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

Directions: Read the passage/argument and answer the question that follows it.

To counter the growing claims ratio of its clients, who take a mediclaim policy for themselves and their dependents, the United Insurance Corp, Pollock has decided to act tough. Most clients take the floater plan wherein the entire medical cover gets transferred to one family member at the time of a medical requirement, if it is not availed of by another family member. This happens within the limits of the total cover available to the family as a whole. The problem has become so acute that currently, the company has slipped into the red, following claims of $1.5 filed for every single dollar collected by it as policy premium.

Which one(s) out of the following, assuming that it is permissible and practically feasible, would MOST CONTRIBUTE to alleviating the problem being faced by the company?

  1. Raising the premium applicable to the respective policies.
  2. Re-look at the accounting policies followed by United Insurance Company.
  3. Refusing to allow the transfer of medical cover to other family members.
  4. Suspending the payment of dividend on stocks held by its stakeholders.
  5. Refusing to give policies to people who suffered from serious illness as children.

  1. 1, but not 2, 3, 4 and 5

  2. 1 and 2 but not 3, 4 and 5

  3. 3, 4 and 5 but not 1and 2

  4. 1and 3 but not 2, 4 and 5

  5. 1, 4 and 5 but not 2 and 3
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The problem being discussed here is that the company is running in losses due to higher claim ratios which are not going to be solved by having a re-look at accounting policies (option choice 2), or suspending the payment of dividend (choice 4- there is hardly any question of any dividend payment if the company is running in losses already) or refusing policies to adult who had serious disease as a child (choice 5 how do we decide it?). Refusing to allow a floater cover (choice 3) defeats its very purpose, which will drive away the customers. Hence, none of these steps is going to solve the problem at all.  In the given circumstances, choice 1 seems to be the most sensible one. Hence option (1) is the correct answer.

Multiple choice

Which of the following is not a function of insurance?

  1. Providing certainty

  2. Protection

  3. Risk sharing

  4. Subrogation

  5. Capital formation
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

This is the correct answer. Subrogation is the right of the insurer to stand in the stead of the insured, after the settlement of the claim, as far as the right of insured in respect of recovery from an alternative source is involved. 

Multiple choice

Which of the following is an incorrect feature of life insurance?

  1. It has elements of protection and investment or both.

  2. Insurable interest must be present at the time of effecting the policy, but need not be necessary at the time when the claim falls due.

  3. It is based on the principal of indemnity.

  4. Life insurance has a surrender or paid up value.

  5. There is an element of certainty in life insurance.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

No, life insurance is not based on the principal of indemnity. The sum assured is either paid on the happening of a certain event or on maturity of the policy.

Multiple choice

Which of the following statements is/are correct? A. The insured must have insurable interest in the subject matter of the insurance in case of fire insurance. B. The contract of fire insurance is a contract of strict indemnity. C. The contract for fire insurance is for a period of one year after which it has to be renewed.

  1. Only A

  2. Only B

  3. Only C

  4. All of these

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

This is the correct answer as all the statements are correct about fire insurance.

Multiple choice

In which of the following life insurance policies is the assured sum payable after the assured attains a certain age in installments?

  1. Whole life policy

  2. Endowment life assurance policy

  3. Joint life policy

  4. Annuity policy

  5. Children’s endowment policy
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

This is the correct choice. Under this policy the assured sum or policy money is payable after the assured attains a certain age in installments, such as monthly, quarterly, annual, etc. The premium is paid in installments over a certain period or single premium may be paid by the assured. This is useful to those who prefer a regular income after a certain age.

Multiple choice

What is 'Material Fact' in an insurance contract?

  1. The insured must either own a part or whole of the subject matter of insurance.

  2. The insurer will promise to indemnify the loss.

  3. The insurer is not liable for any uninsured causes or perils.

  4. The insured is not allowed to make any profit on the happening of an event.

  5. The information that goes to the root of the insurance contract.
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

This is correct. The information that can influence the insurer in accepting or declining the risk or in fixing the conditions of insurance or rate of premium is called the material fact.

Multiple choice

Which of the following statements is incorrect about the principles of insurance?

  1. A contract of insurance is a contract of uberrimae fidei.

  2. The pecuniary interest of the insured in the subject matter is insured.

  3. The principle of mitigation states that it is the duty of the insured to take reasonable steps to minimise the loss or damage to the insured property.

  4. The right of ownership of insured property passes on to the insurer under the principle of subrogation.

  5. The principle of indemnity is only applicable to life insurance.

Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

This is incorrect. The principle of indemnity is not applicable to life insurance. According to the principle of indemnity, the insurer undertakes to put the insured, in the event of loss, in the same position that he occupied immediately before the happening of the event insured against.