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 4 of 13

Discover more Topics under IC22 Life Insurance Underwriting

Q31.
What is the human life value method based on?

a.

The insured's current salary

b.

The insured's estimated potential earnings during the remainder of the working life

c.

The insured's age and gender

d.

The insured's medical history

Discuss
Answer: (b).The insured's estimated potential earnings during the remainder of the working life Explanation:The human life value method is based on quantification of the estimated potential earnings (during the remainder of the working life) of the individual to be insured.
Q32.
What are the factors taken into account while using the human life value method to arrive at the insurance cover amount?

a.

Before tax earnings, expected number of years the income will be earned, annual estimated increase in income, risk-free rate

b.

After tax earnings, expected number of years the income will be earned, annual estimated increase in income, risk-free rate

c.

After tax earnings, expected number of years the income will be earned, annual estimated decrease in income, risk-free rate

d.

After tax earnings, expected number of years the income will be earned, annual estimated increase in income, high-risk rate

Discuss
Answer: (b).After tax earnings, expected number of years the income will be earned, annual estimated increase in income, risk-free rate Explanation:The human life value method takes into account the after-tax earnings, expected number of years the income will be earned (remainder of working life), annual estimated increase in income (salary rise), and a discount factor for future earnings (risk-free rate like the PPF rate).
Q33.
What is the needs analysis method based on?

a.

The insured's current salary

b.

The insured's estimated potential earnings during the remainder of the working life

c.

The insured's financial needs and responsibilities of the beneficiaries

d.

The insured's age and gender

Discuss
Answer: (c).The insured's financial needs and responsibilities of the beneficiaries Explanation:The needs analysis method attempts to arrive at future financial needs of the beneficiaries and then translates this into the death benefit amount. This method is generally based on financial needs and responsibilities of the individual.
Q34.
What is the needs analysis method of arriving at the insurance cover amount?

a.

It is a method that quantifies the estimated potential earnings of the insured.

b.

It is a method that takes into account the future financial needs of the beneficiaries and translates this into the death benefit amount.

c.

It is a method that assesses the value of the insured's assets and liabilities.

d.

It is a method that evaluates the risk factors associated with insuring the life of the insured.

Discuss
Answer: (b).It is a method that takes into account the future financial needs of the beneficiaries and translates this into the death benefit amount. Explanation:The needs analysis method attempts to arrive at the insurance cover amount by taking into account the future financial needs of the beneficiaries and then translating this into the death benefit amount. This method is generally based on factors such as providing benefit in the period immediately following the death of the insured to offset additional expenses, supporting the normal living expenses of the dependents, providing long term income for the retired surviving spouse, and taking into account the financial liabilities and financial responsibilities of the individual.
Q35.
There are various methods used to calculate how much insurance cover an individual should take. In which method is the present value of future earning potential of an individual used as a yardstick to calculate how much insurance cover an individual should take?

a.

Need analysis method

b.

Human life value method

c.

Income multiple method

d.

Expense substitution method

Discuss
Answer: (b).Human life value method Explanation:The human life value method is a method used to calculate the present value of an individual's future earning potential. This method takes into account the individual's age, gender, occupation, annual income, and retirement age to determine the present value of their future income. Based on this calculation, the individual's insurance cover amount is determined. This method is considered to be more accurate than the income multiple method as it takes into account several factors that affect an individual's earning potential.
Q36.
What is the challenge that underwriters face when granting insurance to non-working women?

a.

It is difficult to arrive at the insurable value where the services of housewives are not compensated financially

b.

Difficulty in assessing the overall profile of the life to be insured

c.

Non-working women are not interested in taking insurance

d.

None of the above

Discuss
Answer: (a).It is difficult to arrive at the insurable value where the services of housewives are not compensated financially Explanation:It is difficult to arrive at the insurable value where the services of housewives are not compensated financially, presenting a challenge to the underwriter.
Q37.
In the needs analysis method, what financial responsibilities of the insured are taken into account?

a.

Children's education and marriage expenses

b.

Retirement expenses

c.

Home loan and other loans

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The needs analysis method takes into account the financial responsibilities of the insured, such as children's education and marriage expenses, retirement expenses, home loan and other loans, and other factors that may affect the financial needs of the beneficiaries.
Q38.
What are the assumptions considered while using the needs analysis method to arrive at the insurance cover amount?

a.

It provides benefit in the period immediately following the death of the insured to offset additional expenses, it supports the normal living expenses of the dependents, it provides long term income for the retired surviving spouse, it takes into account the financial liabilities and financial responsibilities of the individual.

b.

It provides benefit in the period immediately preceding the death of the insured to offset additional expenses, it supports the extraordinary living expenses of the dependents, it provides long term income for the retired surviving spouse, it takes into account the financial assets and financial responsibilities of the individual.

c.

It provides benefit in the period immediately following the death of the insured to offset additional expenses, it supports the normal living expenses of the dependents, it provides short term income for the retired surviving spouse, it takes into account the financial liabilities and financial assets of the individual.

d.

It assumes that the insured has no financial liabilities or responsibilities.

Discuss
Answer: (a).It provides benefit in the period immediately following the death of the insured to offset additional expenses, it supports the normal living expenses of the dependents, it provides long term income for the retired surviving spouse, it takes into account the financial liabilities and financial responsibilities of the individual. Explanation:The needs analysis method attempts to arrive at future financial needs of the beneficiaries and then translates this into the death benefit amount. The method is based on several assumptions, including providing benefit in the period immediately following the death of the insured to offset additional expenses, supporting the normal living expenses of the dependents, providing long-term income for the retired surviving spouse, and taking into account the financial liabilities and financial responsibilities of the individual.
Q39.
What is the multiple of salary method used for?

a.

To determine the number of dependents in a family

b.

To determine the age of the life to be insured

c.

To determine the insurance cover amount that an individual should take

d.

To determine the inflation rate for a family's expenses

Discuss
Answer: (c).To determine the insurance cover amount that an individual should take Explanation:The multiple of salary method is used to determine the insurance cover amount that an individual should take.
Q40.
What factors determine the multiple of salary in the multiple of salary method?

a.

The number of dependents

b.

The age of the life to be insured and his salary

c.

The inflation rate

d.

The underwriting philosophy of the insurance company

Discuss
Answer: (b).The age of the life to be insured and his salary Explanation:The multiple of salary in the multiple of salary method is determined by the age of the life to be insured and his salary.
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