANSWER: A

90. Total loss in motor insurance means _______A. Partial damage to the vehicle.B. Theft of the vehicle.C. Confiscation of the vehicle by RTA.D. When the cost of repair exceeds the market value at the time and date of loss.

ANSWER: C

91. 119. Duty to minimise loss is incorporated in the policies through _________A. warranties.B. Conditions.C. clauses.D. declaratives.

ANSWER: B

92. ________ provides guidelines to decide whether the loss is caused by an insured peril or an expectedperil.

A. Indemnity.B. Proximate clause.C. Standard claims.D. Trip sheet.

ANSWER: B

93. _______ means those risks which involve a situation where there is a possibility of gain.


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A. Personal risk.B. Speculative risk.C. Other risk.D. Liability risk.

ANSWER: B

94. _________ is concerned with the conversion of a firms asset and earning power against risks ofaccidental loss.

A. Risk retention.B. Risk management.C. Risk control.D. Risk identification.

ANSWER: B

95. __________ is a contract between the insurer and the insured under which the insurer undertakes tocompensate the insured for the loss arising from the risk.

A. Insurance.B. Agreement.C. Indemnity.D. Proximate clause.

ANSWER: A

96. The ________ has the right to receive the amount assured in the event of death of the insured.A. employer.B. nominee.C. friend.D. third party.

ANSWER: B

97. Nomination can be done only by a _________ who is a major holding Policy Bond in his own name.A. policy holder.

B. insurance company.C. legal advisor.D. employer.

ANSWER: A

98. A policy protecting a group of persons, usually employees of a firm generally called as ___________A. Fire insurance policy.B. Group insurance policy.C. Marine insurance.D. Automobile insurance.

ANSWER: B

99. The period of time for which the policy will normally remain in existence is known as _______A. Policy term.B. Policy note.C. Proposed time.D. Grace time.


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ANSWER: A

100. The amount paid by the insured to the insurer is known as ___________A. Commission.B. Brokerage.C. Premium.D. Overhead charges.

ANSWER: C

101. Insurance is a risk management technique involving____________A. risk retention.B. risk avoidance.C. loss control.D. risk transfer.

ANSWER: D

102. Risk management follows a systematic process which involves _______ steps.A. two.B. three.C. four.D. five.

ANSWER: D

103. Organizations are mainly concerned with managingA. pure risks.B. speculative risks.C. personal risks.D. other risks.

ANSWER: A

104. The first step in risk management process is

A. risk avoidance.B. risk identification.C. insurance.D. risk evaluation.

ANSWER: B

105. Which of the following steps in the risk management process helps in determining sum insured underpolicies?

A. risk identification.B. risk retention.C. risk transfer.D. risk evaluation.

ANSWER: D

106. Main emphasis of risk management is onA. risk retention.B. reduction of cost of handling risk.


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C. risk transfer.D. insurance.

ANSWER: B

107. The general insurance business in India was nationalized in the yearA. 1976.B. 1956.C. 1983.D. 1972.

ANSWER: D

108. The IRDA has replaced by _____________A. the controller of insurance.B. the LIC chairman.C. department of insurance.D. department of commerce.

ANSWER: A

109. Insurance brokers are governed byA. sale of goods act.B. agency law.C. IRDA Act, 1999.D. mercantile law.

ANSWER: C

110. When was IRD Act passed?A. 1972.B. 1999.C. 1989.D. 2000.

ANSWER: B

111. Which of the following is the similarity between insurance and gambling?A. The amount of loss to be paid is known before hand.B. Promise to pay on the happening of an event.C. Both the parties win on happening of an event.D. Both are enforceable at law.

ANSWER: A

112. The business of insurance is related to protection of ______________A. savings.B. status.C. profits.D. economic value of assets.

ANSWER: D

113. The concept of insurance is______________A. to share losses by many.


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B. to make money out of death.C. to earn interest.D. to earn a status.

ANSWER: A

114. Insurance cover___________A. protects assets.B. prevents loss.C. reduces the impact of loss.D. insurances immortality.

ANSWER: C

115. A human life is an income-generating asset______________A. true.B. false.C. partially true.D. partially false.

ANSWER: A

116. The company doing the insurance business is called___________A. mutual funds.B. non-banking firm.C. banking company.D. an insurance company.

ANSWER: D

117. Which one of the following comes under miscellaneous insurance?A. Marine insurance.B. Motor insurance.C. Fire insurance.D. Group insurance.

ANSWER: B

118. Insurance reduces the extent of financial loss connected with uncertain events______A. true.B. false.C. to the extent of insurance cover.D. does not reduce the loss at all.

ANSWER: C

119. Which of the following is an evidence of insurance contract?A. policy insurance.B. payment of premium.C. cover note.D. acceptance of proposal.

ANSWER: A

120. According to the Marine Insurance Act, 1963, a contract of marine insurance is valid


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A. only when it is in writing.B. only when it is verbal.C. only if it fulfils the requirements of a valid contract.D. it can be an oral agreement or a written contract.

ANSWER: A

121. The life insurance business was nationalized in ___________A. 1950.B. 1956.C. 1972.D. 1999.

ANSWER: B

122. The LIC can be liquidated as per the ____ orders.A. state government.B. central government.C. union territory.D. LIC Board resolution.

ANSWER: B

123. LIC was formed in 1956 through nationalization of _______ companies.A. 256.B. 246.C. 250.D. 252.

ANSWER: A

124. Policy stamp needs to be affixed on the ____________A. endorsement.B. cover note.C. policy.

D. stamp paper.ANSWER: A

125. Term assurance provides the following benefitsA. death benefits if the person dies within term.B. death and survival benefits.C. periodic payments at predictable intervals.D. death benefits with bonus.

ANSWER: A

126. Which of the following is a children policy of LIC?A. Jeevan Sneha.B. Jeevan Vishwas.C. Jeevan Dhara.D. Jeevan Sukanya.

ANSWER: D


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127. The premium is lowest forA. whole life policy.B. money back policy.C. term insurance.D. endowment policy.

ANSWER: A

128. Annuity plan offer_________A. liquidity.B. capital appreciation.C. Profitability.D. regular assured return.

ANSWER: A

129. Claim is processed on the basis of__________A. claim form and agents opinion.B. legal opinion.C. claim form, survey report etc., other documents and any evidence secured by the insurer.D. survey report.

ANSWER: C

130. Insurance writing is often referred to as_______________A. rate making.B. underwriting.C. undertaking.D. documenting.

ANSWER: B

131. Subrogation means___________A. something of monetary value.B. sharing of indemnity by a group of insurers.

C. to make good loss.D. transfer of rights of an insured to another person.

ANSWER: D

132. As per the Principle of Insurable interest, it should be present in the case of lifeinsurance______________

A. at the time of claim settlement.B. at the time of survival only.C. only at the inception of the policy.D. at inception and at the time of revival.

ANSWER: D

133. Proximate cause in general insurance means__________A. the insured peril.B. the excluded peril.C. the direct cause that caused the loss.D. others.


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ANSWER: A

134. Which is the consequential loss in the fire insurance?A. Loss of property on account of fire.B. Property damaged by matter used for extinguishing fire.C. Loss due to collapse of walls at the time of fire.D. Loss on stock.

ANSWER: A

135. Fire insurance is a personal contract because_________A. it is a contract of utmost good faith.B. it is a contract of insurable interest.C. the contract does not insure the safety of the property but only the insured from pecuniary loss due to

fire.D. contract of subrogation.

ANSWER: B

136. Which of the following is an incidental loss by fire?A. Loss of profit on account of fire.B. Loss on account of delay.C. Damage caused by a fire brigade in carrying out its fire fighting operation.D. Loss of market.

ANSWER: C

137. European started the Oriental Life Insurance Company in Kolkata in the year___________A. 1870.B. 1872.C. 1818.D. 1906.

ANSWER: B

138. The insurance was enacted by the British Government in the year___________A. 1818.B. 1870.C. 1912.D. 1862.

ANSWER: B

139. Personal accident does not cover the injuries resulting from___________A. intentional self-injury.B. accidental injuries.C. injuries while engaged in sports.D. injuries due to dog bite.

ANSWER: A

140. Premium fixed by insurance company must be sufficient toA. meet the claims and cover the expenses.B. pay the salary.


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C. meet personal obligations.D. other purposes.

ANSWER: A

141. The expenses which arise regularly during the policy term are called___________A. initial expenses.B. renewal expenses.C. termination expenses.D. other expenses.

ANSWER: A

142. The first Indian Insurance Act was passed in__________A. 1938.B. 1912.C. 1985.D. 1956.

ANSWER: B

143. GIC entered in life insurance business in the year___________A. 2002.B. 1999.C. 2000.D. 2003.

ANSWER: A

144. The concept of bancassurance originated in___________A. France.B. U.S.A.C. England.D. Italy.

ANSWER: A

145. The principle of utmost good faith is meant to protect the interest of ___________A. the insurer.B. the community of policyholders.C. the shareholders.D. other category.

ANSWER: B

146. Which of the following risks are insurable?A. Speculative.B. Economic.C. Sure to happen.D. Other risks.

ANSWER: B

147. The premium actually paid by the policy holder depends upon___________A. the wealth of the person to be insured.


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B. the level of risk assessed by the insurer.C. the tables of rates printed by the insurer.D. agents report.

ANSWER: B

148. The policyholder is concerned with the__________A. pure premium.B. office premium.C. net premium.D. risk premium.

ANSWER: B

149. The responsibility to comply with the principle of utmost good faith rests with________A. the agent.B. the proposer.C. the life to be insured.D. insurance company.

ANSWER: B

150. Which one of the following statement is correct?A. A life insurance policy is a contract, enforceable in a court of law.B. A life insurance policy is not required to be stamped.C. Both the statements are correct.D. Both the statements are wrong.

ANSWER: A

Staff NameKumaresan A .


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213d - Principles of Insurance - i

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