Insurance - Study Mode

[#626] With regard to Unit Linked policy, who bears the expense and mortality risk?
Correct Answer

(A) Ins. Co.

Explanation

Solution: With regard to Unit Linked policy, Ins. Co. bears the expense and mortality risk. These are charges to provide for the cost of insurance coverage under the plan. Mortality charges depend on a number of factors such as age, amount of coverage (sum assured) etc. and are deducted on monthly basis. This charge will be deducted proportionately from each of the fund(s) you have chosen.

[#627] In Unit Linked policies, the risk cover is a multiple of _________
Correct Answer

(D) Premiums

Explanation

Solution: In Unit Linked policies, the risk cover is a multiple of Premiums. A unit linked insurance plan (ULIP) is an investment product that provides for insurance payout benefits. ULIP offerings are primarily concentrated in India. The investment vehicle requires a premium payment which is invested in investment products for capital appreciation.

[#628] Savings is a composite of which of the following decisions?
Correct Answer

(C) Both A & B

Explanation

Solution: Savings is a composite of postponement of consumption and parting with liquidity.

[#629] Risk transfer means
Correct Answer

(A) Insuring with an insurance company

Explanation

Solution: Risk transfer means insuring with an insurance company. Risk transfer is most often accomplished through an insurance policy. This is a voluntary arrangement between two parties, the insurance company and the policyholder, where the insurance company assumes strictly defined financial risks from the policyholder.

[#630] Which of the following cannot be categorised under risk?
Correct Answer

(C) Natural wear and tear

Explanation

Solution: Dying too early cannot be categorised under risk. Each individual has got a certain financial value attached to his life in the form of his earning potential. If he dies at a young age or during the time when he had an earning potential his family suffers a financial loss in the form of loss of his potential earnings. A lot of his obligations towards the family remain unfulfilled due to his sudden demise. This is called the Risk of Dying too early and it can be protected against by taking life insurance coverage.