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 13 of 17

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Q121.
What is the primary purpose of offering profits, bonuses, or dividends in insurance contracts?

a.

To decrease the premium amount

b.

To encourage policyholders to buy insurance products by providing extra benefits

c.

To increase the insurer's profit margin

d.

To reduce the risk for the policyholder

Discuss
Answer: (b).To encourage policyholders to buy insurance products by providing extra benefits Explanation:Profits, bonuses, or dividends are offered in insurance contracts to incentivize policyholders to purchase insurance products by providing them with additional benefits beyond the basic guaranteed benefit, thereby encouraging participation in insurance plans.
Q122.
What is the main difference between participating and non-participating insurance policies?

a.

Participating policies have higher premiums but lower guaranteed benefits compared to non-participating policies.

b.

Non-participating policies offer bonuses while participating policies do not.

c.

Participating policies allow policyholders to share in the insurer's profits, while non-participating policies do not.

d.

Non-participating policies have fixed premiums and benefits, while participating policies do not.

Discuss
Answer: (c).Participating policies allow policyholders to share in the insurer's profits, while non-participating policies do not. Explanation:Participating policies allow policyholders to share in the profits of the insurance company through bonuses or dividends, while non-participating policies do not offer this feature.
Q123.
What are 'bonuses' or 'dividends' in insurance contracts?

a.

Additional premiums paid by policyholders

b.

Fixed sums deducted from the sum assured

c.

Additional benefits provided to policyholders based on the insurer's profits

d.

Extra charges for policy administration

Discuss
Answer: (c).Additional benefits provided to policyholders based on the insurer's profits Explanation:Bonuses or dividends in insurance contracts are additional benefits provided to policyholders based on the profits earned by the insurer, usually expressed as a percentage of the sum assured.
Q124.
Which statement about bonuses in insurance contracts is true?

a.

Bonuses are guaranteed payments made to policyholders.

b.

Bonuses are declared annually but not added to the sum assured.

c.

Bonuses are paid only at the end of the policy term.

d.

Bonuses are used to increase the sum assured and are declared annually.

Discuss
Answer: (d).Bonuses are used to increase the sum assured and are declared annually. Explanation:Bonuses in insurance contracts are used to increase the sum assured, and they are typically declared annually, adding to the guaranteed benefits of the policy.
Q125.
What is the purpose of the terminal bonus in insurance contracts?

a.

To increase the policyholder's premium payments

b.

To provide an additional bonus at the end of the policy term

c.

To protect the insurer from falls in investment markets

d.

To reduce the sum assured for the policyholder

Discuss
Answer: (c).To protect the insurer from falls in investment markets Explanation:The terminal bonus in insurance contracts is designed to protect the insurer from losses due to market downturns by withholding a portion of the fund for smoothing or earning higher expected returns.
Q126.
Which method of bonus calculation is based on a fixed percentage of the sum assured or premiums?

a.

Compound bonus

b.

Super - Compound bonus

c.

Cash bonus

d.

Simple bonus

Discuss
Answer: (d).Simple bonus Explanation:Simple bonus is calculated as a fixed percentage of the sum assured or premiums, providing a straightforward method of bonus calculation.
Q127.
How is compound bonus calculated?

a.

Based on a fixed percentage of the sum assured

b.

Based on a percentage of the bonus declared in the preceding policy year

c.

Based on the total premiums paid over the policy term

d.

Based on the investment performance of the insurer

Discuss
Answer: (b).Based on a percentage of the bonus declared in the preceding policy year Explanation:Compound bonus is calculated as a percentage of the bonus declared in the preceding policy year, creating a compounding effect on the bonus amount over time.
Q128.
What distinguishes cash bonus from other methods of bonus payment?

a.

Cash bonus is paid only at the end of the policy term.

b.

Cash bonus is distributed as cash to the policyholder.

c.

Cash bonus is added to the sum assured.

d.

Cash bonus is calculated based on investment returns.

Discuss
Answer: (b).Cash bonus is distributed as cash to the policyholder. Explanation:Unlike other methods of bonus payment, cash bonus is distributed directly to the policyholder as cash, similar to dividends in a manufacturing company.
Q129.
What is the key characteristic of paid-up additions as a method of bonus payment?

a.

Paid-up additions increase the sum assured for the policyholder.

b.

Paid-up additions are paid only at the end of the policy term.

c.

Paid-up additions are distributed as cash to the policyholder.

d.

Paid-up additions are calculated based on investment returns.

Discuss
Answer: (a).Paid-up additions increase the sum assured for the policyholder. Explanation:Paid-up additions provide policyholders with an additional sum assured, increasing the total coverage under the policy.
Q130.
What distinguishes the discount in premium method from the cash bonus method?

a.

The discount in premium method provides cash directly to the policyholder.

b.

The discount in premium method reduces the premium amount payable by the policyholder.

c.

The discount in premium method is declared annually.

d.

The discount in premium method is calculated based on investment returns.

Discuss
Answer: (b).The discount in premium method reduces the premium amount payable by the policyholder. Explanation:Unlike the cash bonus method, the discount in premium method reduces the premium amount payable by the policyholder instead of providing cash directly.
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