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 book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

A prepayment of insurance premium will appear in the Balance Sheet and in the Insurance Account respectively as.

  1. A liability and a debit balance

  2. An asset and a debit balance

  3. An asset and a credit balance

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

A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related account is Insurance Expense, which appears on the income statement and shown on balance sheet as asset.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

Prepaid Insurance is an example of __________.

  1. Increase in asset & decrease in owner's liability

  2. Increase in liability & decrease in owner's liability

  3. Decrease in liability & owner's liability

  4. Increase in asset & owner's liability
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

In the case of marine insurance reserve for unexpired risk is _______.

  1. 50%

  2. 100%

  3. 40%

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

There is an unexpired liability under various policies which may occur during the remaining term of the policy beyond the year and therefore, a provision for unexpired risks is made at normally 50% in case of Fire Insurance and 100% of in case of Marine Insurance. 

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

Premium paid on the life policy of the proprietor should be debited to Insurance Premium Account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Premium paid on the life policy of the proprietor should not be debited to insurance premium account. Premium paid on life policy of proprietor is not an expense in the normal course of business. It is an expense of personal nature any any expense for personal purpose is debited to drawings A/c.
Multiple choice book keeping and accountancy adjustments in preparation of financial statements accrued income earned or accrued income need for adjustment, closing stock and outstanding expenses

Life insurance premium received by an insurance company' should be classified as _______________.

  1. Accrued asset

  2. Accrued liability

  3. Prepaid expense

  4. Unearned revenue
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The life insurance premium should be classified as unearned revenue because against this amount still the company has to render service.  Actually the insurance company will treat each year pro-rata amount of premium received as income.  

For example insurance company receives Rs.10000 as premium for 10 years.  First it shoud be treated as unearned revenue and then each year Rs.1000 should be shifted from this account to income account.

Multiple choice elements of accounts dual effect of transactions and types of accounts meaning and classification of business transactions develop the understanding of recording of transactions in journal illustrations on journal entries

Consider the following statements.
I. Workmen's compensation and third party insurance are examples of guarantee insurance.
II. Re-insurance is more common under fire and marine insurance.
Which of the statement given is/are correct?

  1. I only

  2. II only

  3. Both I and II

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

Both the statements are correct.

1. Guarantee insurance indemnifies the employer and protects against employees and third parties.
2.Insurance of Insurance companies is re-insurance, the claims are high in case of fire and marine insurance and hence, re-insurance is common under them.

Multiple choice organization of commerce and management business risks and insurance marine insurance kinds of insurance re-insurance and double insurance

State the following statement is True or False:
A policy under which all assets (fixed and current) are insured is called blanket policy of Fire Insurance.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Blanket policy is issued to cover more than one property or the assets in the property. Under such a policy, the fixed and current assets of a manufacturer or a trader available in different buildings can be covered with a single policy.

Multiple choice organization of commerce and management business risks and insurance marine insurance kinds of insurance re-insurance and double insurance

Select a word, term or a phase which can substitute the statements:
An insurance policy, covering goods of different types of lying at different places.

  1. Comprehensive policy

  2. Floating policy

  3. Fire policy

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

An insurance policy, covering goods of different types of lying at different places is known as floating policy. Payment for insuring the goods under floating policy can change from one period to another as the value of the insured goods cannot be calculated.

Multiple choice social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

Insurance claim received on account of machinery damaged completely by fire is called _________.

  1. Capital receipt

  2. Revenue receipt

  3. Capital expenditures

  4. Revenue expenditures
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Insurance claim received on account of machinery damaged completely by fire is called capital receipt. As this is a receipt that deals with fixed assets, it falls under capital receipt.

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

When the Joint Life Insurance Policy premium is treated as expenses,the amount reserved on death of the partner is transferred to _________. 

  1. partners capital A/c.

  2. cash A/c.

  3. profit and loss appropriation A/c.

  4. general reserve A/c.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When Joint Life Policy premium is treated as an expense, then it is closed every year by transferring it to profit and loss A/c and the amount reserved on the death of the partner is transferred to partner's capital A/c.

Following are the journal entries :
1. On Payment of premium
            Joint Life Policy A/c               Dr. 
                     To Bank A/c 
2. On charging to profit and loss A/c
            Profit and Loss A/c                Dr.      
                      To Joint life Policy insurance premium A/c 
3. On maturity/ Death of a policy
            Insurance company / Bank A/c   Dr.
                       To Partner's capital A/c (individually)

Multiple choice social science agriculture sector rural credit role of agriculture sector green revolution

Select the incorrect function of the Export Credit Guarantee Corporation (ECGC) __________________.

  1. Provides a range of credit risk insurance covers to exporters against loss in export of gods and services.

  2. Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.

  3. One of its divisions provides export insurance to companies based abroad.

  4. Provides Overseas Investment Insurance (OII) to Indian companies investing in joint ventures abroad in the form of equity or loan.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, and Government, Reserve Bank of India, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs. 800 crores and authorised capital Rs. 1,000 crores.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

In a marine insurance, when must the insurable interest exist?

  1. At the time of making contract

  2. At the time of loss of subject matter

  3. Both at the time of making contract and at the time of loss of subject matter

  4. At the time of termination of the policy
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In marine insurance, the insurable interest must exist at the time of the loss of the subject matter. This differs from life insurance, where it must exist at the time of the contract.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Which of the following statement is true ?

  1. Insurance is not a gambling

  2. Insurance is not a wagering

  3. Insurance is a contract

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Insurance is not a gambling because it is use to cover risk losses gampling is speculative where as insurance is non-speculative
Insurance is not a wagering as insurance itself means surety of the risk cover
Insurance is the contract because it is an agreement where insurer promises to pay benefits to the insured.
Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Insurance claim for loss-in-transit received by consignor is _________________.

  1. Credited to Bank Account

  2. Debited to Insurance Co.

  3. Credited to Abnormal Loss Account

  4. Debited to Consignment Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A loss by theft or losses by fire, flood, earthquake, war, accidents, in transit, etc. are abnormal losses. These losses are avoidable and not inherent in nature. These losses reduce the value of closing stock as well as profit. 

After finding out the value, credit the Consignment A/c and debit the Abnormal Loss A/c.

Multiple choice social science food security in india need for nregs rural development and employment guarantee scheme food security and nutrition

Under Crop Insurance Scheme, a fixed amount is given to the farmer if his crop is damaged.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under Crop Insurance Scheme, when the crop gets damaged by natural calamity or any other factors, a certain amount is provided to the farmers to avoid any further degrading of farmer's quality of life. It is known as 'Pradhan Mantri Fasal Bima Yojana'.