Insurance mcqs

Which element of a valid contract deals with premium?

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Offer and acceptance
Consideration
Free consent
Capacity of parties to contract
✅ The correct answer is B.
Consideration of a valid contract deals with premium. A consideration is an exchange of money for the guarantee of an act preformed or another benefit provided. In the context of insurance, the insurance company gives the consideration of coverage for losses as long as premiums are paid.

Young persons are charged lower premium as compared to older persons because

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Young persons may not have much income to pay for the insurance
Older persons can afford to pay more for their insurance
Younger persons have lower mortality on account of lower age
Younger the age higher the mortality
✅ The correct answer is C.
Young persons are charged lower premium as compared to older persons because younger persons have lower mortality on account of lower age. For example, a racecar driver faces an increased risk of death and, as a result, may pay high life insurance premiums or be denied coverage.

Reversionary bonus is declared as an amount

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Per thousand premium paid
Per thousand surplus of the company
Per hundred premium paid
Per thousand sum insured
✅ The correct answer is D.
Reversionary bonus is the bonus declared every year as a percentage of (Guaranteed Maturity Benefit/Sum Assured + Earlier Reversionary Bonuses). It is payable on the death of life assured or maturity of the policy.

Which of these is a private sector general insurance company in India?

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New India Assurance Company Limited
Bajaj Allianz
National Insurance Company Limited
The Oriental Insurance Company
✅ The correct answer is B.
Bajaj Allianz is a private sector general insurance company in India. Bajaj Allianz General Insurance Company has become one of the top general insurance brands in India. It is the only general insurance company in India to cross the Rs. 100 Crore mark in profit in the last two years.

Which of the below statement is incorrect with regards to assignment of an insurance policy?

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In case of Absolute Assignment, in the event of death of the assignee, the title of the policy would pass to the estate of the deceased assignee
The assignment of a life insurance policy implies the act of transferring the rights right, title and interest in the policy (as property) from one person to another
It is necessary that the policyholder must give notice of assignment to the insurer
In case of Absolute Assignment, the policy vests absolutely with the assignee till maturity, except in case of death of the insured during the policy tenure, wherein the policy reverts back to the ben
✅ The correct answer is D.
In case of Absolute Assignment, the policy vests absolutely with the assignee till maturity, except in case of death of the insured during the policy tenure, wherein the policy reverts back to the ben is incorrect with regards to assignment of an insurance policy.

Surrender value expressed as a percentage of premiums paid is called –

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Guaranteed surrender value
Special surrender value
Special revival value
Minimum surrender value
✅ The correct answer is A.
Surrender value expressed as a percentage of premiums paid is called Guaranteed surrender value. The guaranteed surrender value is the amount guaranteed to the policy holder in case of voluntary termination of the policy by the policy holder before maturity.

Surplus not distributed (retained earnings) could contribute to

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Financial disaster for a company
Financial soundness of a company
Discredit of a company in the eyes of public
Liabilities of a company
✅ The correct answer is B.
Retained earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. Retained earnings contribute to the financial soundness of the company.

Which of the below statement is incorrect with regards to a policy against which a loan has been taken from the insurance company?

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The policy will have to be assigned in favour of the insurance company
The nomination of such policy will get cancelled due to assignment of the policy in favour of the insurance company
The nominee’s right will be affected to the extent of the insurer’s interest in the policy
The policy loan is usually limited to a percentage of the policy’s surrender value
✅ The correct answer is B.
The nomination of such policy will get cancelled due to assignment of the policy in favour of the insurance company is incorrect with regards to a policy against which a loan has been taken from the insurance company.