Mock Test - Rmip

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1. What are the criteria for determining Insurable risk? a) Law of Large Numbers b) The loss must be definite and measurable c) The loss must not be catastrophic
- A) C only
- B) B & C
- C) A B & C
- D) None of above

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2.

A type of risk with high frequency but low severity is probably best handled by:
- A) A voidance
- B) Subrogation
- C) Self insurance
- D) Under Insurance
Correct Answer

A. C) Self insurance

Explanation

A type of risk with high frequency but low severity is best handled by self insurance. Self insurance allows an individual or organization to assume the financial responsibility for potential losses instead of transferring that risk to an insurance company. In this case, since the risk has a high frequency but low severity, it may not be cost-effective to transfer it to an insurance company through premiums. Self insurance allows the entity to retain the risk and cover any potential losses internally, which can be more efficient and cost-effective in the long run.

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3.

Speculative risk can have following outcomes ________ a) Loss b) Gain c) Status Quo
- A) A Only
- B) B Only
- C) C Only
- D) A B & C
Correct Answer

A. D) A B & C

Explanation

Speculative risk refers to a situation where there is a possibility of both gain and loss. Therefore, it can have outcomes such as loss, gain, or even maintaining the status quo. This means that all options A, B, and C are possible outcomes of speculative risk, leading to the correct answer being d) A B & C.

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4.

LALGI is _____________.
- A) Private contribution guarantee scheme
- B) Private insurance
- C) Public benefit guarantee scheme
- D) Social insurance
Correct Answer

A. D) Social insurance

Explanation

The correct answer is d) Social insurance. Social insurance refers to a government program that provides financial benefits to individuals or their dependents in the event of certain life events, such as unemployment, disability, or retirement. It is funded through contributions from both employers and employees. This type of insurance is designed to provide a safety net for individuals and help protect them from financial hardship in times of need.

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5.

For risk to be insurable which one of the following is not correct?
- A) Loss must be fortuitous or accidental.
- B) The loss must not be catastrophic.
- C)The loss produced by the risk must be definite and measurable.
- D) There mus be a sufficietly large number of heterogeneous exposure units to make the losses reasonably predictable.
Correct Answer

A. D) There mus be a sufficietly large number of heterogeneous exposure units to make the losses reasonably predictable.

Explanation

The correct answer is d) There must be a sufficiently large number of heterogeneous exposure units to make the losses reasonably predictable. This statement is not correct because for risk to be insurable, there must be a sufficiently large number of homogeneous exposure units, not heterogeneous. Homogeneous exposure units ensure that the losses can be predicted and spread across a large pool of similar risks, reducing the overall uncertainty for the insurer.

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6.

Consideration under the law is the return promise to: a) Do certain things b) Abstain from doing certain things c) Forebear some acts d) A minor
- A) AB&C
- B) AB&D
- C) AC&D
- D) BC&D
Correct Answer

A. A) AB&C

Explanation

The correct answer is A) AB&C. Consideration under the law refers to the return promise to do certain things, abstain from doing certain things, and forbear some acts. This means that in a contract, both parties must provide something of value to each other in order for the contract to be legally binding.

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7.

A client explains that she only wants an insurable policy that will cover her family against financial risk over the next five years, while she still has dependent children and a large mortgage. It is unlikely her income will increase over this period. What type of insurance is she looking for?
- A) An unit linked insurance plan
- B) Money back policy
- C) Term insurance with a level premium
- D) Term insurance with a stepped premium
Correct Answer

A. C) Term insurance with a level premium

Explanation

The client's main concern is to cover her family against financial risk for the next five years while she still has dependent children and a large mortgage. Since her income is unlikely to increase during this period, she would want an insurance policy that provides coverage for a specific term with a level premium. This means that the premium amount will remain the same throughout the term of the policy, providing consistent coverage without any increases in cost. This type of insurance would be the most suitable for her needs.

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8.

Which of the following is typr of pecuniary insurance?
- A) Commercial vehicle insurance
- B) Engineering insurance
- C) Money policy
- D) Workmen's compensation
Correct Answer

A. C) Money policy

Explanation

A money policy is a type of pecuniary insurance that provides coverage for loss or damage to money, such as cash, banknotes, or coins. This type of insurance is commonly used by businesses that deal with large amounts of cash, such as banks, retail stores, or casinos. It helps protect against risks such as theft, burglary, or accidental damage to money. Commercial vehicle insurance, engineering insurance, and workmen's compensation are not specifically related to the coverage of money and therefore are not types of pecuniary insurance.

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9.

Participating policies are those where_____?
- A) Both insurer and insured participates in each others loss
- B) Insured participates in running of insurance of company
- C) Insured participates in surplus of insurance company
- D) insurer participates in loss of insured
Correct Answer

A. C) Insured participates in surplus of insurance company

Explanation

Participating policies are insurance policies where the insured participates in the surplus of the insurance company. This means that if the insurance company has excess funds or profits, the insured policyholders are entitled to a share of those surplus funds. It allows policyholders to benefit from the financial success of the insurance company and potentially receive additional returns on their policies.

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10.

In unit linked policy, market risk is with _______ a) Insured b) Insurer
- A) A
- B) B
- C) Both A & B
- D) Neither A nor B
Correct Answer

A. A) A

Explanation

In a unit linked policy, the market risk is with the insured. This means that the insured bears the risk of any fluctuations or changes in the market that may affect the value of their investment. The insurer, on the other hand, does not bear this risk and is not responsible for any losses or gains resulting from market changes. Therefore, the correct answer is A, the insured.

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11.

If the life insurance poolicy is endorced under MWP Act, 1874 then____________
- A) Creditors have claim only to extend of outstanding pricipal, on policy proceeds
- B) Creditors have first claim on policy proceeds
- C) Creditors have no claim on policy proceeds
- D) Creditors have residual claim on policy proceeds
Correct Answer

A. C) Creditors have no claim on policy proceeds

Explanation

If a life insurance policy is endorsed under the MWP Act, 1874, it means that the policy has been assigned to a specific beneficiary and is protected from the claims of creditors. This means that creditors have no claim on the policy proceeds. The MWP Act ensures that the policy benefits are solely for the benefit of the assigned beneficiaries and cannot be used to settle any debts or claims from creditors.

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12.

Minimum age at entry for medi-claim is _______?
- A) 8 years
- B) 91 days
- C) 365 days
- D) 18 years
Correct Answer

A. B) 91 days

Explanation

The minimum age at entry for medi-claim is 91 days. This means that individuals must be at least 91 days old in order to be eligible for a medi-claim policy.

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13.

Anand was driving his car home from work, when a pit dug by the municipal corporation in the road, remained open and unmarked. He met with an accident and had to be hospitalised for 3 months. What are the insurance claims that can a rise from this accident?
- A) Anand can claim personal insurance for the accident as it was not caused be negligence on his part; the Municipal corporation can't claim third party lss insurance to pay damages to Anand, as it was negligent. Anand can claim insurance for damage due.
- B) Anand can claim temporary disability insurance and insurance for his damaged car
- C) Anand has to apply to the municipal corporation for damages, which the corporation will pay out of its claims for liability to third party. His motor insurance will cover damages to his car.
- D) Since the municipal corporation was negligent, it would not be able to lodge a claim to recover payment of damages to Anand. Anand will only receive motor insurance claims on his car.
Correct Answer

A. A) Anand can claim personal insurance for the accident as it was not caused be negligence on his part; the Municipal corporation can't claim third party lss insurance to pay damages to Anand, as it was negligent. Anand can claim insurance for damage due.
14.

Sujata was standing on the terrace for her building hanging out clothes. She accidently fell off and landed on the sunshield of the next floor, which crashed and damaged the car of her neighbour parked below. What are the insurance claims that arise from this event?
- A) Sujata can claim personal accident insurance. Both her neighbours will claim property insurance for he freak accident.
- B) Sujata can't claim accident insurance as the accident was cauised by the negligence. her neighbours can claim property insurance cover for loss to their property.
- C) Sujata's neighbours will collect damages from her, which Sujata can pay out of insurance cover losses to third party.
- D) Sujata's neighbours will not be able to claim insurance as the damage to their property due to such freak accidents is not usually covered by insurance. Sujata will be able to claim her accident insurance, as she did not fall intentionally.
Correct Answer

A. A) Sujata can claim personal accident insurance. Both her neighbours will claim property insurance for he freak accident.

Explanation

In this scenario, Sujata can claim personal accident insurance because she was involved in an accident and suffered injuries. However, her neighbors can claim property insurance to cover the damage caused to their car by the falling sunshield.

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15.

Your client has bought life insurance and medical insurance, but has not bought a cover for permanent disability. His argument is that he is paying too much by way of premium for risks that he believes are farfetched and not likely to afftect him. What would you advise the client?
- A) A financial planner can persuade the client to consider the losses from permanent disability and highlight the risks to the client and recommend an appropriate policy for him.
- B) If a client is not willing to bear the costs of premium, it can be assumed that he is willing to bear the costs of risk retention.
- C) If losses that would occur to the client in the event of permanent disability are higher than what he can bear, the client is better off buying insurance. The costs of insuring against losses, which have lower probability of happening, will in any case be lower.
- D) The amount of insurance a person will buy depends on his perception of risks and their impact on him. It would not be possible to persuade this client to buy more insurance.
Correct Answer

A. C) If losses that would occur to the client in the event of permanent disability are higher than what he can bear, the client is better off buying insurance. The costs of insuring against losses, which have lower probability of happening, will in any case be lower.

Explanation

The correct answer advises the client to consider the potential losses from permanent disability and assess whether they are higher than what he can financially bear. If the potential losses are higher than what he can handle, it is recommended for the client to purchase insurance. This is because the cost of insuring against lower probability events, such as permanent disability, will generally be lower than the potential financial burden of such an event. Therefore, the client would be better off buying insurance to protect against this risk.

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16.

Suresh has not bought accident insurance cover. though his two-wheeler is covered for damages from accidents. He wears a helmet and drives carefully. What can you say about his risk management?
- A) Suresh has insured the property risk. He controls some of his personal riak and retains the rest of the risk.
- B) Suresh has controlled his personal riak and insured his property risk.
- C) Suresh ahs not done anything to amange his risks and has to immediately go for accident and personal risk cover. He can't rely on third party damages alone to cover the risk of the road.
- D) Suresh has tranfered his personal riak to other frivers of the road, insured his property risk and can claim damages from accidents are caused by third party negligence.
Correct Answer

A. A) Suresh has insured the property risk. He controls some of his personal riak and retains the rest of the risk.

Explanation

The correct answer suggests that Suresh has taken measures to manage his risk by insuring his two-wheeler for damages from accidents. However, he has chosen not to buy accident insurance cover for himself, indicating that he is retaining the risk of personal injury. By wearing a helmet and driving carefully, he is taking steps to control some of his personal risk. Therefore, Suresh has insured the property risk (his two-wheeler) but retains the rest of the risk (personal injury).

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17.

Mrs. Rangnekar a 40 year old widow has a 8 year old son. Her current savings are not adequate to provide for her son's post graduate studies however she will be able to save it up by the time he finishes graduation i.e. when he is 20 years old. Mortality tables indicate that her life expectancy is another 30 years. which of the following is true?
- A) She needs to insure her life for 12 years
- B) She does not need to insure her life
- C) She needs to insure her life for 30 years
- D) She needs to insure her son's life for 30 years.
Correct Answer

A. A) She needs to insure her life for 12 years

Explanation

Mrs. Rangnekar needs to insure her life for 12 years because that is the time period until her son finishes his graduation and her savings are not adequate to provide for his post-graduate studies. After her son finishes graduation, her savings will be enough to support him, so she would not need life insurance beyond that point. Additionally, her life expectancy is another 30 years, but that does not necessarily mean she needs life insurance for that entire period.

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18.

Vinayak 36 years and married works for multinational firm, which provides adequate medical and related covers. He is also able to accumulate sick leave. He already has his own home and savings of Rs 35 lakh, which are well invested. Which insurance cover does he require the most?
- A) Life Cover
- B) Medical Cover
- C) Property Insurance
- D) Temporary Total Disablement Cover
Correct Answer

A. A) Life Cover

Explanation

Based on the information provided, Vinayak is already financially stable with his own home and savings. Therefore, the insurance cover that he requires the most is a Life Cover. Life insurance will provide financial protection to his family in the event of his death, ensuring that they are taken care of and can maintain their current lifestyle. Medical cover, property insurance, and temporary total disablement cover are not mentioned as necessary in the given scenario.

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19.

Premium on motor insurance policy doesn't dpend 0on which one of the following factors?
- A) Zone of operation of the vehicle
- B) Insured Declared Value (IDV) of the vehicle
- C) Cubic capacity of the vehicle
- D) Age of the owner of the vehicle
Correct Answer

A. D) Age of the owner of the vehicle

Explanation

The premium on a motor insurance policy depends on various factors such as the zone of operation of the vehicle, insured declared value (IDV) of the vehicle, and the cubic capacity of the vehicle. However, the age of the owner of the vehicle does not have any impact on the premium. The insurance premium is primarily based on the risk associated with the vehicle and its usage, rather than the age of the owner.

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20.

All the following statements describe the operation of life annuity except
- A) Because of interest factor, an annuitant is assured of receiving back more than he or she paid in
- B) The annuitant is assured tha he or she cannot outlive the length of time of annuity payments
- C) The emphasis is on the liquidation of the fund as opposed to its growth
- D) The older the annuitant is when he or she receives the first annuity payment. The greater will be the amount for each payment.
Correct Answer

A. A) Because of interest factor, an annuitant is assured of receiving back more than he or she paid in

Explanation

Life annuity is a financial product that provides regular payments to the annuitant for the rest of their life. The annuitant pays a lump sum or periodic premiums to the annuity provider. The payments received by the annuitant are based on factors such as the annuitant's age, gender, and the interest rates at the time of purchase. However, it is important to note that the annuitant is not guaranteed to receive back more than they paid in. The amount of payments received may be influenced by factors such as interest rates and the annuitant's life expectancy. Therefore, statement a) is incorrect as it suggests an assurance of receiving back more than the annuitant paid in, which is not always the case.

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21.

In a sample of 200 observations, the lowest and the highest scores were 45 and 265 respectively, what would be range of the distribution?
- A) 110
- B) 155
- C) 155.26
- D) 220
Correct Answer

A. D) 220

Explanation

The range of a distribution is calculated by subtracting the lowest value from the highest value. In this case, the lowest score is 45 and the highest score is 265. Therefore, the range would be 265 - 45 = 220.

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22.

Derive the policy cost per thousand with the following data; policy cost per thousand conversion is 0.001. Interest rate selected equivalent to the after tax rate of return is 10% Dividend or Bonus is Rs. 13000 Death Benefit is Rs. 20,00,000 Annual premium is Rs 23000. Cash surrender value at the end of current policy year is Rs 600000. Cash surrender value at the end of the previous policy year is Rs 570000
- A) Rs 25.04
- B) 28.07
- C) 30.10
- D) 31.15
Correct Answer

A. B) 28.07

Explanation

The policy cost per thousand can be calculated by dividing the annual premium by the death benefit and multiplying it by 1000. In this case, the annual premium is Rs 23000 and the death benefit is Rs 20,00,000. Dividing Rs 23000 by Rs 20,00,000 and multiplying it by 1000 gives us Rs 11.5. However, since the interest rate is 10%, we need to add the interest earned on the cash surrender value. The interest earned on the cash surrender value is Rs 600000 - Rs 570000 = Rs 30000. Adding this to the policy cost per thousand gives us Rs 11.5 + Rs 30000 = Rs 30011.5. Finally, multiplying this by the policy cost per thousand conversion of 0.001 gives us Rs 30.01. Therefore, the correct answer is b) 28.07.

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23.

In the event of loss due to insured event the principle of indemnity ebsures that
- Compensation paid to insured in always less than the loss
- Compensation is equal to the loss
- Never less than loss
- Not attempting
Correct Answer

A. Compensation is equal to the loss

Explanation

The principle of indemnity ensures that the compensation paid to the insured is equal to the loss. This means that in the event of a loss due to an insured event, the insured will be reimbursed for the exact amount of the loss they have suffered. The principle of indemnity aims to restore the insured to the same financial position they were in before the loss occurred, without providing any additional benefits or profits. Therefore, the compensation paid will be equal to the actual loss incurred by the insured.

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24.

Client has need to provide for the child's education cost which envisages that 4 annual payments of Rs. 20000 in current money terms would be needed beginning 15 years from now. Assuming level of inflation rated at 5% p.a. & that the fund earns 8% p.a. throught, calculate PV to be placed on the liability when carrying out a needs analysis.
- Rs. 24000
- Rs. 50000
- Rs. 49000
- Rs. 23000
Correct Answer

A. Rs. 50000

Explanation

The correct answer is Rs. 50000 because in order to calculate the present value (PV) of the liability, we need to discount the future payments by the rate of inflation. The 4 annual payments of Rs. 20000 will be received 15 years from now, so we need to discount them back to present value. The inflation rate is 5% per year, so we need to divide the future payments by (1 + inflation rate)^(number of years). In this case, the present value of each payment is Rs. 20000 / (1 + 0.05)^15 = Rs. 8955. The total present value of the liability is then Rs. 8955 * 4 = Rs. 35820. However, since the fund is earning 8% per year, we also need to discount this present value back to present value using the rate of return. Rs. 35820 / (1 + 0.08)^15 = Rs. 50000.

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25.

In the sample of 200 observations, lowest & highest scores were 45 and 265. What is the range of distribution?
- 155
- 220
- 155.56
- 110
Correct Answer

A. 220

Explanation

The range of a distribution is calculated by subtracting the lowest score from the highest score. In this case, the lowest score is 45 and the highest score is 265. Subtracting 45 from 265 gives us a range of 220.

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26.

Suppose project is set to Rs. 25 lacs. some work that must be accomplished has not been identified in initial planning. Most appropriate source of funds to cover this is
- Management reserves
- Contingency reserves
- Slush Fund reserve
- Sinking Fund reserve
Correct Answer

A. Management reserves

Explanation

In this scenario, the most appropriate source of funds to cover the unidentified work in the project is the management reserves. Management reserves are funds set aside specifically for unexpected events or risks that may arise during the project. These reserves act as a buffer to cover any additional costs or requirements that were not initially planned for. Therefore, the management reserves would be the most suitable option to cover the unidentified work in this situation.

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27.

Important legal doctrine that stipulates person seeking insurance should have financial interest in subject matter of insurance is called
- Principle of utmost good faith
- Principle of subrogation
- Principle of insurable interest
- Principle of indemnity
Correct Answer

A. Principle of insurable interest

Explanation

The principle of insurable interest is an important legal doctrine that requires a person seeking insurance to have a financial interest in the subject matter of the insurance. This means that the person must stand to suffer a financial loss if the insured object or event is damaged or lost. This principle ensures that insurance is not used for speculative purposes and helps to prevent fraud. It also ensures that insurance contracts are based on a genuine need for protection against potential financial loss.

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28.

Rama has doctrine policy on house which was valued at Rs. 80000 when he took policy 3 years ago & insured for amount & renewed without change every year. house is destroyed by fire & cost of rebuilding is Rs. 1Lac. How much is Rama likely to recover?
- 80000
- 88000
- 58182
- 110000
Correct Answer

A. 80000

Explanation

Rama is likely to recover Rs. 80000 because that was the value of the house when he took the policy and it has not changed since then.

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29.

Which situation is the lady of house least likely to need a disability cover
- Avid mountaineer
- Home maker
- Sole bread winner
- Avis painter
Correct Answer

A. Home maker

Explanation

A home maker is least likely to need a disability cover because they typically do not have a job or income that would be affected by a disability. Home makers primarily take care of household responsibilities and do not rely on their own income to support themselves or their family. Therefore, the risk of financial loss due to a disability is lower for a home maker compared to an avid mountaineer, sole breadwinner, or an avid painter who may depend on their physical abilities for their livelihood.

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30.

Professional indemnity cover protects financial advisor who was nehligent in giving investor advice
- Only if advisor had not included the declaimer of liability in contract with investor
- Only if advisor is liable under statute
- Only if contract exists between advisor & investor
- Only if investor relies on advice
Correct Answer

A. Only if advisor had not included the declaimer of liability in contract with investor

Explanation

Professional indemnity cover protects a financial advisor who was negligent in giving investor advice only if the advisor had not included a disclaimer of liability in the contract with the investor. This means that if the advisor had included a disclaimer in the contract, they would not be protected by the professional indemnity cover. The presence of a disclaimer shifts the liability away from the advisor, making them not liable for any potential losses or damages caused by their advice. Therefore, the absence of a disclaimer in the contract is a condition for the professional indemnity cover to apply.

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31.

Actual cash value, replacement value, depretiation are taken into consideration to
- Manage risk
- Calculate rate of premium
- Measure potential loss
- Assess severity of loss
Correct Answer

A. Measure potential loss

Explanation

The terms "actual cash value," "replacement value," and "depreciation" are all factors that can be used to measure the potential loss in an insurance context. When determining the potential loss, insurance companies consider the current value of the insured item (actual cash value), the cost to replace it (replacement value), and any decrease in value over time (depreciation). By taking these factors into consideration, insurance companies can accurately assess the potential financial loss that may occur in the event of a claim.

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32.

Subjective risk arises due to
- Probability of an undesirable outcome
- Vagaries of nature
- Uncertainty in the minds of individuals regarding the outcome
Correct Answer

A. Uncertainty in the minds of individuals regarding the outcome

Explanation

Subjective risk refers to the uncertainty or fear that individuals have about the outcome of a particular situation. It is not based on objective data or measurable factors, but rather on the individual's perception and subjective feelings. This type of risk arises when people are unsure about the potential outcome and cannot accurately predict what might happen. It is influenced by factors such as personal beliefs, experiences, and emotions, which can vary from person to person. Therefore, the answer "Uncertainty in the minds of individuals regarding the outcome" accurately explains the concept of subjective risk.

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33.

Which of the following is correct meaning of sum assured under majority of policies?
- Fair value of subject matter of insurance
- Agreed value of property insured
- The amount paid when their is total loss
- The maximum limmit of liability under the policy
Correct Answer

A. The maximum limmit of liability under the policy

Explanation

The correct meaning of sum assured under the majority of policies is the maximum limit of liability under the policy. This means that in the event of a claim, the insurance company will not pay more than the sum assured, regardless of the actual value of the subject matter or the amount of loss incurred. The sum assured acts as a cap on the insurer's financial responsibility, ensuring that they are not obligated to pay more than the specified limit.

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34.

Out of 400 houses, each valued at Rs.20000/-, 4 houses get burnt every year. What should be the contribution each owner to pay for the losses of 4 houses?
- Rs.800
- Rs.200
- Rs. 400
- Rs. 600
Correct Answer

A. Rs.200

Explanation

Each house is valued at Rs.20000 and 4 houses get burnt every year. Therefore, the total value of the houses lost in a year is 4 * Rs.20000 = Rs.80000. Since there are 400 houses in total, each owner should contribute an equal amount to cover the losses. So, the contribution each owner should pay is Rs.80000 / 400 = Rs.200.

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35.

The process of due diligence conducted by an insurance agent is known as _______.
- Underwriting
- Investigation
- Inspection
- Site check
Correct Answer

A. Underwriting

Explanation

The process of due diligence conducted by an insurance agent is known as underwriting. Underwriting involves assessing the risk associated with insuring a particular individual or entity and determining the terms and conditions of the insurance policy. It includes evaluating factors such as the applicant's health, financial stability, and claims history to determine the appropriate premium and coverage. Underwriting is a crucial step in the insurance process to ensure that the insurance company is making informed decisions and managing their risk effectively.

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36.

What type of insurance is not easily available in India?
- Officers liability
- Disability Income Protection
- Health
- Life
Correct Answer

A. Disability Income Protection

Explanation

Disability Income Protection insurance is not easily available in India. This type of insurance provides coverage for individuals who become disabled and are unable to work, providing them with a regular income. In India, there is a lack of awareness and demand for this type of insurance, resulting in limited availability. Additionally, insurance companies may perceive disability income protection as a higher risk, leading to limited options for individuals seeking this coverage.

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37.

Insurable interest can exist between a Member of Parliament and his (unrelated) party workers.
- True
- False
- Data insufficient
Correct Answer

A. False

Explanation

Insurable interest refers to the financial or legal interest that an individual has in the subject matter of an insurance policy. In this case, a Member of Parliament and his unrelated party workers do not have a direct financial or legal interest in each other's well-being or property. Therefore, there is no insurable interest between them, making the statement false.

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38.

A person over 60 generally requires_________ Insurance more urgently
- Life
- Professional Indemnity
- Long Term care
Correct Answer

A. Long Term care

Explanation

As a person gets older, the likelihood of needing long-term care increases. Long-term care insurance provides coverage for services such as nursing home care, assisted living, and in-home care that are not typically covered by health insurance or Medicare. Therefore, a person over 60 would require long-term care insurance more urgently than life insurance or professional indemnity insurance.

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39.

Insurance brokers are governed by ______
- IRDA
- SEBI
- Both IRDA & SEBI
Correct Answer

A. IRDA

Explanation

Insurance brokers in India are regulated by the Insurance Regulatory and Development Authority (IRDA). IRDA is the regulatory body that oversees the functioning and operations of insurance companies and intermediaries in the country. It sets guidelines and standards for insurance brokers to ensure fair practices, transparency, and consumer protection in the insurance industry. Therefore, the correct answer is IRDA.

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40.

Third party administrators directly reimburse the Policy holders for any expenses incurred.
- True
- False
- Data Insufficient
Correct Answer

A. False

Explanation

The statement is false because third party administrators do not directly reimburse policy holders for any expenses incurred. Instead, they process and manage claims on behalf of the insurance company, ensuring that the policy holder receives the appropriate reimbursement from the insurance company.

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41.

An Insurance agent must disclose his/her commission to the client in an upfront manner.
- True
- False
Correct Answer

A. False

Explanation

Insurance agents are not required to disclose their commission to clients in an upfront manner. While it is important for agents to act in the best interest of their clients and provide them with all relevant information, including any potential conflicts of interest, there is no specific requirement for them to disclose their commission. However, they are expected to provide accurate and complete information about the insurance policies they offer and any fees or charges associated with them.

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42.

Insurance can be ___________ contracts a) Benefit b) Indemnity c)Negotiated
- Either B or C
- A Only
- Only B
Correct Answer

A. Either B or C

Explanation

Insurance contracts can be either benefit contracts or indemnity contracts. Benefit contracts provide a predetermined sum of money in the event of a specified occurrence, while indemnity contracts reimburse the insured for the actual amount of loss incurred. Both types of contracts are commonly used in the insurance industry, depending on the specific needs and circumstances of the insured party. Therefore, the correct answer is either B or C.

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43.

Abraham 30 years and married, works for a firm which provide him with medical cover. He already has his own home and savings of 42 lacs which are well invested. In next 20 Years he will be able to save up enough to fund his retirement and his children education. which of the following might be the most important insurance for him?
- Medical Cover
- Temporary Total disability cover
- Property Insurance
- Life Cover
Correct Answer

A. Life Cover

Explanation

Life cover might be the most important insurance for Abraham because he is married and has dependents, such as children. In the event of his untimely death, life cover would provide financial protection for his family, ensuring that they are taken care of and can maintain their current standard of living. This insurance would help cover any outstanding debts, funeral expenses, and provide a source of income for his family in his absence.

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44.

When ever insurer partly reinsures the risk with a re-insurer, it is a case of a) Risk retention b) Risk transfer c) Risk avoidance.
- A & B
- A
- B
- B & C
Correct Answer

A. A & B

Explanation

When an insurer partly reinsures the risk with a re-insurer, it is a case of both risk retention and risk transfer. Risk retention refers to the insurer keeping a portion of the risk on their books, while risk transfer involves transferring a part of the risk to the re-insurer. Therefore, the correct answer is A & B.

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45.

Two ways of assessing life insurance needs is a need based appraoch and the income replacement method. What in your judgement would be the life cover required for Mr. Joshi on the basis of each of the two approaches. Mr. Joshi is the sole income earner in the family. Mrs Rao is a home maker. They are aged 40 and 36 respectively. Life expectancy of both of them is another 40 years. They have no children. Other information you have is: current investment portfolio Rs.20lac; estimated final expenses Rs. 3.5 lac, present annual expenses is Rs. 4 Lac (including a lac of Mr. rao's personal expenses); Mr. Rao post tax income in hand Rs.3.5 lac; Assume post tax post inflation return is 3%. Calculate the insurance requirement under the needs based method.
- Rs. 14.2 Lac
- Rs. 14.8 Lac
- Rs. 15.8 Lac
- Rs. 15.4 Lac
Correct Answer

A. Rs. 15.4 Lac

Explanation

To calculate the insurance requirement under the needs-based method, we need to consider the following factors:
1. Final expenses: Rs. 3.5 lac
2. Present annual expenses: Rs. 4 lac
3. Mr. Rao's personal expenses: Rs. 1 lac
4. Post-tax income in hand: Rs. 3.5 lac
5. Post-tax post-inflation return: 3%

First, we calculate the total annual expenses by adding Mr. Rao's personal expenses to the present annual expenses, which gives us Rs. 5 lac.

Next, we calculate the annual income requirement by subtracting the post-tax income in hand from the total annual expenses. This gives us Rs. 1.5 lac.

To calculate the insurance requirement, we divide the annual income requirement by the post-tax post-inflation return rate. This gives us Rs. 50 lac.

Finally, we divide the insurance requirement by the life expectancy of 40 years to get the insurance cover required, which is Rs. 15.4 lac.

Therefore, the correct answer is Rs. 15.4 lac.

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46.

A Condition that increases the chance of loss is called a(n)
- Peril
- Indirect (consequential) loss
- Hazard
- Direct loss
Correct Answer

A. Hazard

Explanation

A hazard is a condition that increases the chance of loss. It refers to any situation or factor that can cause harm, damage, or loss to property, life, or health. Hazards can include natural disasters such as floods or earthquakes, as well as human-made risks like fire or theft. Therefore, the term "hazard" accurately describes a condition that increases the likelihood of loss.

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47.

A publishing company solicits manuscripts for publication. The publishing company is concerned that an author might plagiarize material and that the person who was plagrized might sue the publisher. To address this risk, the contract with the author includes a hold harmless agreement. Through this agreement the author rather than the publisher is held liable for plagrism. In this situation, the publisher is using the hold harmless agreement as what type of risk treatment measure?
- Risk selection
- Risk transfer
- Risk retention
- Risk avoidance
Correct Answer

A. Risk transfer

Explanation

The publisher is using the hold harmless agreement as a risk transfer measure. By including this agreement in the contract with the author, the publisher is transferring the liability for plagiarism to the author. This means that if the person who was plagiarized decides to sue, they would sue the author rather than the publisher. This helps protect the publisher from potential legal and financial consequences of plagiarism.

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48.

A risk that affects the entire economy or a large number of persons or groups within the economy is called a(n)
- Fundamental risk
- Speculative risk
- Particular risk
- Objective risk
Correct Answer

A. Fundamental risk

Explanation

A risk that affects the entire economy or a large number of persons or groups within the economy is called a fundamental risk. This type of risk is not specific to any particular individual or entity, but rather impacts the overall economic system. It can arise from factors such as economic recessions, natural disasters, or global financial crises. Fundamental risks have the potential to cause widespread and significant negative consequences for businesses, industries, and the general population.

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49.

All the following are burdens if risk on society except
- Risk creats fear and worry
- Risk require reserve funds to be set aside in case a loss occurs
- Risk deprives society of certain goods and services
- Risk forces individuals to pracice loss control
Correct Answer

A. Risk forces individuals to pracice loss control

Explanation

Risk forces individuals to practice loss control because it is not a burden on society. In fact, practicing loss control helps to minimize the negative impact of risk on individuals and society as a whole. By taking proactive measures to prevent or mitigate losses, individuals can protect themselves and their assets, reducing the burden on society in terms of financial assistance or resources needed to deal with the consequences of those losses. Therefore, this statement does not align with the concept of risk being a burden on society.

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Quiz Edited by
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Mar 11, 2010

Quiz Created by
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Mock Test - Rmip

1. What are the criteria for determining Insurable risk? a) Law of Large Numbers b) The loss must be definite and measurable c) The loss must not be catastrophic

Quiz Preview

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Speculative risk can have following outcomes ________ a) Loss b) Gain c) Status Quo

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For risk to be insurable which one of the following is not correct?

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A client explains that she only wants an insurable policy that will cover her family against financial risk over the next five years, while she still has dependent children and a large mortgage. It is unlikely her income will increase over this period. What type of insurance is she looking for?

Which of the following is typr of pecuniary insurance?

Participating policies are those where_____?

In unit linked policy, market risk is with _______ a) Insured b) Insurer

If the life insurance poolicy is endorced under MWP Act, 1874 then____________

Minimum age at entry for medi-claim is _______?

Anand was driving his car home from work, when a pit dug by the municipal corporation in the road, remained open and unmarked. He met with an accident and had to be hospitalised for 3 months. What are the insurance claims that can a rise from this accident?

Sujata was standing on the terrace for her building hanging out clothes. She accidently fell off and landed on the sunshield of the next floor, which crashed and damaged the car of her neighbour parked below. What are the insurance claims that arise from this event?

Your client has bought life insurance and medical insurance, but has not bought a cover for permanent disability. His argument is that he is paying too much by way of premium for risks that he believes are farfetched and not likely to afftect him. What would you advise the client?

Suresh has not bought accident insurance cover. though his two-wheeler is covered for damages from accidents. He wears a helmet and drives carefully. What can you say about his risk management?

Vinayak 36 years and married works for multinational firm, which provides adequate medical and related covers. He is also able to accumulate sick leave. He already has his own home and savings of Rs 35 lakh, which are well invested. Which insurance cover does he require the most?

Premium on motor insurance policy doesn't dpend 0on which one of the following factors?

All the following statements describe the operation of life annuity except

In a sample of 200 observations, the lowest and the highest scores were 45 and 265 respectively, what would be range of the distribution?

In the event of loss due to insured event the principle of indemnity ebsures that

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Which situation is the lady of house least likely to need a disability cover

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Subjective risk arises due to

Which of the following is correct meaning of sum assured under majority of policies?

Out of 400 houses, each valued at Rs.20000/-, 4 houses get burnt every year. What should be the contribution each owner to pay for the losses of 4 houses?

The process of due diligence conducted by an insurance agent is known as _______.

What type of insurance is not easily available in India?

Insurable interest can exist between a Member of Parliament and his (unrelated) party workers.

A person over 60 generally requires_________ Insurance more urgently

Insurance brokers are governed by ______

Third party administrators directly reimburse the Policy holders for any expenses incurred.

An Insurance agent must disclose his/her commission to the client in an upfront manner.

Insurance can be ___________ contracts a) Benefit b) Indemnity c)Negotiated

When ever insurer partly reinsures the risk with a re-insurer, it is a case of a) Risk retention b) Risk transfer c) Risk avoidance.

A Condition that increases the chance of loss is called a(n)

A risk that affects the entire economy or a large number of persons or groups within the economy is called a(n)

All the following are burdens if risk on society except