IC 23 Application of Life Insurance

2. Mention the types of annuities that can be opted under defined contributions fund.

I. Pension guaranteed for a fixed term of 35 years.

II. Pension for life with return of double the original capital on death.
III. Pension for life with return of capital on death
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
3. The claimant’s statement made during a death claim should INCLUDE.
I. FIR Report
II. Post-Mortem Report
III. Details of the claimant like name, address, how related to the life assured in what
capacity claim is being made
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
4. Who among the following are best suited to purchase annuities?
(a) Individuals seeking comprehensive insurance cover
(b) Investment savvy individuals
(c) Individuals with liquidity problems
(d) Individuals who prefer equities to mutual funds
(e) Individuals who prefer investing in mutual funds as opposed to individuals securities.
5. Under Section 80C deduction will be allowed only for premiums up to a maximum of ____%
of the sum assured for policy issued on or after April 1, 2012.
(a) 5
(b) 10
(c) 15
(d) 20
(e) 25
7. Which among the following cannot be the object of contract of insurance?
I. Sunk ship
II. Lottery ticket
III. Debtors life

(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
8. Expand the term SEWA with respect to community based health insurance programmes.
(a) Self Employed Women’s Association
(b) State Employed Worker’s Association
(c) Self-Educated Women’s Association
(d) State Employed Women’s Association
(e) Steps for Everybody’s Welfare Act
9. Which among the following is associated with Increasing annuity without guarantee?
I. Income from annuity remains the same for the rest of one’s life
II. Income from annuity increases each year but ceases on death
III. When the first life dies the income from annuity is passed on to the second life until his or
her death
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
10. Which among the following is true with regard to Takaful industry in Pakistan :
I. Proposed capital requirements are the same for both Takaful and conventional
companies
II. Proposed capital requirements are different for conventional and Takaful companies
III. Composite companies are present in abundance

(a) I only
(b) II only
(c) III only
12. Advertise the tax benefits available to approved gratuity funds.
 I. Entire amount contributed to an approved fund is treated as business expense
II. Gratuity is exempt at the hands of the recipient
III. Income of the fond is exempt from tax under section 10 (25) (IV)
(a) I only
(b) II only
(c) III only
(d) I and II
(e) I and II and III
13. Indisputability clause can be enforced by the insurance company during the ____.
(a) Lifetime of the policy
(b) First 2 years of the policy
(c) First 3 years of the policy
(d) First 4 years of the policy
(e) First 5 years of the policy
14. Disability insurance exclude this type of injury from coverage. Which type are we referring
to?
(a) Head injury
(b) Loss of a limb
(c) Loss of both limbs
(d) Self-inflicted injury
(e) Loss of eye
15. Which among the following are valid rules and regulations to be followed f…. gratuity fund
to receive exemption under the act?
I. The gratuity fund should be able to serve more than one purpose
II. The gratuity fund should never be replenished
III. The fund is maintained through initial and annual contributions made by the employer
into the fund based on the advice of a private actuary or an insurance company
(a) I only
(b) II only
(c) III only
(d) I and II
(e) I and II and III
16. All of the following are examples of direct property losses EXCEPT:
I. The theft of a person’s jewellery
II. The destruction of s firm’s manufacturing plant by an earthquake
III. The cost of renting a substitute vehicle while a collision-damaged car is being repaired
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
17. Highlight the cons of Convertible term policies
I. Can be converted to permanent insurance
II. Change in health may make permanent insurance too costly
III. Coverage stays same
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
18. Which among the following is true with regards to Health Savings Accounts?
I. Contributions to it are taxed at a nominal rate
II. HAS is primarily for employers
III. HAS fund grows tax free
(a) I only
(b) II only
(c) III only
(d) I and II
(e) I and II and III
19. Annuitant can choose from several different incomes payment options for immediate
annuity. What happens if he chooses life- with a life payment option?
(a) Annuitant receives income payments for the number of years of his choosing
(b) Annuitant receives income payments totaling a value of his choosing
(c) Annuitant can decide till when he would like to receive payments for the remainder
of his life
(d) Equal payments are made to the annuitant throughout his lifetime or to the
beneficiary for a guaranteed minimum period of time
(e) Annuitant opts to receive a life income; but if he doesn’t live long enough to receive
all the premiums back, then in such a case it will be refunded to the beneficiary.
21. Identify the factors that do not determine the retention capacity of the insurer
(a) Nature of risk
(b) Location of risk
(c) Insurer’s capacity to bear the loss without affecting the financial position of the
reinsurer
(d) Reinsurer’s capacity to bear loss
(e) Nature of perils covered
22. None of the following is true with regards to Statutory Provident Fund EXCEPT
(a) No Deduction under 80C is available for employee contribution
(b) Employers contribution is tax exempt up to 30% of wage bill
(c) Interest earned on the fund is taxed at a lower rate
(d) Statutory Provident Fund is applicable to people working in the unorganized sector
(e) Employers contribution is fully tax exempt
23. Compare nomination and assignment an identify the statement true with regards to
Nomination :
(a) It is transfer to rights, title and interest of policy to some person(s)
(b) Insurer is bound to pass policy benefits to assignee
(c) Along with instance of insured, consent of insurer is also required
(d) Normally done once or twice during policy period
(e) It is appointing some person(s) to receive policy monies in case of death claim
24. The medical organization consisting of surgeons and specialists that provides routine
medical services to employees in exchange of paying nominal fee is called ______ .
(a) Preferred health organization
(b) Private health organization
(c) Health maintenance organization
(d) Preferred provider organizations
(e) Preferred maintenance organizations
25. from the following which is not a non-proportional form of reinsurance?
(a) Excess of loss method
(b) Pools method of reinsurance
(c) Lake method of reinsurance
(d) All Treaty method of reinsurance
(e) Quota Method of reinsurance

26. Restoring a policy holder to his pre-loss financial position means ____________.
 (a) Contribution
(b) Subrogation
(c) Indemnity
(d) Goodwill
(e) Liquid asset
27. Employer based retirement plans can be categorized as:
(a) Vanilla and Derivative plans
(b) Variable benefit and variable contribution plans
(c) Variable benefit and definite contribution plans
(d) Voluntary benefit and mandatory plans
(e) Defined benefit and defined contribution plans
28. The managed care plans that are administered through the HMO are popular in which
country?
(a) India
(b) China
(c) UK
(d) USA
(e) France
29. All of the following statements are true with respect to General Provident Fund EXCEPT:
(a) It is a defined contribution plan
(b) Government contribution equals employee contribution
(c) The GPF constitutes a part of the Consolidated Fund of India
(d) The Government pays interest on GPF at a determined rate which varies from year
to year
(e) Advances and withdrawals can be made out of the GPF by an employee for
specified purposes
30. Select the statement(s) that is/are true with regards to conventional insurance.
I. It is a risk transfer mechanism
II. Element of uncertainty is bought down to acceptable levels
III. Funds are only invested in non-interest bearing instruments.
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

32. Gratuity is a _____________as per payment of Gratuity Act, 1972.

(a) Social welfare scheme
(b) Statutory Liability
(c) Non-statutory Liability
(d) Business Liability
(e) Personal Liability

33. For settlement of claims, Insurer requires proper knowledge of ____________

I. Law only
II. Law, principles and practice of insurance
III. Law, principles, practice of insurance, terms and conditions of policy extensions and modifications
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

34. Outline the two financial planning functions addressed by life insurance

I. Risk transfer
II. Saving to build wealth
III. Risk Retention
(a) I only
(b) II only
(c) III only
(d) I and II
(e) I and III

35. Which among the following conditions justify the use of quota share treaties for reinsurance?
I. Insurance companies that are well established and have significant capacities
II. Concentrate risks
III. High ceding commission is attractive to insurers
(a) I only
(b) II only
(c) III only
(d) I and II

36. Ram opened a successful restaurant, One night, after the restaurant had closed, a fire started
when the electrical system malfunctioned. In addition to the physical damage to the restaurant,
Ram also lost profits that could have been earned while the restaurant was closed for repairs. The
lost profits are an example of

(a) Direct loss

(b) Indirect loss
(c) Pure risk
(d) Static risk
 (e) Dynamic risk

37. Illustrate your understanding of the term Intestate:

(a) Process of validating a will

(b) Written will
(c) Oral will
(d) Dying without a valid will
(e) Selection of trust

38. Which among the following is true with regard to Expenditure / Indemnity based plans?

I. The plan tenure is for a year, after which they are renewable
II. They are sold by life insurers
III. Their tenure is long term in nature
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

39. Under the PF Act, 1952 “Insurance Fund” means _____________

(a) Unit Linked Insurance Plan

(b) Deposit Linked Insurance Fund
(c) Employees’ Group Accident Insurance
(d) Medical Insurance Fund
(e) Wealth Insurance Fund

40. The __________and__________ department is responsible to prepare a costing for new products.

(a) Actuarial; Administration

(b) Actuarial; Pricing
(c) Administration; Pricing
(d) Administration; Shariah
(e) Shariah; Regulator

42. Which among the following is/are characteristic(s) of recognized provident fund

I. Contributions to the fund are to be made by employers only

II. Employer has to contribute double of what the employee is contributing into the fund
III. Employer’s contribution shall also not exceed the contribution made by the employee into the
fund.
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and II
 43. Mention the valid conditions for claim settlement.

(a) First policy premium had been paid on time

(b) No Pre-existing illness had been reported
(c) Policy has been lost
(d) Contingent event failed to occur
(e) Those claiming policy monies should have legal title to it

44. The _____ has the right to receive the amount assured in the event of death of the insured.

(a) Employer
(b) Employee
(c) Nominee
(d) Friend
(e) Adjudicator

45. Advertise the positives of quota share treaties.

(a) Small amounts of premium are ceded away

(b) Treaty is flexible and retention can be varied
(c) Company is not bound by treaty terms
(d) Re-insurer is protected in case of national catastrophic risks
(e) Flexibility exits in the amount ceded at each anniversary

46. What are the financial needs associated with post-retirement stage of life?

(a) Buying a house

(b) Educational needs of children
(c) Protection of children
(d) Marriage of children

48. All of the following are true with respect to HMO EXCEPT:

I. HMO plans typically have lower monthly premiums as compared to PPO

II. Doctors serving on the HMO are also covered under the plan
III. HMO’s cover out of network treatments
(a) I only
(b) II only
(c) III only
(d) I and II
(e) I and II and III
49. Pension funds whose contributions are dictated by the benefits that will eventually be provided are
called ____________ plans.

(a) Defined benefit

(b) Defined contribution
(c) Defined cess
(d) Beneficiary
(e) Guarantor insured

50. The assets of shareholders fund consists of:

I. Insurance premiums
II. Claims from reinsurer
III. Paid up capital and reserve attributable to shareholders
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

51. An insurer purchases 75% quota share treaty. What is the percentage of premiums that they would
share with the reinsurer?

(a) ¼ of premiums
(b) ½ of premiums
(c) ¾ of premiums
(d) 2/5 of premiums
(e) 7/5 of premiums

59. Immediate annuity is a good choice if you:

I. Still have time before retiring

II. Need to supplement your income
III. Want to lock in market gains
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

60. Why does a takaful company need a marketing department?

I. Design new products

II. Manage all information related to participants
III. Promote the organization itself
(a) I only
(b) II only
(c) III only
 (d) I and II
(e) II and III

61. Delta Insurance has an Excess of loss treaty agreement with Omega Reinsurance. Delta Insurance
has set a retention limit (line) of Rs 100,000. Delta Insurance suffers a cumulative loss of 60000. What is
the claim liability for Delta Insurance?

(a) Rs. 60,000

(b) Rs. 20,000
(c) Rs. 80,000
(d) Rs. 50,000
(e) Rs. 40,000

63. __________means a person appointed by competent authority to administer the estate of a

deceased person when there is no executor.

(a) Nominator
(b) Assignor
(c) Nominee
(d) Administrator
(e) Executor

64. Jitendra is a 30 year old individual working as a Finance Trainer for a MNC Jitendra is currently
earning Rs. 750,000 per annum. Jitendra’s family consists of his wife and retired parents, who are all
dependent on him. The net contribution made by Jitendra to his family is Rs.600,000 after paying taxes
and taking care of his personal expenses. Jitendra expects his salary to increase by 10% every year.
Calculate the amount of insurance cover that Jitendra should take as per the human life value method.

(a) Rs. 1 Lakh

(b) Rs. 2 Lakh
(c) Rs. 10 Lakh
(d) Rs. 1 crore
(e) Rs. 1.3 crore

65. Mr. Phillip wants to buy insurance policy from authorized agencies. He is 30 years old. He indulges
in Family Takaful plan the maturity period is 25 years. In the contract it is stated that proportion
between AL-Mudarabah fund and Al-tabarru fund is 91.7:8.3 respectively. His policy amount is RM
50000. How much amount allotted in Tabarru funds?

(a) 13.83 RM
(b) 166.67 RM
(c) 200 RM
(d) 500 RM
(e) 133.33 RM
66. Give us an example of a personal opportunity cost.

I. Time taken to drive to work

II. Sleeping only 4 hours a night
III. Time spent shopping instead of studying

(a)I Only
(b) II Only
(c)III Only
(d) I and II
(e) II and III

67. Which among the following policies are riot eligible for nomination?

(a) Term Policies

(b) Money Back Policies
(c) Whole Life Policies
(d) Endowment Policies
(e) Life Insurance Policies under MWP Act

68. Which among the following are important underwriting factors considered in accepting or
classifying health insurance applicants?

I. Occupation
II. Moral or Morale Hazard
III. Physical condition of applicant
(a) I Only
(b) II Only
(c) III Only
(d) I and II
(e) I and II and III

69. The amount of the pension benefit under EPS is based on______________.
I. Employee’s average salary during the final year of employment
II. Total number of years of employment put in by the employee
III. Market conditions
(a) I Only
(b) II Only
(c) III Only
(d) I and II
(e) II and III
70. The investment portion in saving takaful works on ______________ basis
(a) Wakalah
(b) Mudaraba
(c) Al-taboor
(d) Maisir
(e) Gharar

71. Which among the following is motivation for selling re-insurance?

I. National retention of premiums

II. Set-up captive insurance companies
III. Avoid catastrophe losses
(a) I Only
(b) II Only
(c) III Only
(d) I and II
(e) II and III

72. All types of annuities except _____________are available

(a) Pension for Life

(b) Decreasing annuity
(c) Pension guaranteed for a fixed term & life thereafter
(d) Pension for life with return of capital on death
(e) Joint life with pension payable to the last survivor

73. ____________is a transfer of the property contained in the policy by the assignor to the assignee.

(a) Nomination
(b) Assignment
(c) Indisputability Clause
(d) Duty of Disclosure
(e) Suppression of Material Facts

74. Ram and Sita in their late 20s with 3 young children. Their most important financial planning
concerns would probably include all of the following EXCEPT

(a) Asset acquisition planning

(b) Liability and insurance planning
(c) Retirement and estate planning
(d) Savings and investment planning
(e) Employee benefits planning
75. Ram pays insurance premiums for his employees. What type of insurance premium is not deductible
as compensation paid to the employee?

(a) Health insurance with benefits payable to employee

(b) Whole life insurance with benefits payable to the employee’s dependents.
(c) Group term life insurance with benefits payable to the employee’s dependents.
(d) Key man life insurance with benefits payable to Ram
(e) Life Insurance with benefits payable to the employee’s dependents.

76. _________ stage of life is best suitable for adoption of good financial habits of budgeting, saving and
investing.

(a) Initial
(b) Prime earning
(c) Pre-retirement
(d) Retirement
(e) Post-retirement

78. _________ gives a lump sum payment to the insured in the event of an accident causing death or
permanent disability
(a) Life insurance
(b) Personal accident insurance
(c) General insurance
(d) Casualty insurance
(e) Long term care insurance

79. Which among the following is true with regards to Deferred Annuity?
(a) Pay-out begins shortly after the premium is paid
(b) Purchase with a single premium
(c) Contract is usually irrevocable
(d) Assets do not accumulate on a tax-deferred basis
(e) Purchase with either a single premium or periodic premiums

80. List out any objective behind management conditions in Takaful

(a) Compliance with Islamic co-operative principles
(b) Distribution of profits among participants
(c) Invest in regulator approved avenues
(d) Transfer the risk using re-insurance
(e) Attaining profitability sufficient to support the growth of Takaful provider
81. Investigate the need for reinsurance. Choose the option that best describes this need.
(a) Reduce the number of claims incurred
(b) Maintain solvency requirements
(c) Keep the premiums low
(d) Insure large risks
(e) To gain insurance expertise

82. If the only contribution to an approved superannuation fund is made by the employer, the fund is
referred to as_____________.
(a) Contributory Fund
(b) Non-contributory Fund
(c) Statutory Fund
(d) Non-statutory Fund
(e) Defined contribution Fund

89. A split annuity is a combination of two products. Which are they?

I. 401 K Plan
II. Fixed period immediate annuity
III. Singe premium tax deferred annuity
IV. Unit linked deferred annuity
V. Unit linked immediate annuity
(a) I and II
(b) II and III
(c) I and III
(d) II and IV
(e) I and V

90. _________ is referred to as “Daman Khatar AL-Tariq”.

(a) Funds to assist victims of natural disasters
(b) Surety
(c) Gift
(d) Uncertainty
(e) Gambling

91. Which of the following statements about treaty reinsurance is true?

I. The reinsurer is required to underwrite each individual applicant that is reinsured.
II. The reinsurer must accept all business that falls within the scope of the treaty.
III. The ceding insurer can choose which business falling within the scope of the treaty it wishes to
reinsure
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III
92. Identify the scenarios in which an employee can claim Gratuity even before completion of 5 years.
I. Disablement of employee
II. Termination of employee
III. Resignation of employee
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

94. Identify the scheme under the operation of the employee’s Provident Fund and Miscellaneous
Provisions (EPF & MP) Act.
(a) Workmen compensation scheme
(b) Rural social scheme
(c) Employee welfare scheme
(d) Workers welfare scheme
(e) Employees’ Pension Scheme

95. Advocate the reasons for expeditious settlement of maturity claims.

(a) Insured is no longer there to claim the amount
(b) To increase insurance awareness
(c) Accommodate additional liabilities
(d) Improve PNL of the organization
(e) Make the policyholders happy by delivering on time

96. Identify the condition(s) appropriate for risk retention.

I. Losses are catastrophic
II. Losses are difficult to predict
III. Worst possible loss is not serous
(a) I only
(b) II only
(c) III only
(d) I and II
(e) II and III

97. Suggest factors to be considered while buying life insurance.

(a) Market risks
(b) Number of years insurer is in business
(c) Insurance Agent’s advice
(d) General macroeconomic conditions
 99. __________scheme of the Government of India grants an incentive of Rs 1000 to all eligible
NPS accounts if they meet the prescribed criteria.
(a) Swavalamban
(b) Swabhlman
(c) Apman
(d) Sabla
(e) Abla

98. __________is referred to as “Riba”.

(a) Funds to assist victims of natural disasters
(b) Interest
(c) Gift
(d) Uncertainty
(e) Gambling