What is a Debenture

What is a Debenture?
A debenture is a type of debt instrument that is not secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness and reputation of the issuer. 
Both corporations and governments frequently issue this type of bond to secure capital.

Types
There are two types of debentures as :
1 .convertible debentures  and
2. nonconvertible debentures 

Convertible debentures are bonds that can convert into equity shares of the issuing corporation after a specific period of time.
Nonconvertible debentures are regular debentures that cannot be converted into equity of the issuing corporation. 

Debentures are generally freely transferable by the debenture holder. 
Debenture holders have no rights to vote in the company's general meetings of shareholders,
but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. 
The interest paid to them is a charge against profit in the company's financial statements.

Solved answers of APPLICATIONS OF LIFE INSURANCE

CHAPTER

 APPLICATIONS OF LIFE INSURANCE

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Question 1
The sum assured under keyman insurance policy is generally linked to which of
the following?
I. Keyman income
II. Business profitability
III. Business history
IV. Inflation index
Answer: II. Business profitability

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Question 2
Mortgage redemption insurance (MRI) can be categorised under ________.
I. Increasing term life assurance
II. Decreasing term life assurance
III. Variable life assurance
IV. Universal life assurance
Answer: II. Decreasing term life assurance

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Question 3
Which of the below losses are covered under keyman insurance?
I. Property theft
II. Losses related to the extended period when a key person is unable to work
III. General liability
IV. Losses caused due to errors and omission
Answer: II. Losses related to the extended period when a key person is unable to work

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Question 4
A policy is effected under the MWP Act. If the policyholder does not appoint a
special trustee to receive and administer the benefits under the policy, the sum
secured under the policy becomes payable to the _____________.
I. Next of kin
II. Official Trustee of the State
III. Insurer
IV. Insured
Answer: II. Official Trustee of the State

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Question 5
Mahesh ran a business on borrowed capital. After his sudden demise, all the
creditors are doing their best to go after Mahesh’s assets. Which of the below
assets is beyond the reach of the creditors?
I. Property under Mahesh’s name
II. Mahesh’s bank accounts
III. Term life insurance policy purchased under Section 6 of MWP Act
IV. Mutual funds owned by Mahesh
Answer: III. Term life insurance policy purchased under Section 6 of MWP Act

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Question 6
Which of the below option is true with regards to MWP Act cases?
Statement I: Maturity claims cheques are paid to policyholders
Statement II: Maturity claims cheques are paid to trustees
I. I is true
II. II is true
III. Both I and II are true
IV. Neither I nor II is true
Answer: II. II is true

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Question 7
Which of the below option is true with regards to MWP act cases?
Statement I: Death claims are settled in favour of nominees
Statement II: Death claims are settled in favour of trustees
I. I is true
II. II is true
III. Both I and II are true
IV. Neither I nor II is true
Answer: II. II is true

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Question 8
Ajay pays insurance premium for his employees. Which of the below insurance
premium will not be treated deductible as compensation paid to employee?
Choice I: Health insurance with benefits payable to employee
Choice II: Keyman life insurance with benefits payable to Ajay
I. I only
II. II only
III. Both I and II
IV. Neither I nor II
Answer: II. II only

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Question 9
The practice of charging interest to borrowers who pledge their property as
collateral but leaving them in possession of the property is called
_____________.
I. Security
II. Mortgage
III. Usury
IV. Hypothecation
Answer: II. Mortgage

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Question 10
Which of the below policy can provide protection to home loan borrowers?
I. Life Insurance
II. Disability Insurance
III. Mortgage Redemption Insurance
IV. General Insurance
Answer: III. Mortgage Redemption Insurance

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Question 11
What is the objective behind Mortgage Redemption Insurance?
I. Facilitate cheaper mortgage rates
II. Provide financial protection for home loan borrowers
III. Protect value of the mortgaged property
IV. Evade eviction in case of default
Answer: II. Provide financial protection for home loan borrowers

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Financial planning

Financial planning:

If we want to invest our money we should first think twice about it .
The points to keep in our investment are : Time of period , return of the money with percentage and time.

We should have a financial planning
Financial planning plays a crucial role in building a life with less worry. Careful planning can help set your priorities and work steadily to achieve your various goals.
Types of goals:
1) Short term Goals

2) Medium term Goals

3) Long term Goals

Elements of financial planning include::
#Investing - allocation assets based on one's risk taking appetite,
#Risk management,
#Retirement planning,
#Tax and estate planning , and
#Financing one's needs

Life stages and priorities:
a) Learner -till say age 20-25
b)Earner - from 25 onward
c)Partner - on getting marriage at say 28 - 30
d)Parent - say 28 to 35
e) Provider - say age  35- 55
f) Empty nester - age 55- 65
g) Retirement - the twilight years - age 60 and beyond

As we can see above , the economic life cycle has three phases:
Student phase - first phase is the pre job when typically a student.
Working phase - phase of work begin individual comes to earn more than he consumes and thus begins to save and invest fund.
Retirement phase - process he accumulates wealth and builds assets which would provide funds for various needs in future including an income later years, when one has retired and stopped working.


To achieve one's financial goals , one must follow a disciplined savings in investment vehicles that  best suit one's risk taking appetite.
An unplanned, impulsive approach to financial planning is one of the prime causes of financial distress that affects individuals.

These goals may be short term : Buying an LCD TV set or a family vacation.
They could be medium term : Buying a house or a vacation abroad.
The long term goals may include : Education or marriage of one's child or post retirement provision

Tears wipe by yourself

Wipe your tears by yourself if other comes to wipe then they will do business of it

Never give up

Fell years ago Never gave up

Share market study

In share market you can buy and sell stocks to earn money with proper study of stock you want to purchase.

There is intraday and delivery trading in share market.
Intraday trading deals with buying and selling of stocks on the same day, during the trading hours that are stipulated by the exchange.
In Intraday the cost of brokerage is low and you receive margin profits the same day.

Delivery Trading is, if we buy shares today and sell them after 1 day whenever we want.It is the one of the secured ways of trading in stock market.
Customer can take delivery for undefined period and need not sell them on the same day with loss, even if the market price of share value reduces. This is a kind of long-term investments.

Example if we buy a share of Tata with Rs 100 and we purchase total 500 share that is we have to pay 500*100=Rs 50000 and sell it when the share price goes to Rs 110 ,
so we will get 500 * 110 = Rs 55000 that is we will get 10% profit
Make the overall study of the share you are going to purchase with its all information and management with all the market depth.

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There is NSE and BSE

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai.
The NSE was established in 1992 as the first demutualized electronic exchange in the country.

The Bombay Stock Exchange BSE) is an Indian stock exchange located at Dalal Street, Mumbai.BSE is established in 1875 is Asia's first stock exchange
Bombay Exchange was founded by Premchand Roychand.

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Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors;
an IPO is underwritten by one or more investment banks,who also arrange for the shares to be listed on one or more stock exchanges.

A new fund offer (NFO) is the first subscription offering for any new fund offered by an investment company.
A new fund offer occurs when a fund is launched, allowing the firm to raise capital for purchasing securities

Solved - LIFE INSURANCE PRODUCTS

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LIFE INSURANCE PRODUCTS 

Question 1
What does inter-temporal allocation of resources refer to?
I. Postponing allocation of resources until the time is right
II. Allocation of resources over time
III. Temporary allocation of resources
IV. Diversification of resource allocation
Answer : II. Allocation of resources over time

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Question 2
Which among the following is a limitation of traditional life insurance products?
I. Yields on these policies is high
II. Clear and visible method of arriving at surrender value
III. Well defined cash and savings value component
IV. Rate of return is not easy to ascertain
Answer: IV. Rate of return is not easy to ascertain

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Question 3
Where was the Universal Life Policy introduced first?
I. USA
II. Great Britain
III. Germany
IV. France
Answer : I. USA

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Question 4
Who among the following is most likely to buy variable life insurance?
I. People seeking fixed return
II. People who are risk averse and do not dabble in equity
III. Knowledgeable people comfortable with equity
IV. Young people in general
Answer: III. Knowledgeable people comfortable with equity

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Question 5
Which of the below statement is true regarding ULIP’s?
I. Value of the units is determined by a formula fixed in advance
II. Investment risk is borne by the insurer
III. ULIP’s are opaque with regards to their term, expenses and savings
components
IV. ULIP’s are bundled products
Answer: III. ULIP’s are opaque with regards to their term, expenses and savings

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Question 6
All of the following are characteristics of variable life insurance EXCEPT:
I. Flexible premium payments
II. Cash value is not guaranteed
III. Policy owner selects where savings reserve is invested
IV. Minimum Death benefit is guaranteed
Answer: I. Flexible premium payments

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Question 7
Which of the below is correct with regards to universal life insurance?
Statement I: It allows policy owner to vary payments
Statement II: Policy owner can earn market-based rate of return on cash value
I. I is true
II. II is true
III. I and II are true
IV. I and II are false
Answer : III. I and II are true

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Question 8
All of the following is true regarding ULIP’s EXCEPT:
I. Unit holder can choose between different kind of funds
II. Life insurer provides guarantee for unit values
III. Units may be purchased by payment of a single premium or via regular
premium payments.
IV. ULIP policy structure is transparent with regards to the insurance expenses
Component
Answer : II. Life insurer provides guarantee for unit values

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Question 9
As per IRDA norms, an insurance company can provide which of the below nontraditional
savings life insurance products are permitted in India?
Choice I: Unit Linked Insurance Plans
Choice II: Variable Insurance Plans
I. I only
II. II only
III. I and II both
IV. Neither I nor II
Answer:  III. I and II both

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Question 10
What does unbundling of life insurance products refers to?
I. Correlation of life insurance products with bonds
II. Correlation of life insurance products with equities
III. Amalgamation of protection and savings element
IV. Separation of the protection and savings element
Answer : IV. Separation of the protection and savings element

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Question 11
 Which among the following is a non-traditional life insurance product?
I. Term assurance
II. Universal life insurance
III. Endowment insurance
IV. Whole life insurance
Answer : II. Universal life insurance

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Question 12
Which of the below statement is incorrect?
I. Variable life insurance is a temporary life insurance policy
II. Variable life insurance is a permanent life insurance policy
III. The policy has a cash value account
IV. The policy provides a minimum death benefit guarantee

Answer : I. Variable life insurance is a temporary life insurance policy

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Solved -LIFE INSURANCE PRODUCTS

LIFE INSURANCE PRODUCTS – I

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(1) ___________ life insurance pays off a policyholder's mortgage in the event of
the person's death.
I. Term
II. Mortgage
III. Whole
IV. Endowment
Answer: II. Mortgage

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(2) The ________ premium paid by you towards your life insurance, the
________ will be the compensation paid to the beneficiary in the event of your
death.
I. Higher, Higher
II. Lower, Higher
III. Higher, Lower
IV. Faster, Slower
Answer: I. Higher, Higher

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(3) Which of the below option is correct with regards to a term insurance plan?
I. Term insurance plans come with life-long renewability option
II. All term insurance plans come with a built-in disability rider
III. Term insurance can be bought as a stand-alone policy as well as a rider with
another policy
IV. There is no provision in a term insurance plans to convert it into a whole life
insurance plan
Answer: III. Term insurance can be bought as a stand-alone policy as well as a rider with another policy

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(4) In decreasing-term insurance, the premiums paid ____________ over time.
I. Increase
II. Decrease
III. Remain constant
IV. Are returned

Answer: III. Remain constant

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(5) Using the conversion option present in a term policy you can convert the same
to __________.
I. Whole life policy
II. Mortgage policy
III. Bank FD
IV. Decreasing term policy
Answer: I. Whole life policy

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(6) What is the primary purpose of a life insurance product?
I. Tax rebates
II. Safe investment avenue
III. Protection against the loss of economic value of an individual’s productive
abilities
IV. Wealth accumulation
Answer: III. Protection against the loss of economic value of an individual’s productive abilities

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(7) Who among the following is best advised to purchase a term plan?
I. An individual who needs money at the end of insurance term
II. An individual who needs insurance and has a high budget
III. An individual who needs insurance but has a low budget
IV. An individual who needs an insurance product that gives high returns
Answer: III. An individual who needs insurance but has a low budget

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(8) Which of the below statement is incorrect with regards to decreasing term
assurance?
I. Death benefit amount decreases with the term of coverage
II. Premium amount decreases with the term of coverage
III. Premium remains level throughout the term
IV. Mortgage redemption plans are an example of decreasing term assurance
Plans
Answer: II. Premium amount decreases with the term of coverage

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(9) Which of the below statement is correct with regards to endowment assurance
plan?
I. It has a death benefit component only
II. It has a survival benefit component only
III. It has both a death benefit as well as a survival component
IV. It is similar to a term plan

Answer: III. It has both a death benefit as well as a survival component

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(10) Which of the below is an example of an endowment assurance plan?
I. Mortgage Redemption Plan
II. Credit Life Insurance Plan
III. Money Back Plan
IV. Whole Life Plan

Answer: III. Money Back Plan

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(11) Which among the following is an intangible product?
I. Car
II. House
III. Life insurance
IV. Soap

Answer: III. Life insurance

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(12) The premium paid for whole life insurance is _____________ than the premium
paid for term assurance.
I. Higher
II. Lower
III. Equal
IV. Substantially higher
Answer: I. Higher

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Solved questions -FINANCIAL PLANNING

FINANCIAL PLANNING

Questions and answers 

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(1) Which among the following would you recommend in order to seek protection
against unforeseen events?
I. Insurance
II. Transaction products like bank FD’s
III. Shares
IV. Debentures
Answer: I. Insurance

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(2) When is the best time to start financial planning?
I. Post retirement
II. As soon as one gets his first salary
III. After marriage
IV. Only after one gets rich
Answer: II. As soon as one gets his first salary

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(3) Which among the following is not an objective of tax planning?
I. Maximum tax benefit
II. Reduced tax burden as a result of prudent investments
III. Tax evasion
IV. Full advantage of tax breaks
Answer: III. Tax evasion

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(4) An individual with an aggressive risk profile is likely to follow wealth _______
investment style.
I. Consolidation
II. Gifting
III. Accumulation
IV. Spending
Answer: III. Accumulation

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(5) Which among the following is a wealth accumulation product?
I. Bank Loans
II. Shares
III. Term Insurance Policy
IV. Savings Bank Account
Answer: II. Shares

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(6) Savings can be considered as a composite of two decisions. Choose them from
the list below.
I. Risk retention and reduced consumption
II. Gifting and accumulation
III. Spending and accumulation
IV. Postponement of consumption and parting with liquidity
Answer: IV. Postponement of consumption and parting with liquidity

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(7) During which stage of life will an individual appreciate past savings the most?
I. Post retirement
II. Earner
III. Learner
IV. Just married
Answer: I. Post retirement

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(8) What is the relation between investment horizon and returns?
I. Both are not related at all
II. Greater the investment horizon the larger the returns
III. Greater the investment horizon the smaller the returns
IV. Greater the investment horizon more tax on the returns
Answer: II. Greater the investment horizon the larger the returns

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(9) Which among the following can be categorised under transactional products?
I. Bank deposits
II. Life insurance
III. Shares
IV. Bonds
Answer: I. Bank deposits

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(10) Which among the following can be categorized under contingency products?
I. Bank deposits
II. Life insurance
III. Shares
IV. Bonds
Answer: II. Life insurance

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(11) Which of the below can be categorized under wealth accumulation products?
I. Bank deposits
II. Life insurance
III. General insurance
IV. Shares
Answer: IV. Shares

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(12) __________ is a rise in the general level of prices of goods and services in an
economy over a period of time.
I. Deflation
II. Inflation
III. Stagflation
IV. Hyperinflation
Answer: II. Inflation

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(13) Which of the below is not a strategy to maximize discretionary income?
I. Debt restructuring
II. Loan transfer
III. Investment restructuring
IV. Insurance purchase
Answer : IV. Insurance purchase

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Solve -LEGAL PRINCIPLES OF LIFE INSURANCE

LEGAL PRINCIPLES OF LIFE INSURANCE

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(1)Which among the following is an example of coercion?

I. Ramesh signs a contract without having knowledge of the fine print

II. Ramesh threatens to kill Mahesh if he does not sign the contract

III. Ramesh uses his professional standing to get Mahesh to sign a contract

IV. Ramesh provides false information to get Mahesh to sign a contract



Answer:II. Ramesh threatens to kill Mahesh if he does not sign the contract

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(2)Which among the following options cannot be insured by Ramesh?

I. Ramesh’s house

II. Ramesh’s spouse

III. Ramesh’s friend

IV. Ramesh’s parents



Answer :III. Ramesh’s friend

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(3)Which element of a valid contract deals with premium?

I. Offer and acceptance

II. Consideration

III. Free consent

IV. Capacity of parties to contract



Answer:II. Consideration

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(4)_____________ relates to inaccurate statements, which are made without any

fraudulent intention.

I. Misrepresentation

II. Contribution

III. Offer

IV. Representation



Answer :I. Misrepresentation

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(5)________________ involves pressure applied through criminal means.

I. Fraud

II. Undue influence

III. Coercion

IV. Mistake



Answer :III. Coercion

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(6)Which among the following is true regarding life insurance contracts?

I. They are verbal contracts not legally enforceable

II. They are verbal which are legally enforceable

III. They are contracts between two parties (insurer and insured) as per

requirements of Indian Contract Act, 1872

IV. They are similar to wager contracts



Answer : III. They are contracts between two parties (insurer and insured) as per
requirements of Indian Contract Act, 1872

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(7)Which of the below is not a valid consideration for a contract?

I. Money

II. Property

III. Bribe

IV. Jewellery



Answer : III. Bribe

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(8)Which of the below party is not eligible to enter into a life insurance contract?

I. Business owner

II. Minor

III. House wife

IV. Government employee



 Answer :II. Minor

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(9)Which of the below action showcases the principle of “Uberrima Fides”?

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

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

III. Disclosing known material facts on an insurance proposal form

IV. Paying premium on time



Answer :III. Disclosing known material facts on an insurance proposal form

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(10)Which of the below is not correct with regards to insurable interest?

I. Father taking out insurance policy on his son

II. Spouses taking out insurance on one another

III. Friends taking out insurance on one another

IV. Employer taking out insurance on employees



Answer :III. Friends taking out insurance on one another

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(11)When is it essential for insurable interest to be present in case of life insurance?

I. At the time of taking out insurance

II. At the time of claim

III. Insurable interest is not required in case of life insurance

IV. Either at time of policy purchase or at the time of claim



Answer : I. At the time of taking out insurance

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(12)Find out the proximate cause for death in the following scenario?

Ajay falls off a horse and breaks his back. He lies there in a pool of water and

contracts pneumonia. He is admitted to the hospital and dies because of

pneumonia.

I. Pneumonia

II. Broken back

III. Falling off a horse

IV. Surgery



Answer :III. Falling off a horse

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