Insurance MCQ Questions and Solutions with Explanations | Commerce

If Assets are undervalued it would result in less surplus.

If liabilities are overvalued, it would result in less bonuses to the present policyholders.

If Assets/Liabilities are liberally valued, it would benefit current policyholders. Current policyholders would be benefited at the expense of future ones.

Free assets of a company are Unallocated surpluses. Free assets are the assets held over and above the liabilities (which may or may not include supervisory reserves), whilst surplus is the amount held over and above the reserve level.

An insurance company needs free assets for Financing new business, Generating more competitive returns and Greater leverage in investment.

In respect of Bonuses, Premiums need to be paid for a specified no. of years.

Simple reversionary bonus, Compound reversionary bonus and Terminal bonus, all this are bonus.
Simple reversionary bonus is a with profits life assurance bonus, normally declared annually, which is based on the profits of the life company's investment and is payable at the maturity of the policy or prior death.
Simple Reversionary bonus (SRB) This type of bonus is calculated on the sum assured only. This bonus is declared annually and is accrued to be paid out at the time of a claim or maturity.
Terminal Bonus is also known as persistency bonus which is paid once, i.e. at the time of maturity of the policy.

Terminal Bonus would increase with the duration/term of the policy.

Prospectus is a document which is Providing details about product. A prospectus includes some of the following information: A brief summary of the company's background and financial information. The name of the company issuing the stock. The number of shares.

Documents required for claim is not provided in a Prospectus.