Types of Insurance Products Individual MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Types of Insurance Products Individual, 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 Types of Insurance Products Individual MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Types of Insurance Products Individual mcq questions that explore various aspects of Types of Insurance Products Individual problems. Each MCQ is crafted to challenge your understanding of Types of Insurance Products Individual principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 92 Actuarial Aspects of Product Development tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Types of Insurance Products Individual MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.

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Types of Insurance Products Individual MCQs | Page 12 of 17

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Q111.
What does the term "Guaranteed Maturity Benefit" refer to in insurance contracts?

a.

The amount of benefit payable upon the death of the policyholder

b.

Additional benefits provided to the policyholder during the premium paying period

c.

The fixed and predetermined amount of benefit payable on the date of maturity

d.

An option for the policyholder to convert the policy into a different type of contract

Discuss
Answer: (c).The fixed and predetermined amount of benefit payable on the date of maturity Explanation:Guaranteed Maturity Benefit refers to the fixed and predetermined amount of benefit that is guaranteed to be payable on the date of maturity of the insurance contract.
Q112.
What are 'With profit contracts' in insurance?

a.

Contracts that offer guaranteed benefits only

b.

Contracts that offer bonuses or dividends in addition to guaranteed benefits

c.

Contracts that offer lower premiums in exchange for reduced benefits

d.

Contracts that offer no additional benefits beyond the guaranteed ones

Discuss
Answer: (b).Contracts that offer bonuses or dividends in addition to guaranteed benefits Explanation:'With profit contracts' in insurance refer to insurance contracts that provide bonuses or dividends in addition to the guaranteed benefits. These contracts allow policyholders to receive a share of profits generated by the insurer, typically in the form of bonuses or dividends.
Q113.
What is the purpose of with-profit contracts offering bonuses or dividends?

a.

To increase the premiums paid by policyholders

b.

To provide guaranteed benefits only

c.

To induce policyholders to buy insurance products by offering additional benefits

d.

To reduce the investment risk for the insurer

Discuss
Answer: (c).To induce policyholders to buy insurance products by offering additional benefits Explanation:With-profit contracts offer bonuses or dividends to induce policyholders to purchase insurance products by providing additional benefits, thereby incentivizing them to invest in these policies.
Q114.
How are bonuses usually expressed in 'with profit contracts'?

a.

As a percentage of the premium paid

b.

As a fixed amount determined by the insurer

c.

As a percentage of the Sum Assured (Face Value of Basic Contract)

d.

As a percentage of the policy term

Discuss
Answer: (c).As a percentage of the Sum Assured (Face Value of Basic Contract) Explanation:Bonuses in 'with profit contracts' are typically expressed as a percentage of the Sum Assured (Face Value of Basic Contract), representing the additional benefits policyholders receive based on the policy's performance.
Q115.
What happens once a bonus is declared by an insurer in a with-profit contract?

a.

The bonus is immediately paid out to the policyholder

b.

The bonus becomes vested to the policy as an addition to the Sum Assured

c.

The bonus is held back by the insurer for investment purposes

d.

The bonus is subject to fluctuation based on market conditions

Discuss
Answer: (b).The bonus becomes vested to the policy as an addition to the Sum Assured Explanation:Once a bonus is declared by an insurer in a with-profit contract, it becomes vested to the policy as an addition to the Sum Assured, serving as a guaranteed benefit for the policyholder.
Q116.
What is the purpose of smoothing in with-profit policies?

a.

To ensure consistent returns for policyholders regardless of market conditions

b.

To maximize short-term profits for the insurer

c.

To minimize bonuses paid to policyholders

d.

To eliminate investment risk for the insurer

Discuss
Answer: (a).To ensure consistent returns for policyholders regardless of market conditions Explanation:The purpose of smoothing in with-profit policies is to ensure consistent returns for policyholders regardless of market conditions, helping to stabilize returns over time and mitigate the impact of market fluctuations.
Q117.
What is a reversionary bonus in with-profit policies?

a.

A bonus paid annually to policyholders

b.

A bonus paid at the end of the policy term or upon death

c.

A bonus paid as a percentage of the premium paid

d.

A bonus paid based on market performance

Discuss
Answer: (a).A bonus paid annually to policyholders Explanation:A reversionary bonus in with-profit policies is a bonus paid annually to policyholders, typically expressed as a percentage of the Sum Assured, which increases the Sum Assured over time.
Q118.
When is the terminal bonus payable in with-profit policies?

a.

At the beginning of the policy term

b.

At the end of each policy year

c.

When a policy matures or on the death of the life assured

d.

When the policyholder decides to surrender the policy

Discuss
Answer: (c).When a policy matures or on the death of the life assured Explanation:The terminal bonus in with-profit policies is payable when a policy matures or on the death of the life assured, representing the policyholder's entitlement to a proportion of the fund held back for the purpose of smoothing or earning higher returns.
Q119.
How does an insurance company decide the mix of bonuses to pay in with-profit policies?

a.

Based on policyholder preferences

b.

Based on market conditions

c.

Based on the insurer's profitability goals

d.

Based on actuarial recommendations and investment strategies

Discuss
Answer: (d).Based on actuarial recommendations and investment strategies Explanation:An insurance company decides the mix of bonuses to pay in with-profit policies based on actuarial recommendations and investment strategies, aiming to balance policyholder returns, financial stability, and long-term profitability.
Q120.
What is the purpose of offering low annual bonuses and a high terminal bonus in some with-profit policies?

a.

To maximize short-term profits for the insurer

b.

To minimize investment risk for the insurer

c.

To provide consistent returns for policyholders

d.

To protect against falls in investment markets and choose more profitable long-term investments

Discuss
Answer: (d).To protect against falls in investment markets and choose more profitable long-term investments Explanation:Offering low annual bonuses and a high terminal bonus in some with-profit policies aims to protect against falls in investment markets and allows the insurer to choose more profitable long-term investments while ensuring consistent returns for policyholders.
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