Insurance MCQ Questions and Solutions with Explanations | Commerce

Discretionary income is not maximised by purchase of insurance policy. Some people use credit cards to purchase discretionary goods, but increasing personal debt is not the same as having discretionary income.

The essential purpose of Life Insurance is protection for loss of economic value of human life in the event of death or disability. The purpose of life insurance is to provide financial protection to surviving dependents after the death of an insured.

The endowment plans pays the money, which includes the sum assured (or cover) and bonus, on the maturity of the policy. Money back policy, on the other hand, returns money usually as a fixed percentage of the sum assured to the insured during the term of the policy at some regular frequency (e.g. 5 years).

Inter temporal refers to allocation of resources over time.

Unbundling of life insurance products refers to Separation of protection and savings element.

Amount of annuity depends on duration of annuity payments, principal sum of money, investment period and rate of return. An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees. Annuities are created and sold by financial institutions, which accept and invest funds from individuals and then, upon annuitization, issue a stream of payments at a later point in time.

Every pension is a kind of annuity. Annuity is a fixed sum that you get every year to provide for pension.

Family floater policy covers self, spouse, parents and dependants. A family floater covers all the family members under one single plan. The sum insured is fixed and gets exhausted as and when any member avails medical services and makes a claim. The members coverable under a family floater can be the policyholder and his/her parents, spouse and children.

Moral Hazard in health insurance would mean adverse selection. Moral hazard occurs when there is asymmetric information between two parties and a change in the behavior of one party after a deal is struck.

In emergencies insurer may waive preauthorisation for entering into a hospital for treatment.