Banking Financial Awareness · General Awareness

Insurance Policies and Claims

1,580 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.

Deductible clausesInsurance perilsTravel insurance coveragePolicy conversion rightsClaim dispute avoidanceSubrogation principles

Insurance Policies and Claims Questions

Multiple choice

Insurance prepaid will be a

  1. current liability

  2. current asset

  3. fixed asset

  4. contingent liability

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Correct; insurance prepaid is the amount paid before. Hence, it is an asset.

Multiple choice

Directions: For this question, select the best of the answer choices given.

In 1960, 10 percent of every dollar paid in automobile insurance premiums went to pay costs arising from injuries incurred in car accidents. In 1990, 50 percent of every dollar paid in automobile insurance premiums went toward such costs, despite the fact that cars were much safer in 1990 than in 1960. Which of the following, if true, best explains the discrepancy outlined above?

  1. There were fewer accidents in 1990 than in 1960.

  2. On average, people drove more slowly in 1990 than in 1960.

  3. Cars grew increasingly more expensive to repair over the period in question.

  4. The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990.

  5. Health-care costs rose sharply between 1960 and 1990.
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

E is correct because if healthcare costs rose sharply between 1960 and 1990, this would explain why a much larger percentage of insurance premiums went toward injury costs in 1990 - even if cars were safer, the medical treatment for those injuries cost much more. A would make the discrepancy harder to explain - fewer accidents should mean lower costs, not higher. B doesn't explain why costs rose as a percentage of premiums. C discusses repair costs, not injury costs, so it is irrelevant. D discusses insurance prices generally, not specifically injury-related costs, so it doesn't explain the shift.

Multiple choice

Directions: For this question, select the best of the answer choices given.

Home insurance premiums are typically set after an appraiser assigns an official assessed value. Reassessments should be frequent in order to remove distortions that arise when property value changes at differential rates. In actual fact, however, properties are reassessed only when they stand to benefit the insurance company. In other words, a reassessment takes place when the most likely outcome is in increase in insurance premiums to the homeowner. Which of the following, if true, describes a situation in which a reassessment should occur but in unlikely to do so?

  1. Property values have risen sharply and uniformly.

  2. Property values have risen everywhere - some very sharply, some moderately.

  3. Property values have on the whole risen sharply; yet some have dropped slightly.

  4. Property values have on the whole dropped significantly; yet some have risen slightly.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The best answer is (4). Distortions occur when property values change at differential rates. If most property values have dropped significantly, but some have risen slightly, a reassessment should occur but is unlikely to do so since it will not benefit the insurance companies.

Multiple choice

Which of the following is not an actionable claim?

  1. A claim to mesne profits

  2. A claim for arrears of rent

  3. A claim for return of earnest money

  4. A claim to money under insurance policy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Actionable claim is a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property. 

Multiple choice

Directions: Choose the correct option for the given question:

Life insurance is a contract of which of the following?

  1. Indemnity

  2. Guarantee

  3. Contribution

  4. Subrogation
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Life insurance is fundamentally a contract of guarantee, not indemnity. Unlike property insurance which aims to restore the insured to their original financial position (indemnity), life insurance guarantees a predetermined sum upon death/maturity. The insured's life cannot be valued in monetary terms, so indemnity principle doesn't apply. Contribution and subrogation are principles applicable to indemnity contracts, not life insurance.

Multiple choice

Directions: Choose the correct option for the given question.

Under which principle, all the rights of an insured are transferred to insurance company after making payment of claim?

  1. Subrogation

  2. Utmost good faith

  3. Contribution

  4. Average clause
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The principle of subrogation allows an insurance company to step into the insured's shoes after paying a claim. This means the insurer acquires all legal rights the insured had against third parties responsible for the loss, and can recover costs from them. For example, if your car is damaged by another driver and your insurer pays you, they can then pursue the at-fault driver for reimbursement.

Multiple choice

Prepaid Insurance paid for the current year is

  1. an asset

  2. a liability

  3. an expense

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 It is an asset since it is paid in advance for the next year. It is deducted from the total insurance paid in the debit side of Profit & Loss and shown in assets side of Balance Sheet.

Multiple choice

Every motor vehicle must be insured because

  1. it compensates against the damages to the vehicle in an accident

  2. it fulfills the needs of the Motor Vehicle Act

  3. it compensates life, property, damages in an accident and also theft

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct option is (3).

Multiple choice

What is insurance rate?

  1. Rate of interest which insurer pays to an insured person/company based on the total premium paid.

  2. Factor used to determine the amount called the premium, to be charged for a certain amount of insurance coverage.

  3. The number of claims made during a period of time.

  4. The number of claims made by a person during his term of insurance.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An insurance rate is the numerical factor used to calculate the premium for a specific amount of insurance coverage. It is determined by actuaries based on the probability of loss and the cost of claims. The premium is the final amount the policyholder pays, derived from this rate.

Multiple choice

Name the Indo-US joint venture life insurance company which launched its operation in India in April 2001:

  1. ICICI Prudential

  2. Bajaj Alliance

  3. Max Life New York

  4. All of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Max New York Life Insurance (now Max Life Insurance) was a joint venture between Max India Limited and New York Life International. It was one of the first private life insurance companies to start operations in India after the sector was opened up.

Multiple choice

"Started a family, son attends University, loved ones falls ill, birth of a grand daughter" is the baseline used by____company:

  1. Life Insurance Corporation

  2. General Insurance Corporation

  3. Allianz Bajaj Life Insurance Corporation

  4. Standard Chart Life Insurance Corporation
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This descriptive baseline was used by Allianz Bajaj Life Insurance to illustrate the various stages of life where insurance provides security. It emphasizes the long-term relationship between the insurer and the policyholder's family.

Multiple choice

' Aam Admi Bima Yojana' is an insurance scheme for rural landless households, introduced by

  1. National Insurance Co.

  2. Life Insurance Co.

  3. UTI

  4. ICICI Life Prudential Co.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Aam Admi Bima Yojana (AABY) is a social security scheme for rural landless households, administered by the Life Insurance Corporation of India (LIC). It provides insurance coverage against death and disability to the head of the family or one earning member. The premium is shared between the Central and State governments.

Multiple choice

Bharti AXA is associated with

  1. Financial Services

  2. Life Insurance

  3. General Insurance

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

Bharti AXA is a joint venture between Bharti Enterprises and AXA, primarily focused on life insurance and general insurance products in India.