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.
Who has insurable interest in the property mortgaged against a loan granted by a bank?

a.

The borrower

b.

The bank

c.

Both the borrower and the bank

d.

None of the above

Discuss
Answer: (b).The bank Explanation:A bank has insurable interest in the property mortgaged against the loan granted by the bank to a borrower.
Q24.
What is key-man insurance?

a.

Insurance taken by an employee on the life of his employer

b.

Insurance taken by a company on the life of its key people

c.

Insurance taken by a partner on the life of another partner

d.

Insurance taken by a creditor on the life of the debtor

Discuss
Answer: (b).Insurance taken by a company on the life of its key people Explanation:Key-man insurance is insurance taken by a company on the life of its key people, whose absence can affect the company adversely.
Q25.
Who has insurable interest in the lives of each other in a partnership?

a.

Creditors

b.

Partners

c.

Key persons

d.

Employers

Discuss
Answer: (b).Partners Explanation:Partners have insurable interest in the lives of each other. The death of any of the partner/s can affect the firm adversely.
Q26.
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.
Q27.
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.
Q28.
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.
Q29.
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.
Q30.
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
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