Insurance MCQ Questions and Solutions with Explanations | Commerce

Bonuses are declared only once a year and do not reflect daily fluctuations in the value of the assets, Policyholder's benefits depend on assumptions/discretions of the insurance company and Bonus structure does not reflect the true value of assets of the insurer are the disadvantages of Traditional With Profit policies over ULIPs.

Annuity belongs to one where the annuity amount is fixed (guaranteed) and one where the annuity amount is variable (linked to investment performance).

Variable life insurance is a permanent life insurance policy with an investment component. The policy has a cash value account which is invested in a number of sub-accounts available in the policy.

IRDA has implemented guidelines on persistency from 1st July, 2014.

Death claims are settled in the favour of trustees, not in the favour of nominees

The insurance ombudsman mechanism had been set up by the insurers themselves, as an alternative dispute redressal system. It is a quasi-judicial body, established to address the grievances of customers, without them having to involve themselves in lengthy court proceedings.

In the initial years of a ULIP, the value of the benefits would be low.

As per Section 45 of Insurance Act, 1938, an insurance company can reject a claim after 2 years from issuance of policy if the material facts in the proposal are fraudulently made.

Endowment plan is a type of life insurance plan, which is a combination of insurance and savings. A certain amount is kept for life cover – insurance, while the rest is invested by the life insurance company. In an endowment plan, if the life assured outlives the policy term, the insurance company offers him the maturity benefit. Moreover, endowment plans may offer bonuses periodically, which are paid either on maturity or to the nominee under death claim. On death, the death benefit is payable to the nominee. Endowment plans are commonly known as traditional life insurance, although, there is an investment component the risk is lower than the other investment products and so are the returns.