Insurance

Insurance MCQs with Answers and Explanations | Life, Health & General Insurance Objective Questions

Enhance your understanding of Insurance and Risk Management with our comprehensive collection of MCQs with answers and detailed explanations. Topics include principles of insurance, life insurance, health insurance, fire insurance, marine insurance, reinsurance, risk management, premium calculation, claims settlement, insurance laws, and regulatory framework. These objective questions are ideal for students, teachers, and candidates preparing for competitive and professional exams (CA, ACCA, ICMA, MBA, BBA, CSS, PMS, NTS, FPSC, PPSC, UPSC, insurance licensing exams, etc.). Each MCQ is followed by a clear explanation to strengthen concepts, improve problem-solving skills, and boost exam performance. Perfect for practice, revision, and self-assessment in the field of Insurance.

21. In order for the policy to acquire a guaranteed surrender value, for how long must the premium be paid as per law?

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A) Premiums must be paid for least 2consecuitve years
B) Premiums must be paid for least 3consecuitve years
C) Premiums must be paid for least 4consecuitve years
D) Premiums must be paid for least 5consecuitve years
✅ ANSWER: B
In order for the policy to acquire a guaranteed surrender value, Premiums must be paid for at least 3 consecuitve years the premium be paid as per law.

22. Term insurance is mainly suitable for which of the following needs?

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A) Tax planning
B) Savings
C) Disease
D) Income replacement
✅ ANSWER: D
Term insurance is mainly suitable for income replacement.
Under regular term plans, the amount is paid as lump sum in the event of death of the policyholder. Under income replacement term plans, the sum assured is not paid in lump sum, but as monthly payout for a fixed number of years. This monthly payout takes away the pressure to generate income from your investment.

23. What are the correct statements?

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A) Bancassurance model can either be a bank forming an insurance company on its own or acting as an agent for another Insurance company without capital participation
B) Such an agency of bank acting for an insurer is known as corporate agency
C) A commercial bank is not barred from acting as an agent for insurance companies
D) All of the above
✅ ANSWER: D
All the statements are correct.
Bancassurance model can either be a bank forming an insurance company on its own or acting as an agent for another Insurance company without capital participation, Such an agency of bank acting for an insurer is known as corporate agency and A commercial bank is not barred from acting as an agent for insurance companies.

24. Which is not an appropriate reason for a proper financial planning?

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A) Break-up of joint family system
B) Changing lifestyle
C) Underwriting
D) Change in behavioral pattern
✅ ANSWER: C
Underwriting is not a reason for proper financial planning. Underwriting services are provided by some large financial institutions, such as banks, or insurance or investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee.

25. State which is incorrect statement

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A) Life Insurance agents desirous of doing stand alone Health insurance business will have to be certified under IC-34 separately
B) Such life agents as above are exempt from passing IC-34 if they have been certified under IC-33 and if they undergo some internal training for 25 hours given by Health Insurance Company
C) Agents certified under IC 34 for non life insurer can do standalone Health insurance business after undergoing internal training for 25 hrs from the standalone health insurance company
D) No agent, individual or corporate of life and or non-life insurer shall offer his services to more than one standalone health insurance Company
✅ ANSWER: A
Term insurance can be bought as a stand -alone policy as well as a rider with another policy.

26. Savings can be considered as a composite of two decisions. Choose them from the list below.

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A) Risk retention and reduced consumption
B) Gifting and accumulation
C) Spending and accumulation
D) Postponement of consumption and parting with liquidity
✅ ANSWER: D
Savings can be considered as a composite of Postponement of consumption and parting with liquidity.
Postponement of consumption: an allocation of resources between present and future consumption.
Parting with liquidity (or ready purchasing power) in exchange for less liquid assets. For instance, purchase of a life insurance policy implies exchanging money for a contract which is less liquid.

28. A loan-cum revival would mean –

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A) Granting a loan
B) Revival of the policy
C) Both A & B
D) None of the above
✅ ANSWER: C
A loan-cum revival would mean Granting a loan and Revival of the policy. If a policy acquires the surrender value, the date of the policy can be revived by a policy loan. The loan amount will be calculated and treated as premiums paid upto the date of the revival. If a loan amount is more than the required revival, the excess will be paid to the policyholder.

30. Choose the correct statement.

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A) Lower yields are a disadvantage in cash value contracts
B) Discipline in saving is not an advantage in cash value contracts
C) Income Tax advantage is not an advantage in cash value contracts
D) Safe and secure investment is not an advantage in cash value contracts
✅ ANSWER: A
Lower yields are a disadvantage in cash value contracts. Whole life insurance is significantly more expensive. Premiums are often much higher than a term life insurance policy with the same amount of coverage because you’re paying for an insurance policy as well as putting money into the cash value portion of the policy.