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Insurance MCQ Questions and Solutions with Explanations | Commerce

Insurance MCQ Questions and answers with easy and logical explanations. Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. Insurance MCQ is important for exams like B.COM, M.COM, BBA, BBM, CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other commerce department exam. Page-2 section-5

Each section contains 100 MCQs on Insurance .
11
In decreasing-term insurance, the premiums paid _________ over time.
Discuss
Answer & Solution
Answer: Option C
Solution:
In decreasing-term insurance, the premiums paid remain constant over time. Decreasing term insurance is renewable term life insurance with coverage decreasing over the life of the policy at a predetermined rate. Premiums are usually constant throughout the contract, and reductions in coverage typically occur monthly or annually.
12
Using the conversion option present in a term policy you can convert the same to _________.
Discuss
Answer & Solution
Answer: Option A
Solution:
Using the conversion option present in a term policy you can convert the same to Whole life policy. Most term life insurance policies sold today come with a conversion feature that allows you to convert some or all of your term life insurance policy to a permanent policy like whole life, universal life or variable life.
13
What is the primary purpose of a life insurance product?
Discuss
Answer & Solution
Answer: Option C
Solution:
Protection against the loss of economic value of an individual’s productive abilities is the primary purpose of a life insurance product. The primary purpose for purchasing life insurance is to provide financial stability to beneficiaries in the event of the insured's death.
14
Who among the following is best advised to purchase a term plan?
Discuss
Answer & Solution
Answer: Option C
Solution:
An individual who needs insurance but has a low budget is advised to purchase a term plan. Term plans are beneficial for those who want higher coverage at low premium rates, providing financial protection for their family in case they are not around.
15
Which of the below statement is incorrect with regards to decreasing term assurance?
Discuss
Answer & Solution
Answer: Option B
Solution:
Premium amount doesn't decreases with the term of coverage. Premium payments often start at a higher level than policies with similar coverage but are ultimately worth more than competitors as policyholders experience increased coverage over time at no additional expense.
16
Which of the below statement is correct with regards to endowment assurance plan?
Discuss
Answer & Solution
Answer: Option C
Solution:
Endowment assurance plan has both a death benefit as well as a survival component. Endowment plan is a life insurance policy which provides you with a combination of both i.e.: an insurance cover, as well as an savings plan. It helps you in saving regularly over a specific period of time, so that you are able to get a lump sum amount on policy maturity, if the policyholder survives the policy term.
17
Which of the below is an example of an endowment assurance plan?
Discuss
Answer & Solution
Answer: Option C
Solution:
Money Back Plan is an example of an endowment assurance plan. In a money back plan, the insured person gets a percentage of sum assured at regular intervals, instead of getting the lump sum amount at the end of the term. It is an endowment plan with the benefit of liquidity.
18
What does inter-temporal allocation of resources refer to?
Discuss
Answer & Solution
Answer: Option B
Solution:
Inter-temporal allocation of resources refer to Allocation of resources over time. One of the principal purposes of saving and investing is to achieve inter-temporal allocation of resources, which is both efficient and effective. Effective allocation implies that sufficient funds are available to satisfy successfully the various needs as they arise in different stages of the life cycle.
19
Which among the following is a limitation of traditional life insurance products?
Discuss
Answer & Solution
Answer: Option D
Solution:
Rate of return is not easy to ascertain in traditional life insurance products. A traditional whole life policy is a type of life insurance contract that provides for insurance coverage of the contract holder for his/her entire life. These policies also include an investment component, which accumulates a cash value that the policyholder can withdraw or borrow against.
20
Which of the below statement is true regarding ULIP’s?
Discuss
Answer & Solution
Answer: Option C
Solution:
ULIP's are transparent with regards to their term, expenses and savings components. The value of each unit of a fund is determined by dividing the total value of the fund's investments by the total number of units.