Insurance - Study Mode

[#1] Which among the following is not a variant of term assurance?
Correct Answer

(D) Endowment assurance

Explanation

Solution: An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death.

[#2] Which of the following is not a risk fit for insurance?
Correct Answer

(D) Natural wear and tear to an asset

Explanation

Solution: Natural wear and tear to an asset is not to be included in insurance. A wear and tear exclusion states that the normal, expected deterioration of the insured object will not be covered by an insurance policy.

[#3] In context of insurance, ‘risk retention’ indicates a situation where
Correct Answer

(D) One decides to bear the risk and its effects

Explanation

Solution: Risk retention is a situation where one decides to bear the risk and its effects. Risk retention is a company's decision to take responsibility for a particular risk it faces, as opposed to transferring the risk over to an insurance company. Companies often retain risks when they believe that the cost of doing so is less then the cost of fully or partially insuring against it.

[#4] Occurrence of _________ has to be _________ and not a _________ of the insured person.
Correct Answer

(A) Peril, uncertain, creation

Explanation

Solution: Occurrence of peril has to be uncertain and not a creation of the insured person. A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.

[#5] In this method of underwriting, the underwriter gives rating points for all the negative or adverse factors, totals them and decides extra mortality rating. Which method are we talking about?
Correct Answer

(D) Numerical rating

Explanation

Solution: Numerical rating system is underwriting method used in classifying applicants for life insurance according to certain demographic factors and assigning weights to these factors. Factors include physical condition, build, family history, personal history, habits, and morals.