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 3 of 13

Discover more Topics under IC22 Life Insurance Underwriting

Q21.
When does lack of insurable interest exist?

a.

When the beneficiaries are neighbours, casual acquaintances, friends etc.

b.

When the beneficiary has a contractual obligation towards the insured

c.

When the insured has no financial loss or obligations created by his death

d.

When the amount of coverage necessary to replace the financial loss by the beneficiary is lower than the insurance coverage

Discuss
Answer: (a).When the beneficiaries are neighbours, casual acquaintances, friends etc. Explanation:Lack of insurable interest exists when the beneficiaries are neighbours, casual acquaintances, friends etc.
Q22.
What is the definition of insurable value?

a.

The measure of financial loss and obligations created by the beneficiary's death

b.

The maximum amount of the death benefit which can be acceptable

c.

The extent of insurable interest in the life of the insured

d.

The amount necessary to replace the financial loss by the beneficiary

Discuss
Answer: (b).The maximum amount of the death benefit which can be acceptable Explanation:Insurable value as the measure of financial loss and obligations created by the insured's death, which determines the maximum amount of the death benefit which can be acceptable.
Q23.
What is the consequence of ignoring the insurable interest and the insurable value limits?

a.

Payment of unnecessary coverage

b.

Legal consequences leading to the policy contract being void

c.

Excess coverage serving as an incentive for fraudulent claims

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Ignoring the insurable interest and the insurable value limits can result in payment of unnecessary coverage, legal consequences leading to the policy contract being void, and excess coverage serving as an incentive for fraudulent claims.
Q24.
What is the purpose of personal insurance cover?

a.

To replace the income stream of the insurer

b.

To replace the income stream of the beneficiary

c.

To cover non-existent financial loss

d.

None of the above

Discuss
Answer: (b).To replace the income stream of the beneficiary Explanation:A common reason to purchase personal insurance cover is to replace the income stream of the decedent, which helps the dependents in supporting their ongoing needs, immediate post death expenses, etc.
Q25.
What are the key principles of financial underwriting?

a.

Establishing the need and amount for insurance

b.

Making sure the insured is not worth more dead than alive

c.

Ruling out speculation from insurance

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The key principles of financial underwriting include establishing the need and amount for insurance, making sure the insured is not worth more dead than alive, ruling out speculation from insurance, and relating past financial trends with current economic conditions.
Q26.
What does it mean to say that the insured is "Not worth more dead than alive"?

a.

The insured has an insurable interest in the policy

b.

The insured's life is not worth insuring

c.

The insured has no dependents who rely on their income

d.

The insured's death should not result in a financial windfall for their beneficiaries

Discuss
Answer: (d).The insured's death should not result in a financial windfall for their beneficiaries Explanation:One of the key principles of financial underwriting is to ensure that the insured is "Not worth more dead than alive", which means that the insured's death should not result in a financial windfall for their beneficiaries.
Q27.
What should underwriters do to relate past financial trends with current economic conditions?

a.

Conduct extensive background checks on the insured

b.

Consult with financial experts and analysts

c.

Study historical data and trends

d.

All of the above

Discuss
Answer: (c).Study historical data and trends Explanation:Underwriters should relate past financial trends with current economic conditions by studying historical data and trends.
Q28.
What is the purpose of financial underwriting in insurance?

a.

To maximize profits for insurance companies

b.

To prevent fraudulent claims

c.

To determine the profit of the insurer

d.

To ensure that insurance policies are granted only to those who have a genuine need for them and are not over-insured

Discuss
Answer: (d).To ensure that insurance policies are granted only to those who have a genuine need for them and are not over-insured Explanation:The purpose of financial underwriting in insurance is to ensure that insurance policies are granted only to those who have a genuine need for them and are not over-insured.
Q29.
How much is the insurable interest that a person can have in his own life?

a.

A person can have unlimited insurable interest in his own life

b.

A person's insurable interest in his own life is limited to the value of his financial responsibilities like children's education and marriage expenses.

c.

A person's insurable interest in his own life is I imited to the value of his financial liabilities like home loans and other loans.

d.

No insurable interest

Discuss
Answer: (a).A person can have unlimited insurable interest in his own life Explanation:Insurable interest refers to the financial interest that a person has in the life, health or property of another person. When it comes to a person's own life, there is no limit to the amount of insurable interest that they can have. This means that a person can purchase life insurance for themselves for any amount.
Q30.
What are the three methods of arriving at the amount of insurance cover that an individual should take?

a.

Human life value method, needs analysis method, income replacement method

b.

Human life value method, needs analysis method, discount rate method

c.

Human life value method, debt-to-income ratio method, income replacement method

d.

Needs analysis method, debt-to-income ratio method, discount rate method

Discuss
Answer: (a).Human life value method, needs analysis method, income replacement method Explanation:The three methods of arriving at the amount of insurance cover as the human life value method, needs analysis method, and income replacement method.
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