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 7 of 13

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Q61.
What is the importance of the number of key persons in a company in confirming the criticality of a person to the company?

a.

The more the number of key persons, the easier it is to confirm the criticality of the person to the company

b.

The fewer the number of key persons, the easier it is to confirm the criticality of the person to the company

c.

The number of key persons in a company has no impact on the criticality of a person to the company

d.

None of the above

Discuss
Answer: (b).The fewer the number of key persons, the easier it is to confirm the criticality of the person to the company Explanation:Fewer the number of key persons in a company, the easier it is to confirm the criticality of the person to the company. This means that if there are only a few key persons in a company, it is easier to assess the value of each individual's contribution and determine their criticality to the company.
Q62.
Why is it easier to evaluate the value of a key person with a good earnings trend?

a.

Because it is easier to predict future earnings

b.

Because it is easier to assess the potential financial loss to the company

c.

Because it indicates that the key person's contribution to the company is significant

d.

None of the above

Discuss
Answer: (c).Because it indicates that the key person's contribution to the company is significant Explanation:A good earnings trend indicates that the key person's contribution to the company is valuable, and therefore, the potential financial loss to the company on the death of the key person would be significant. This makes it easier to evaluate the value of a key person with a good earnings trend.
Q63.
What is the primary reason to purchase keyman insurance?

a.

To indemnify the company against the loss of a key person

b.

To provide additional coverage for the employees of the company

c.

To secure the financial future of the key person

d.

None of the above

Discuss
Answer: (a).To indemnify the company against the loss of a key person Explanation:The primary reason to purchase keyman insurance is to indemnify the company against the loss of a key person whose skills and contribution are critical to the company.
Q64.
What are the common challenges faced by underwriters while assessing a keyman insurance proposal?

a.

Qualifying the proposed insured as a key person

b.

Quantifying the potential financial loss to the company on the death of the insured

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:Two main challenges that are faced by underwriters: qualifying the proposed insured as a key person and quantifying the potential financial loss to the company on the death of the insured.
Q65.
Which of the following is NOT a factor in qualifying a proposed insured as a key person?

a.

Age

b.

Level of expertise

c.

Marital status

d.

Successful track record

Discuss
Answer: (c).Marital status Explanation:Key person insurance is designed to protect a company against the loss of a key employee, whose skills, knowledge and experience are critical to the company's success. The person insured under this policy is referred to as the "key person". When assessing a keyman insurance proposal, underwriters look for several factors that qualify the proposed insured as a key person. These factors include the person's level of expertise, successful track record, importance to the company's operations, etc. Age is also considered, as younger key persons are typically preferred over older ones, as they are likely to work for the company for a longer period of time. Marital status, on the other hand, is not a factor in qualifying a proposed insured as a key person, as it does not affect the person's contribution to the company's operations.
Q66.
What is the maximum amount of keyman insurance that can be granted to a company?

a.

3 times the average gross profit of the company for the last three years

b.

5 times the average net profit of the company for the last three years

c.

10 times the total annual compensation package for the keyman

d.

The minimum of the amount arrived at on the basis of the above three methods

Discuss
Answer: (d).The minimum of the amount arrived at on the basis of the above three methods Explanation:The total permissible amount of keyman insurance for a company will be the minimum of the amount arrived at on the basis of the three guidelines provided: 3 times the average gross profit of the company for the last three years, 5 times the average net profit of the company for the last three years, 10 times the total annual compensation package for the keyman.
Q67.
What type of insurance plans are allowed for keyman insurance according to current regulations?

a.

Whole life insurance plans

b.

Term assurance plans

c.

Endowment insurance plans

d.

Unit linked insurance plans

Discuss
Answer: (b).Term assurance plans Explanation:Only term assurance plans are allowed for keyman insurance according to current regulations.
Q68.
Which are the types of child plans offered by the insurers in the market?

a.

Child endowment plans

b.

Child money back plans

c.

Child ULIPs

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Insurers offer different types of child plans in the market, including child endowment plans, child money back plans, and child ULIPs. Child endowment plans are traditional life insurance plans that provide guaranteed payouts to the child at specific intervals, while child money back plans provide periodic payouts to the child during the policy term. Child ULIPs are unit-linked insurance plans that offer market-linked returns and investment flexibility. These plans are designed to help parents save and invest for their child's future financial needs.
Q69.
What is partnership insurance?

a.

Insurance that covers a partnership against losses due to market fluctuations

b.

Insurance that provides financial support to the partners in case of a dispute

c.

Insurance that provides funds to buy out the share of a deceased partner

d.

None of the above

Discuss
Answer: (c).Insurance that provides funds to buy out the share of a deceased partner Explanation:Partnership insurance is a type of life insurance that provides funds to buy out the share of a deceased partner in a partnership business.
Q70.
Why is partnership insurance important?

a.

To ensure continuity of the partnership business after the death of a partner

b.

To provide financial support to the surviving partners in case of a dispute

c.

To protect the partnership against losses due to market fluctuations

d.

None of the above

Discuss
Answer: (a).To ensure continuity of the partnership business after the death of a partner Explanation:Partnership insurance is important to ensure the continuity of the partnership business after the death of a partner. Without partnership insurance, the surviving partners may have to sell assets or close down the business to pay the deceased partner's share.
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