Life Underwriting Principles and Concepts Part 2 MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Life Underwriting Principles and Concepts Part 2, 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 Life Underwriting Principles and Concepts Part 2 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 Life Underwriting Principles and Concepts Part 2 mcq questions that explore various aspects of Life Underwriting Principles and Concepts Part 2 problems. Each MCQ is crafted to challenge your understanding of Life Underwriting Principles and Concepts Part 2 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 Life Underwriting Principles and Concepts Part 2 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 Life Underwriting Principles and Concepts Part 2. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

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Life Underwriting Principles and Concepts Part 2 MCQs | Page 8 of 14

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Q71.
What is the purpose of charging an extra premium?

a.

To accept a sub-standard risk

b.

To decline the risk

c.

To accept the risk without any additional requirements

d.

None of the above

Discuss
Answer: (a).To accept a sub-standard risk Explanation:An underwriter may opt to charge an extra premium on grounds of medical, occupational, a vocational, or for residence or for a combination of reasons to accept a sub-standard risk. The extra premium can be charged either for the entire policy term or for a limited period, depending upon the adverse factors.
Q72.
What are the documents necessary for risk selection that an underwriter needs to review?

a.

Only medical reports used as pre-insurance screening

b.

Only age-proof documents

c.

Only financial documents

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The underwriter needs to review several documents necessary for risk selection, such as duly filled proposal application form, age-proof documents, medical reports used as pre-insurance screening, personal health records of the client (if any), financial documents etc. (income proof and other business income statements etc.), and moral hazard reports from competent authorities of the insurance company.
Q73.
What is the underwriter's classification of risk based on the assessment of extra mortality rates?

a.

Standard only

b.

Standard and highly standard

c.

Standard, sub-standard, and highly sub-standard

d.

Highly sub-standard only

Discuss
Answer: (c).Standard, sub-standard, and highly sub-standard Explanation:After assessment of extra mortality rates, the underwriter classifies the risk as standard, sub-standard, or highly sub-standard based on the level of risk.
Q74.
What decisions can an underwriter take with respect to a risk?

a.

Accept the risk with extra premium

b.

Accept the risk with exclusions

c.

Postpone/defer the risk for a certain period

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:An underwriter can take any of the following decisions with respect to risk: accept the risk with extra premium, accept the risk with exclusions, postpone/defer the risk for a certain period, or decline the risk.
Q75.
In what situations can an underwriter choose to accept a sub-standard risk by charging extra premium?

a.

Only for the entire policy term

b.

Only for a limited period

c.

For both the entire policy term or for a limited period, depending upon the adverse factors

d.

None of the above

Discuss
Answer: (c).For both the entire policy term or for a limited period, depending upon the adverse factors Explanation:An underwriter can choose to accept a sub-standard risk by charging extra premium, which can be charged either for the entire policy term or for a limited period, depending upon the adverse factors.
Q76.
What is the difference between extra premium based extra mortality rate and standard extra premium?

a.

Extra premium based extra mortality rate is a flat or standard rate applied for expected extra mortality rate, while standard extra premium is the extra mortality rate converted into extra premium.

b.

Extra premium based extra mortality rate and standard extra premium are the same.

c.

Extra premium based extra mortality rate is only charged for specific individuals, while standard extra premium is charged for all individuals covered by the product.

d.

None of the above

Discuss
Answer: (a).Extra premium based extra mortality rate is a flat or standard rate applied for expected extra mortality rate, while standard extra premium is the extra mortality rate converted into extra premium. Explanation:Extra premiums can be loaded in two ways: extra premium based extra mortality rate and standard extra premium. In extra premium based extra mortality rate, the extra mortality rate that has been calculated for sub-standard life and the risk associated is converted into extra premium, which is then charged in addition to the tabular premium. In standard extra premium, a flat or standard rate is applied for expected extra mortality rate for a certain adverse factor such as dangerous hobbies like mountaineering. Hence, all prospects who are engaged in dangerous hobbies will be charged an extra premium of a specified amount for getting the cover.
Q77.
What are the two kinds of exclusions that an underwriter can impose when accepting a risk with exclusions?

a.

General and specific exclusions

b.

Special and general exclusions

c.

Occupational and medical exclusions

d.

Exclusions for sub-standard and highly sub-standard risks

Discuss
Answer: (a).General and specific exclusions Explanation:When an underwriter accepts a risk with exclusions, they may impose two kinds of exclusions: general and specific exclusions. General exclusions apply to all individuals covered by a particular product, while specific exclusions are applied only to certain individuals based on their health and risk profile determined after underwriting the proposal. Exclusions are restrictions on the policy coverage that specify certain situations or conditions under which the policy will not provide benefits. While exclusions can limit the benefits available to the policyholder, they can also help the insurer manage risk by excluding coverage for specific risks that are deemed too high or unpredictable.
Q78.
In which case would an underwriter defer or postpone a decision on a proposal?

a.

When the applicant is young and healthy

b.

When the applicant has a minor medical condition

c.

When the applicant requires long-term medical treatment

d.

When the applicant engages in dangerous hobbies

Discuss
Answer: (c).When the applicant requires long-term medical treatment Explanation:The underwriter may defer or postpone a decision on a proposal when the applicant has a medical condition that requires long-term treatment, to avoid adding very high risks to the portfolio.
Q79.
How long can an underwriter defer or postpone a decision on a proposal?

a.

Up to 1 year

b.

Up to 2 years

c.

Up to 3 years

d.

Indefinitely

Discuss
Answer: (c).Up to 3 years Explanation:The underwriter may defer or postpone a decision on a proposal for a period ranging from 3 months to 3 years depending upon the severity of the medical condition.
Q80.
What is the benefit of deferment or postponement of risk for the insurer?

a.

It allows the insurer to charge extra premiums.

b.

It allows the insurer to avoid adding very high risks to the portfolio.

c.

It allows the insurer to cover all risks.

d.

It allows the insurer to accept all applicants.

Discuss
Answer: (b).It allows the insurer to avoid adding very high risks to the portfolio. Explanation:Deferment or postponement of risk allows the insurer to avoid adding very high risks to the portfolio, thus helping to maintain a balanced risk profile.
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