Banking Financial Awareness · General Awareness

Insurance Policies and Claims

1,514 Questions

Insurance policies provide financial protection against specific perils, involving concepts like deductibles, premiums, and claim settlements. Banking and insurance aspirants need a solid grasp of policy types, coverage limits, and claim procedures. Practice these questions to understand how different insurance principles apply in real scenarios.

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Insurance Policies and Claims Questions

Multiple choice

When would special reports be necessary?

  1. When high sum insured is proposed

  2. When age is advanced

  3. Both 1 and 2

  4. Special reports are not necessary in any case.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In both the cases, special reports are necessary. If the insurance is being proposed for the first time after 50 years of age, there is a need to suspect moral hazard and enquire about why such insurance was not taken earlier. We must also note that chances of occurrence of degenerative diseases, like diseases of the heart and kidney failure, increase with age and become high at older ages. Life insurers may also seek for some special reports when proposals are submitted for high sums assured/advanced ages or a combination of both.

Multiple choice

Which of the following is/are true?

I. Insurance is necessary to cover the risk of living too long. II. Insurance helps one to be less dependent on others.

  1. Only I

  2. Only II

  3. Both I and II

  4. Neither I nor II
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Insurance is necessary to cover the risk of living too long. To guard against unpredictable events that may have serious financial repercussions, one must buy insurance. The 2nd statement is not correct because the insurance does not pay you any premium on monthly basis or pensions which would make one less dependent on others. It provides you with risk coverage. 

Multiple choice

Which of the following statements is incorrect?

  1. An agent today cannot work for more than one non-life insurance company.

  2. An agent can work only for one life insurance company and also for only one non-life company.

  3. An agent today can work for more than one life insurance company.

  4. Such an agent who works for one life and one non-life insurance company is called composite agent.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

An agent today is not allowed to work for more than one life insurance company.

Multiple choice

Insurance is not gambling because of the presence of

  1. principle of utmost good faith

  2. insurable interest

  3. indemnity principle

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Insurable interest exists when an insured person derives a financial or other kind of benefit from the continuous existence, without impairment or damage, of the insured object (or in the case of a person, their continued survival). Hence, insurance is not gambling. 

Multiple choice

In which of the following cases is insurable interest not present?

  1. A person insuring his own life

  2. A father taking out a life policy on the life of his son

  3. A person insuring his colleague

  4. An employer taking a life insurance policy on his employees
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For purposes of life insurance, everyone is considered to have an insurable interest in their own lives as well as the lives of their spouses and dependents. Employer also has an insurable interest on the life of his employees. Insurable interest is not present in the life of a colleague.

Multiple choice

Which of the following statements is correct?

  1. Higher premium will give the beneficiary higher benefits at the time of claim.

  2. With lower premium in a life insurance policy, higher benefits are available to the beneficiary in a claim.

  3. Higher premium in a life policy will result in lower benefits to the claimant.

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The higher the premium deposited, the more the benefits at the time of claim.

Multiple choice

Which of the following is NOT true regarding ULIP?

  1. A unit holder can choose between different kinds of funds.

  2. Life insurer provides guarantee for unit values.

  3. Units may be purchased by payment of a single premium or by regular premium payments.

  4. ULIP policy structure is transparent with regards to the insurance expenses component.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

ULIP is a life insurance product which provides risk cover for the policy holder along with investment options to invest in any number of qualified investments such as stocks, bonds or mutual funds.

Multiple choice

A policy with cover for an indefinite term is called

  1. whole life

  2. endowment

  3. money back

  4. term insurance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Whole life insurance is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid throughout.

Multiple choice

Which of the following actions showcases the principle of “uberrima fides”?

  1. Lying about known medical conditions on an insurance proposal form

  2. Not revealing known material facts on an insurance proposal form

  3. Disclosing known material facts at the time of taking the policy

  4. Paying premium on time
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Uberrima fides is a Latin phrase, meaning "utmost good faith". This means that all the parties to an insurance contract must deal in good faith, making a full declaration of all the material facts in the insurance proposal.

Multiple choice

Which among the following is not a variant of term assurance?

  1. Mortgage redemption insurance

  2. Return of premiums

  3. Increasing term assurance

  4. Endowment assurance
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death.

Multiple choice

In this method of underwriting, the underwriter gives rating points for all the negative or adverse factors, totals them and decides extra mortality rating. Which method are we talking about?

  1. Biometric rating

  2. Judgmental rating

  3. Clinical rating

  4. Numerical rating
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In numerical underwriting, underwriters assign positive rating or debit points for all the negative or adverse factors and negative rating or credit points for favorable characteristics of the life being selected. Numerical method of underwriting is widely used for underwriting insurance proposals.