Important Terms and Definitions MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Important Terms and Definitions, a fundamental topic in the field of IC 92 Actuarial Aspects of Product Development. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Important Terms and Definitions MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Important Terms and Definitions MCQs | Page 3 of 6

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Q21.
What is a top-up premium?

a.

The initial premium paid at the inception of the policy

b.

An additional premium paid irregularly over and above the contractual basic premiums

c.

A premium paid for switching between different investment funds

d.

The premium paid for availing rider benefits

Discuss
Answer: (b).An additional premium paid irregularly over and above the contractual basic premiums Explanation:Top-up premium refers to an additional amount of premium paid, if any, over and above the contractual basic premiums stipulated in the terms and conditions, at irregular intervals during the period of the contract.
Q22.
What do units represent in a unit-linked fund?

a.

Segments of the policy term

b.

Portions of the premium amount

c.

Parts of the underlying segregated unit linked fund representing the policyholder's entitlement

d.

Dividends paid to the policyholder

Discuss
Answer: (c).Parts of the underlying segregated unit linked fund representing the policyholder's entitlement Explanation:Units represent a specific portion or part of the underlying segregated unit-linked fund, which is representative of the policyholder's entitlement in such funds.
Q23.
How is an accident defined in insurance?

a.

A planned event causing damage to an entity

b.

An unforeseen and unintended event causing damage or injury

c.

A natural disaster such as a hurricane or earthquake

d.

A financial loss incurred due to market fluctuations

Discuss
Answer: (b).An unforeseen and unintended event causing damage or injury Explanation:An accident in insurance refers to an event or occurrence causing damage or injury to an entity, which is unforeseen and unintended.
Q24.
What does accident benefit provide for?

a.

Additional coverage for regular medical check-ups

b.

Payment of an additional benefit on the occurrence of an accident

c.

Coverage for damages caused by natural disasters

d.

Compensation for loss of income due to unemployment

Discuss
Answer: (b).Payment of an additional benefit on the occurrence of an accident Explanation:Accident benefit provides for payment of an additional benefit equal to the sum assured or in installments on permanent total disability and waiver of subsequent premiums payable under the policy.
Q25.
What do age limits stipulate in insurance?

a.

The maximum age at which a policyholder can claim benefits

b.

The minimum age at which a policyholder can purchase insurance

c.

The range of ages within which an insurance company accepts applications or renews policies

d.

The age at which the policyholder is no longer eligible for insurance coverage

Discuss
Answer: (c).The range of ages within which an insurance company accepts applications or renews policies Explanation:Age limits stipulate the minimum and maximum ages below and above which the company will not accept applications or may not renew policies.
Q26.
What is the role of an insurance agent?

a.

To evaluate insurance claims

b.

To manage the finances of the insurance company

c.

To solicit, negotiate, or effect contracts of insurance on behalf of the insurer

d.

To provide legal advice to policyholders

Discuss
Answer: (c).To solicit, negotiate, or effect contracts of insurance on behalf of the insurer Explanation:An insurance agent is a representative licensed by the state who solicits, negotiates, or effects contracts of insurance, and provides service to the policyholder for the insurer.
Q27.
What do annuity plans provide for?

a.

Lump-sum payments upon the death of the policyholder

b.

Regular pension payments to the policyholder or their spouse

c.

Medical coverage for specific illnesses

d.

Investment opportunities in the stock market

Discuss
Answer: (b).Regular pension payments to the policyholder or their spouse Explanation:Annuity plans provide for a "pension" (or a mix of a lumpsum amount and a pension) to be paid to the policyholder or their spouse. In the event of the death of both of them during the policy period, a lump-sum amount annuity is provided for the next of kin.
Q28.
What is the purpose of an application form in insurance?

a.

To provide information about the insurance company's financial status

b.

To collect data for market research

c.

To serve as a legal document forming part of the insurance policy if issued

d.

To track policyholder behavior and preferences

Discuss
Answer: (c).To serve as a legal document forming part of the insurance policy if issued Explanation:The application form, filled in by the agent and medical examiner (if applicable) based on information received from the applicant, serves as a legal document and becomes part of the insurance policy if it is issued.
Q29.
What does assignment mean in insurance?

a.

Modifying the terms of the insurance contract

b.

Transferring the policyholder's interest to another person

c.

Cancelling the insurance policy

d.

Renegotiating the premium rates

Discuss
Answer: (b).Transferring the policyholder's interest to another person Explanation:Assignment in insurance refers to the legal transference of the policyholder's interest to another person. It can be made by an endorsement on the policy document or as a separate deed, and can be conditional or absolute.
Q30.
Who is a beneficiary in the context of an insurance policy?

a.

The person who sells insurance policies

b.

The person or entity named in the policy to receive insurance proceeds upon the death of the insured

c.

The insurance company providing the coverage

d.

The medical examiner evaluating the policyholder's health

Discuss
Answer: (b).The person or entity named in the policy to receive insurance proceeds upon the death of the insured Explanation:A beneficiary is the person(s) or entity(ies) named in the policy to receive insurance proceeds upon the death of the insured.
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