Financial Underwriting MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Financial Underwriting, a fundamental topic in the field of IC22 Life Insurance Underwriting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Financial Underwriting 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 Financial Underwriting mcq questions that explore various aspects of Financial Underwriting problems. Each MCQ is crafted to challenge your understanding of Financial Underwriting principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC22 Life Insurance Underwriting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Financial Underwriting MCQs are your pathway to success in mastering this essential IC22 Life Insurance Underwriting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Financial Underwriting. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Financial Underwriting knowledge to the test? Let's get started with our carefully curated MCQs!

Financial Underwriting MCQs | Page 2 of 13

Discover more Topics under IC22 Life Insurance Underwriting

Q11.
What is the role of financial underwriting in insurance?

a.

To ensure that the amount of insurance applied for is justified based on the potential economic loss that will be suffered in the event of the individual's death

b.

To determine the medical conditions of the individual for insurance coverage

c.

To determine the age of the individual for insurance coverage

d.

To determine the location of the individual for insurance coverage

Discuss
Answer: (a).To ensure that the amount of insurance applied for is justified based on the potential economic loss that will be suffered in the event of the individual's death Explanation:The role of financial underwriting is to make sure that the amount of insurance applied for by an individual is justified based on the potential economic loss that will be suffered in the event of the individual's death.
Q12.
What is adverse selection in insurance?

a.

The situation where the amount of insurance applied for is in excess of the potential economic loss

b.

The situation where the amount of insurance applied for is less than the potential economic loss

c.

The situation where the individual's medical conditions are not disclosed for insurance coverage

d.

The situation where the individual's age is not disclosed for insurance coverage

Discuss
Answer: (a).The situation where the amount of insurance applied for is in excess of the potential economic loss Explanation:Adverse selection (also termed as anti-selection) is the situation where the amount of insurance applied for is in excess of the potential economic loss.
Q13.
Why should every proposal for insurance be financially underwritten?

a.

To ensure that the amount of insurance applied for will adequately compensate the beneficiary in the event of an untimely loss

b.

To ensure that the individual's medical conditions are disclosed for insurance coverage

c.

To ensure that the individual's age is disclosed for insurance coverage

d.

To ensure that the individual's location is disclosed for insurance coverage

Discuss
Answer: (a).To ensure that the amount of insurance applied for will adequately compensate the beneficiary in the event of an untimely loss Explanation:Every proposal for insurance should be financially underwritten to ensure that the amount of insurance applied for will adequately compensate the beneficiary in the event of an untimely loss.
Q14.
What is the overall purpose of financial underwriting in insurance?

a.

To ensure that the insured or their beneficiaries are not put in a better financial position by the occurrence of an insured event

b.

To determine the medical conditions of the individual for insurance coverage

c.

To determine the age of the individual for insurance coverage

d.

To determine the location of the individual for insurance coverage

Discuss
Answer: (a).To ensure that the insured or their beneficiaries are not put in a better financial position by the occurrence of an insured event Explanation:The overall purpose of financial underwriting is to ensure that the insured or their beneficiaries are not put in a better financial position by the occurrence of an insured event.
Q15.
What is insurable interest?

a.

The owner of the insurance must have a financial interest in the continued existence of the insured and would suffer significant financial loss in the event of death of the insured

b.

The process of verifying insurance needs

c.

The process of assessing violence potential

d.

The process of determining the quantified value of financial need

Discuss
Answer: (a).The owner of the insurance must have a financial interest in the continued existence of the insured and would suffer significant financial loss in the event of death of the insured Explanation:Insurable interest is one of the basic concepts of life insurance, where the owner of the insurance must have a financial interest in the continued existence of the insured and would suffer significant financial loss in the event of death of the insured.
Q16.
What are the objectives of financial underwriting?

a.

To minimize fraudulent claims, minimize adverse claims experience due to anti-selection, and minimize the early lapse and surrender due to the insured not being able to pay the premium

b.

To maximize fraudulent claims, maximize adverse claims experience due to anti-selection, and maximize the early lapse and surrender due to the insured not being able to pay the premium

c.

To minimize fraudulent claims, maximize adverse claims experience due to anti-selection, and minimize the early lapse and surrender due to the insured not being able to pay the premium

d.

To maximize fraudulent claims, minimize adverse claims experience due to anti-selection, and maximize the early lapse and surrender due to the insured not being able to pay the premium

Discuss
Answer: (a).To minimize fraudulent claims, minimize adverse claims experience due to anti-selection, and minimize the early lapse and surrender due to the insured not being able to pay the premium Explanation:The objectives of financial underwriting are to minimize fraudulent claims, minimize adverse claims experience due to anti-selection, and minimize the early lapse and surrender due to the insured not being able to pay the premium.
Q17.
What are a few examples of valid insurable interest?

a.

Self, spouse, children, assets

b.

Self, spouse, pets, assets

c.

Self, parents, children, assets

d.

Self, spouse, children, liabilities

Discuss
Answer: (a).Self, spouse, children, assets Explanation:Some examples of valid insurable interest are self, spouse, children, and assets.
Q18.
What is the concept of insurable interest in life insurance?

a.

The beneficiary must have a financial interest in the continued existence of the insured

b.

The sum assured must not exceed the quantified value of the financial need

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:Insurable interest means that the beneficiary under the policy should have a financial interest in the continued existence of the insured and would suffer significant financial loss in the event of death of the insured. Also, the sum assured must not exceed the quantified value of that financial need.
Q19.
Who can take life insurance for themselves?

a.

Only employed individuals

b.

Only married individuals

c.

Anyone can take life insurance for themselves

d.

None of the above

Discuss
Answer: (c).Anyone can take life insurance for themselves Explanation:A person has unlimited insurable interest in his/her own life, and can take life insurance for themselves of any amount.
Q20.
Can children take insurance for their parents?

a.

Yes, it is allowed

b.

No, it is not allowed and is considered a moral hazard

c.

It depends on the insurance company

d.

None of the above

Discuss
Answer: (b).No, it is not allowed and is considered a moral hazard Explanation:Parents can take insurance for their children, but children buying insurance cover (except pension plans) for their parents are not allowed and is taken as a moral hazard.
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