Solve WHAT LIFE INSURANCE INVOLVES

WHAT LIFE INSURANCE INVOLVES

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(1) How does diversification reduce risks in financial markets?
I. Collecting funds from multiple sources and investing them in one place
II. Investing funds across various asset classes
III. Maintaining time difference between investments
IV. Investing in safe assets

Answer: II. Investing funds across various asset classes

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(2) Which of the below is not an element of the life insurance business?
I. Asset
II. Risk
III. Principle of mutuality
IV. Subsidy

Answer: IV. Subsidy

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(3) Who devised the concept of HLV?
I. Dr. Martin Luther King
II. Warren Buffet
III. Prof. Hubener
IV. George Soros

Answer: III. Prof. Hubener

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(4) Which of the below mentioned insurance plans has the least or no amount of savings element?
I. Term insurance plan
II. Endowment plan
III. Whole life plan
IV. Money back plan

Answer: I. Term insurance plan

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(5) Which among the following cannot be termed as an asset?
I. Car
II. Human Life
III. Air
IV. House

Answer: III. Air

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(6) Which of the below cannot be categorized under risks?
I. Dying too young
II. Dying too early
III. Natural wear and tear
IV. Living with disability

Answer: III. Natural wear and tear

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(7) Which of the below statement is true?
I. Life insurance policies are contracts of indemnity while general insurance
policies are contracts of assurance
II. Life insurance policies are contracts of assurance while general insurance policies are contracts of indemnity
III. In case of general insurance the risk event protected against is certain
IV. The certainty of risk event in case of general insurance increases with time

Answer: II. Life insurance policies are contracts of assurance while general insurance policies are contracts of indemnity

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(8) Which among the following methods is a traditional method that can help determine the insurance needed by an individual?
I. Human Economic Value
II. Life Term Proposition
III. Human Life Value
IV. Future Life Value

Answer: III. Human Life Value

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(9) Which of the below is the most appropriate explanation for the fact that young
people are charged lesser life insurance premium as compared to old people?
I. Young people are mostly dependant
II. Old people can afford to pay more
III. Mortality is related to age
IV. Mortality is inversely related to age

Answer: III. Mortality is related to age

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(10) Which of the below is not an advantage of cash value insurance contracts?
I. Safe and secure investment
II. Inculcates saving discipline
III. Lower yields
IV. Income tax advantages

Answer: III. Lower yields

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(11) Which of the below is an advantage of cash value insurance contracts?
I. Returns subject to corroding effect of inflation
II. Low accumulation in earlier years
III. Lower yields
IV. Secure investment

Answer: IV. Secure investment

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Solve Questions

(1) Risk transfer through risk pooling is called ________.
I. Savings
II. Investments
III. Insurance
IV. Risk mitigation

Answer : III. Insurance

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(2)The measures to reduce chances of occurrence of risk are known as _____.
I. Risk retention
II. Loss prevention
III. Risk transfer
IV. Risk avoidance

Answer :II. Loss prevention

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(3)By transferring risk to insurer, it becomes possible ___________.
I. To become careless about our assets
II. To make money from insurance in the event of a loss
III. To ignore the potential risks facing our assets
IV. To enjoy peace of mind and plan one’s business more effectively

Answer :IV. To enjoy peace of mind and plan one’s business more effectively

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(4)Origins of modern insurance business can be traced to __________.
I. Bottomry
II. Lloyds
III. Rhodes
IV. Malhotra Committee

Answer :II. Lloyds

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(6)In insurance context ‘risk retention’ indicates a situation where _____.
I. Possibility of loss or damage is not there
II. Loss producing event has no value
III. Property is covered by insurance
IV. One decides to bear the risk and its effects

Answer :IV. One decides to bear the risk and its effects

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(7)Which of the following statement is true?
I. Insurance protects the asset
II. Insurance prevents its loss
III. Insurance reduces possibilities of loss
IV. Insurance pays when there is loss of asse

Answer :IV. Insurance pays when there is loss of asse

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(8)Out of 400 houses, each valued at Rs. 20,000, on an average 4 houses get burnt
every year resulting in a combined loss of Rs. 80,000. What should be the annual
contribution of each house owner to make good this loss?
I. Rs.100/-
II. Rs.200/-
III. Rs.80/-
IV. Rs.400/-

Answer :II. Rs.200/-

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(9)Which of the following statements is true?
I. Insurance is a method of sharing the losses of a ‘few’ by ‘many’
II. Insurance is a method of transferring the risk of an individual to another
individual
III. Insurance is a method of sharing the losses of a ‘many’ by a few
IV. Insurance is a method of transferring the gains of a few to the many

Answer :I. Insurance is a method of sharing the losses of a ‘few’ by ‘many’

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(10)Why do insurers arrange for survey and inspection of the property before
acceptance of a risk?
I. To assess the risk for rating purposes
II. To find out how the insured purchased the property
III. To find out whether other insurers have also inspected the property
IV. To find out whether neighbouring property also can be insured

Answer :I. To assess the risk for rating purposes

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(11)Which of the below option best describes the process of insurance?
I. Sharing the losses of many by a few
II. Sharing the losses of few by many
III. One sharing the losses of few
IV. Sharing of losses through subsidy

Answer :II. Sharing the losses of few by many

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