CFP Mock Test Risk Management and Insurance Planning

1) Corporate agent can represent ___________. (1) A) Only corporate insurance company B) Multiple insurance companies C) Only one insurance company D) Can obtain business only from corporate 2) A catastrophe is not likely to be insured because ______. (1) A) It violates the principle of sharing of losses B) It violates the principle of insurable interest C) Insurance companies may not be having capital to handle losses of such magnitude D) Catastrophes are very much insurable through good product design 3) Insurance contracts are __________. (1) A) Same as commercial contracts B) Governed by Regular Contract Act as well as Insurance Contract Act, 1999 C) Different from regular contracts and is regulated by Insurance Contract Act 1999 D) Similar to regular contracts, but have many distinct differences, with own set of principles 4) In India, statutory trust insurance policies are normally created pursuant to ____________. (1) A) Estate Duty Act B) Section 6 of the Married Women .s Property Act, 1874 C) Charity Commissioner D) Indian Insurance Act, 1938 5) The Insurance Act, 1938, in respect of insurer obligations to the rural and social sector provides _____. (1) A) Specific obligations for the rural sector and general obligations for the social sector B) Specific level of obligations to be met in these sectors for life insurers C) Specific obligations to be met in these sectors for all insurers D) Broad directional guidance to focus on these sectors 6) Ram needs to decide on taking insurance of his property against fire and other perils. This decision should depend on ____________. (1) A) Age of the property B) His ability to pay premium C) The prevalent standard practice D) His inability to afford financial consequences of self insurance 7) Postal Life insurance is open only for employees of __________. (1) A) Central and State government / P&T department B) all Central and State Government Departments, Nationalized Banks, PSU, Financial Institutions, Local Bodies, Educational Institutions aided by the Government etc. C) Nationalized banks / PSUs / Zila Parishads etc D) None of the above 8) Insurable liability in case of 3rd party liability insurance risk is best defined as: (2)

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

A) The risk that confronts every person or business from negligence. B) The risk that confronts every person or business from a public wrong. C) The risk that confronts every person or business resulting from intentional or unintentional behaviour that Could result in the injury of another person or damage to property. D) The risk that confronts every person or business resulting from intentional behaviour that could result in the injury of another person or damage to property.
9) (A) In level term insurance policies, the coverage remains constant throughout the term. (B) The premium payable in level term insurance policies can remain same or increase with increase in insured.s age. (2) A) (B) is correct B) Neither (A) nor (B) are correct C) Both (A) & (B) are correct D) (A) is correct 10) Which of the following statement is false about warranty in an insurance contract? (A) Declarations on the proposal form can be warranties by reference. (B) Warranties help the insurer to ensure that the risk stays the same during currency of the policy. (C) Warranties have to be followed literally. (2) A) (A) B) (B) C) (A), (B) & (C) D) None of the above 11) An insurance firm has to create and sell a policy to cover the risk of partial disability to workmen in a chemical Factory. Which of the following is not a relevant factor in pricing the policy? (2) A) The ability of the insurance firm to deploy the premium and earn positive investment returns on the funds. B) The ability of the workmen to bear the cost of the policy. C) The extent of probable disability created due to the work environment and its impact on workmen’s earning Capability. D) The willingness of the management of the firm to bear part of the costs of the premium. 12)Sajid has a pension policy details of which are given as under; 28 year PPT; Non Participating policy; Yearly Premium Rs. 10,000; guaranteed returns of Rs. 50/1,000 SA; SA during accumulation phase Rs. 3 Lakh; No riders. What will be the value of the accumulated corpus just on completion of the premium paying term? (4) A) Rs. 5.58 Lakh B) Rs. 4.80 Lakh C) Rs. 4.20 Lakh D) Rs. 7.20 Lakh 13)Suryakant has an accident insurance policy which pays TPD benefit of Rs. 3,000 per week, for up to 104 weeks. He meets with an accident and is disabled and bedridden for 6 months. He has available leave of 4 weeks, after Which he is on loss of pay. What benefit amount will he get from the insurance company? (4) A) Rs. 66,000 B) Rs. 72,000 C) Rs. 60,000 D) Rs. 78,000

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

14) Ram had taken an endowment plan for 35 years on 20/05/1990 for a sum assured of Rs. 2.5 lakh, wherein premium Payable is Rs. 2,000 quarterly. He dies on 18/08/2006. Quarterly premium due in August 2006 was paid on 06/08/2006. Bonus vested: Rs. 1, 44,000, Interim Bonus declared after valuation on 31/03/2005 is Rs. 68 per Thousand. What is the amount of claim payable under the policy? (4) A) Rs. 4, 11,000 B) Rs. 4, 07,000 C) Rs. 3, 57,600 D) Rs. 3, 54,600

15. Insurable liability in case of 3rd party liability insurance risk is best defined as: 1 A risk that confronts every person or business resulting from intentional behavior that could result in the injury of another person or damage to property. B The risk that confronts every person or business resulting from intentional or unintentional behavior that could result in the injury of another person or damage to property. C The risk that confronts every person or business from a public wrong. D The risk that confronts every person or business from negligence. 16. Actual cash value, replacement cost, depreciation are taken into consideration to _________. 1 A Measure potential loss B Calculate rate of premium C Manage risk D Assess severity of loss 17. LALGI is _________. 1 A Private insurance B Social insurance C Public benefit guarantee scheme D Actuarial technique of determining insurance premium 18.For risk to be insurable which one of following is not correct? 1 A The loss must not be catastrophic. B The loss must be fortuitous or accidental. C The loss produced by the risk must be definite and measurable. D There must be a sufficiently large number of heterogeneous exposure units to make the losses reasonably predictable. 19.NEED-BASED approach for calculating life insurance requirement does not take into consideration the following _______. 1 A Existing life insurance policies B Future unknown expenses C Current expenses D Current investments 20 If the life insurance policy is endorsed under MWP Act, 1874 then ________.1

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

A Creditors have no claim on policy proceeds B Creditors have first claim on policy proceeds C Creditors have residual claim on policy proceeds D Creditors have claim only to the extent of outstanding principal, on policy Proceeds 21.Deposit Insurance and Credit Guarantee Corporation insures deposits in Banks up to the following limit per account. 1 A Rs. 0.5 lakh. B Rs. 1.0 lakh. C Rs. 1.5 lakh. D No insurance is available. 22.The maximum amount payable under group gratuity is _________. 2 A Rs. 3 lakh B Rs. 3.50 lakh C Rs. 2.5 lakh D 5% of salary 23.Which of the following statement/s is/are correct? Statement A: The dismemberment accident rider has provision for cover if the insured looses either of the limbs. Statement B: The dismemberment accident rider provides compensation if the insured dies during the accident. 2 A Statement B is correct B Statement A is correct C Both statements are correct D both the statements are not correct 24.Which of the following statement/s is/are correct? Statement A: The solvency margin should be maintained at all the times. Statement B: The solvency margin is to be maintained only at the end of financial Year. 2 A Both the statements are not correct B Both statements are correct C Statement B is correct D Statement A is correct 25.Ramesh and Mahesh are healthy, able bodied men working in mines. Ramesh lives on a flood plain, Mahesh lives on a hill in the next town. While taking out insurance, the insurance company proposes a higher premium for Ramesh. How should Ramesh react? 2 A Ramesh should understand that the risk for his life is higher, therefore the higher premium. B Living on a flood plain does not in any way affect the premium C They should in fact get discount for being able bodied men D Both are healthy; both should be charged the same premium.

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

26.A client has the need to provide for his child's college education costs. He envisages that four annual payments of Rs 20,000/-, in current money terms, would be needed beginning 15 years from now. Assuming level of inflation rate at 5% per annum and that the fund earns 8% per annum returns throughout; calculate the present value to be placed on this liability when carrying out a needs analysis for this client. (Round of your answer to the nearest '000') 4 A Rs. 49,000/B Rs. 50,000/C Rs. 24,000/D Rs. 23,000/27.Life Insurance Company ABC Ltd entered into a reinsurance arrangement with life insurance company XYZ Ltd. On accepting a proposal for Rs 500,000/- life cover, ABC Ltd transfers Rs 100,000 to XYZ Ltd. The above transaction indicates that: 4 A ABC Ltd. is the ceding company with retention of Rs 400,000/-. B XYZ Ltd. is the ceding company with retention of Rs 100,000/-. C ABC Ltd. is the reinsurance company with a retention of Rs 400,000/-. D XYZ Ltd. is the reinsurance company with a retention of Rs 100,000/-. 28.Liability Insurance is primarily concerned with the financial consequence of: 4 A Criminal activities B Unintentional Torts. C Intentional Torts D All Torts 29. What is the usual structure of a personal accident insurance policy? (1) A) The insured can alter the premium based on a narrow definition of the contingency, but the insurer will pay the sum assured on the occurrence. B) The contingencies which can trigger insurance payment are pre-specified. Payment is usually in installments over a specific period after the contingency. C) The extent of cover and its comprehensiveness determines the extent of payment after the event. The insurer has the rights to determine the extent of damage and the liability due. D) The premium payable is waived after the contingency and the lump sum payment is made on the occurrence of the insured event. 30. An absolutely assigned policy will revert to the assignor __________. (1) A) When the assignee dies B) When the policy becomes a claim C) Whenever the assignor likes it to happen D) When the assignee reassigns the policy 31. Critical illness rider in life insurance provides________. (1) A) Long term care for major illness. B) Assured benefits for major illness C) Hospital expenses during illness D) All of the above

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

32. For repudiating a claim under section 45 of Insurance Act, 1938, non disclosure must be____________.(1) A) Intentional B) Fraudulent C) Material D) All of the above 33. Main difference between Life Insurance and Non-life insurance is ____________. (1) A) Life insurance is based on indemnity, Non-life insurance is not B) Non-life insurance is based on indemnity, life insurance is not C) Nature of cover, one covers sickness other does not D) Object of insurance 34. Ram needs to decide on taking insurance of his property against fire and other perils. This decision should Depend on ____________. (1) A) Age of the property B) His ability to pay premium C) The prevalent standard practice D) His inability to afford financial consequences of self insurance 35. As an employee Mohan has come to you with his question on superannuation plans/ Annuity Plans to get More educated with current scenario. The term 'Employee benefits' includes contributions in which of the Following categories of schemes? (1) A) Non occupation disability Insurance B) Unemployment compensation Insurance C) Social security Scheme D) Group Insurance Scheme 36. A property worth Rs. 30 lakh has an insurance cover of Rs. 15 lakh. Following damages worth Rs. 20 lakh How much would the insurer usually pay? (2) A) Rs. 20 lakh B) Rs. 10 lakh C) Rs.15 lakh D) none of the above 37. A village has 400 houses valued at Rs. 200000 each. Every year 4 houses get burnt. This risk is distributed amongst all house owners. How much each owner contributes to cover the risk? (2) A) Rs. 1000 B) Rs. 200 C) Rs. 2000 D) Rs. 500 38. (A) The insurer can compensate the insured only once in case of any particular critical illness. (B) The insured person has to survive for 30 successive days after the diagnosis of critical illness to lodge the Claim. (2)

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

A) (A) is correct B) (B) is correct C) Both (A) & (B) are correct D) Both (A) & (B) are incorrect 39. (A) If the assignee dies after the death of life assured and before settlement, the policy money would be Payable to the heirs of the assignee. (B) If the assignee dies after the death of life assured and before settlement, the policy money would be Payable to the heirs of the life assured. (2) A) (A) is correct B) (B) is correct C) Both (A) & (B) are correct D) Both (A) & (B) are incorrect 40. Dr. Arun is a well to do surgeon aged 48 years. His son is in final year medical college, and daughter would be marriageable in 2 years. He has a saving of Rs 50 lakh, a house, a clinic, Gold and other valuables. His wife died 2 years back. State his priority in regard to the following insurances. (A) Permanent total disability cover B) Property insurance (C) Professional indemnity insurance (D) Life cover. (4) A) (A), (C), (B), (D) B) (D), (C), (A), (B) C) (A), (D), (B), (C) D) (A), (B), (C), (D)

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Roots Institute of Financial Markets RIFM 1197, NHBC Mahavir Dal Road Panipat 132103, Haryana Ph No. 99961-55000, 99964-55055, Web: www.rifmindia.com, email: info@rifmindia.com

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