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.
Can a company take key-man insurance on the lives of any employees?

a.

Yes, on the lives of any employees

b.

No, only on the lives of employees who have special skills and whose absence can affect the company adversely

c.

Only on the lives of employees who are over 50 years old

d.

None of the above

Discuss
Answer: (b).No, only on the lives of employees who have special skills and whose absence can affect the company adversely Explanation:A company can take key-man insurance on the lives of certain "key" people, whose absence can affect the company adversely. These are key people and the insurance amount for such policies can be to the extent of any liability or reduction in profit resulting from the loss of special skills of the key-person.
Q22.
Do children buying insurance cover for their parents fall under insurable interest?

a.

Yes

b.

No

c.

Only for pension plans

d.

None of the above

Discuss
Answer: (b).No Explanation:Children buying insurance cover (except pension plans) for their parents are not allowed and this is taken as a moral hazard.
Q23.
What is important to understand when granting insurance to non-working women?

a.

Who the beneficiary of the insurance policy is

b.

The nature of plan requested for

c.

Trends related to social or cultural aspects and trends related to the claims experience

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Various factors, including the beneficiary of the insurance policy, the nature of the plan requested for, and trends related to social or cultural aspects and trends related to the claims experience, should be understood when granting insurance to non-working women.
Q24.
Why is it important to understand who the beneficiary of the insurance policy is for non-working women?

a.

To ensure that the beneficiary is financially capable of taking care of the insured's family in case of any unfortunate event

b.

To understand the needs and financial profile of the beneficiary

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:The beneficiary of an insurance policy plays an important role in the event of the insured's death. For non-working women, it is important to understand who the beneficiary of the policy is in order to ensure that they are financially capable of taking care of the insured's family in case of any unfortunate event. Additionally, understanding the needs and financial profile of the beneficiary can help in determining the appropriate amount of insurance cover and the type of plan that is suitable for the insured.
Q25.
What is the potential risk when an illiterate woman with little or no earned income asks for a term plan with a high sum assured?

a.

Moral hazard

b.

Adverse selection

c.

Investment risk

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:An illiterate woman with little or no earned income asking for a term plan with a high sum assured is a high-risk scenario for the insurance company. There is a potential for both moral hazard and adverse selection. Moral hazard refers to the possibility that the insured person may engage in riskier behavior knowing that they are protected by insurance. Adverse selection refers to the tendency for higher-risk individuals to apply for insurance more frequently than lower-risk individuals. In this scenario, the combination of a high sum assured and the lack of financial resources or education on the part of the applicant increase the potential for both moral hazard and adverse selection.
Q26.
Why do parents apply for insurance on the lives of their children?

a.

To get insurance at high cost when children have poor health

b.

To pass on the wealth to the future generation

c.

To minimise moral hazard

d.

None of the above

Discuss
Answer: (b).To pass on the wealth to the future generation Explanation:Parents apply for insurance on the lives of their children for various reasons, one of which is to pass on the wealth to the future generation. This implies that parents want to secure the financial future of their children
Q27.
What is the importance of considering the health status and cover of siblings and parents while insuring the life of a child?

a.

To increase the sum assured for the child

b.

To minimise moral hazard

c.

To reduce the premium amount

d.

None of the above

Discuss
Answer: (b).To minimise moral hazard Explanation:The importance of considering the health status and cover of siblings and parents while insuring the life of a child is to minimize moral hazard. This means that insurers need to assess the risks associated with insuring the child, taking into account the health status and insurance coverage of the parents and siblings, to ensure that the insurance policy is not being taken out purely for financial gain and that it is providing real protection for the child's future.
Q28.
What is the main purpose of child insurance plans?

a.

To secure the financial future of parents

b.

To provide periodic payments at specific intervals

c.

To offer financial security for the children's future

d.

None of the above

Discuss
Answer: (c).To offer financial security for the children's future Explanation:Child insurance plans are purchased by parents to secure the financial future of their children, particularly in the case of an unfortunate event like the parents' untimely death. These plans help parents save funds for their children's education, marriage, and other financial needs. By providing financial security for the children's future, child insurance plans ensure that children are protected against unforeseen financial contingencies.
Q29.
What is the 'waiver of premium' built-in rider in most child plans?

a.

A rider that provides additional coverage for the child

b.

A rider that allows the policyholder to skip premium payments

c.

A rider that makes sure the plan continues in case of the parent's untimely death

d.

None of the above

Discuss
Answer: (c).A rider that makes sure the plan continues in case of the parent's untimely death Explanation:The 'waiver of premium' built-in rider is a feature in most child plans that ensures the plan continues in case of the parent's untimely death. In such a scenario, the parent's premium payments are waived off, and the insurance company continues to pay the premium on their behalf to keep the policy in force. This ensures that the child's financial security is not compromised even if the parent is no longer able to make premium payments.
Q30.
What is the primary reason for a company to purchase life insurance on the life of a key person?

a.

To indemnify the company against the loss of the key person

b.

To provide financial assistance to the family of the key person

c.

To increase the revenue of the company

d.

None of the above

Discuss
Answer: (a).To indemnify the company against the loss of the key person Explanation:The primary reason for a company to purchase life insurance on the life of a key person is to indemnify the company against the loss of the key person whose skills and contribution are critical to the company.
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