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 5 of 13

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Q41.
What are the disadvantages of using the multiple of salary method?

a.

It does not take into account the age of the surviving spouse and the number of dependents

b.

It does not take into account inflation and the number of years the income will be needed

c.

It is difficult to use and not useful in simple sales situations

d.

None of the above

Discuss
Answer: (b).It does not take into account inflation and the number of years the income will be needed Explanation:The disadvantages of the multiple of salary method are that it does not take into account the age of the surviving spouse, the number of dependents, the number of years the income will be needed, and inflation.
Q42.
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.
Q43.
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.
Q44.
What approach can be adopted to arrive at the insurance cover for non-working women?

a.

Need analysis approach

b.

Human life value method

c.

Income multiple method

d.

Expense substitution method

Discuss
Answer: (a).Need analysis approach Explanation:The need analysis approach can be adopted to arrive at the insurance cover for non-working women.
Q45.
What is the recommended approach when granting small sums assured to non-working women?

a.

Equal cover on the husband's life

b.

Consideration of educational background of husband

c.

Consideration of age

d.

None of the above

Discuss
Answer: (a).Equal cover on the husband's life Explanation:Generally, small sums assured are granted if there is an equal cover on the husband's life.
Q46.
What needs to be considered when granting moderate or large covers to non-working women?

a.

Educational background

b.

Insurance on other family members

c.

Marital status and the nominee

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Special consideration needs to be given to the overall profile of the life to be insured, which can comprise of the factors mentioned.
Q47.
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.
Q48.
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.
Q49.
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.
Q50.
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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