C01 Introduction to Insurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on C01 Introduction to Insurance, a fundamental topic in the field of IC38 Life Insurance Agent Exam. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our C01 Introduction to Insurance 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 C01 Introduction to Insurance mcq questions that explore various aspects of C01 Introduction to Insurance problems. Each MCQ is crafted to challenge your understanding of C01 Introduction to Insurance principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC38 Life Insurance Agent Exam tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our C01 Introduction to Insurance MCQs are your pathway to success in mastering this essential IC38 Life Insurance Agent Exam topic.

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C01 Introduction to Insurance MCQs | Page 5 of 10

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Q41.
What is the secondary burden of risk in insurance?

a.

It consists of losses actually suffered as a result of pure risk events.

b.

It includes the fear and anxiety caused by potential loss events.

c.

It involves the physical and mental strain of managing reserve funds.

d.

It consists of costs and strains due to exposure to loss situations.

Discuss
Answer: (d).It consists of costs and strains due to exposure to loss situations. Explanation:The secondary burden of risk in insurance consists of costs and strains due to exposure to loss situations.
Q42.
What is one of the physical and mental strains caused by the secondary burden of risk?

a.

Fear and anxiety

b.

Loss of profits

c.

Investment in reserve funds

d.

Peace of mind

Discuss
Answer: (a).Fear and anxiety Explanation:Fear and anxiety caused by potential loss are physical and mental strains associated with the secondary burden of risk.
Q43.
Why is transferring the risk to an insurer important in managing the secondary burden of risk?

a.

To increase the physical and mental strains

b.

To enjoy fear and anxiety

c.

To invest funds more effectively

d.

To achieve peace of mind and invest funds more effectively

Discuss
Answer: (d).To achieve peace of mind and invest funds more effectively Explanation:Transferring the risk to an insurer allows individuals to enjoy peace of mind and invest their funds more effectively, reducing the strains associated with the secondary burden of risk.
Q44.
Which among the following is a secondary burden of risk?

a.

Business interruption cost

b.

Goods damaged cost

c.

Setting aside reserves as a provision for meeting potential losses in the future

d.

Hospitalisation costs as a result of heart attack

Discuss
Answer: (c).Setting aside reserves as a provision for meeting potential losses in the future Explanation:The setting aside of reserves as a provision for meeting potential losses in the future is a secondary burden of risk. This is because it involves the cost and strain of managing reserve funds even if the loss event does not occur. Business interruption cost is an example of the primary burden of risk, as it is a cost resulting from an actual loss event. Goods damaged cost is also an example of the primary burden of risk, as it involves the actual loss of goods. Hospitalization costs as a result of a heart attack are an example of the primary burden of risk, as they result from an actual health-related event.
Q45.
What is the principle that underlies insurance contracts?

a.

Principle of Risk Pooling

b.

Principle of Diversification

c.

Principle of Mutuality

d.

Principle of Premiums

Discuss
Answer: (a).Principle of Risk Pooling Explanation:Insurance contracts are based on the principle of risk pooling.
Q46.
How do insurance companies reduce risk in financial markets?

a.

By placing all funds in one basket

b.

By spreading funds among various assets

c.

By avoiding insurance contracts

d.

By not accepting policyholders

Discuss
Answer: (b).By spreading funds among various assets Explanation:Diversification involves spreading funds among various assets to reduce risk.
Q47.
In the context of risk reduction, what does "Diversification" involve?

a.

Placing all funds in one basket

b.

Spreading funds among various assets

c.

Keeping all eggs in the same basket

d.

Not investing in any assets

Discuss
Answer: (b).Spreading funds among various assets Explanation:Diversification is described as spreading funds among various assets.
Q48.
How do funds flow in the principle of mutuality?

a.

From one source to many destinations

b.

From many sources to one

c.

From one source to one destination

d.

Funds do not flow in the principle of mutuality

Discuss
Answer: (b).From many sources to one Explanation:In the principle of mutuality, funds flow from many sources to one.
Q49.
What creates a potential corpus of money in insurance contracts?

a.

Paying a small contribution

b.

Premiums

c.

Policyholders

d.

Insured risks

Discuss
Answer: (a).Paying a small contribution Explanation:By paying a small contribution (the premium), insured individuals create a potential corpus of money.
Q50.
What makes insurance unique among financial products?

a.

Premiums

b.

Mutuality

c.

Diversification

d.

Losses

Discuss
Answer: (b).Mutuality Explanation:The principle of mutuality is what makes insurance unique among all financial products.
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