C02 Core Elements of Insurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on C02 Core Elements of 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 C02 Core Elements of 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 C02 Core Elements of Insurance mcq questions that explore various aspects of C02 Core Elements of Insurance problems. Each MCQ is crafted to challenge your understanding of C02 Core Elements of 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 C02 Core Elements of Insurance MCQs are your pathway to success in mastering this essential IC38 Life Insurance Agent Exam topic.

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C02 Core Elements of Insurance MCQs | Page 3 of 5

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Q21.
What is a physical hazard in the context of insurance?

a.

A hazard related to dishonesty or character defects

b.

A physical condition that increases the chance of loss

c.

A hazard associated with legal liabilities

d.

A hazard that influences the frequency of loss

Discuss
Answer: (b).A physical condition that increases the chance of loss Explanation:A physical hazard in insurance refers to a physical condition that increases the chance of loss.
Q22.
Which of the following is an example of a moral hazard?

a.

Defective wiring in a building

b.

Indulging in water sports

c.

Deliberately setting fire to one's property to collect insurance

d.

Enactment of laws governing workmen's compensation

Discuss
Answer: (c).Deliberately setting fire to one's property to collect insurance Explanation:Deliberately setting fire to one's property to collect insurance is an example of a moral hazard, as it involves dishonesty or character defects that influence the frequency or severity of loss.
Q23.
What is a legal hazard in insurance?

a.

A hazard related to dishonesty or character defects

b.

A physical condition that increases the chance of loss

c.

A condition arising from features of the legal system or regulatory environment

d.

A hazard that influences the frequency of loss

Discuss
Answer: (c).A condition arising from features of the legal system or regulatory environment Explanation:A legal hazard in insurance arises from certain features of the legal system or regulatory environment that can increase the incidence or severity of losses.
Q24.
What mathematical principle makes insurance possible?

a.

The principle of risk avoidance

b.

The principle of moral hazard

c.

The principle of risk pooling

d.

The principle of risk retention

Discuss
Answer: (c).The principle of risk pooling Explanation:The mathematical principle that makes insurance possible is the principle of risk pooling.
Q25.
How does the principle of risk pooling work in insurance?

a.

By charging higher premiums to those at higher risk

b.

By excluding high-risk individuals from insurance

c.

By pooling the risks of all insured individuals similarly placed and exposed to the possibility of loss

d.

By refusing to pay claims to those who suffered a loss

Discuss
Answer: (c).By pooling the risks of all insured individuals similarly placed and exposed to the possibility of loss Explanation:The principle of risk pooling in insurance works by pooling the risks of all insured individuals similarly placed and exposed to the possibility of loss.
Q26.
What principle states that the larger the size of the pool of risks, the actual average of losses would be closer to the estimated or expected average loss?

a.

Principle of risk avoidance

b.

Law of small numbers

c.

Principle of moral hazard

d.

Law of large numbers

Discuss
Answer: (d).Law of large numbers Explanation:The "Law of large numbers" states that the larger the size of the pool of risks, the actual average of losses would be closer to the estimated or expected average loss.
Q27.
Why can insurers be more certain about their predictions regarding losses?

a.

Because they charge higher premiums to compensate for losses

b.

Because they exclude high-risk individuals from insurance

c.

Because of the principle of risk avoidance

d.

Because of the "Law of large numbers"

Discuss
Answer: (d).Because of the "Law of large numbers" Explanation:Insurers can be more certain about their predictions regarding losses because of the "Law of large numbers," which states that larger pools of risks lead to actual averages of losses closer to estimated averages.
Q28.
What is the minimum solvency ratio mandated by IRDAI in India for insurance companies?

a.

1.0

b.

1.5

c.

2.0

d.

0.5

Discuss
Answer: (b).1.5 Explanation:In India, IRDAI has mandated that insurers are required to maintain a minimum solvency ratio of 1.5.
Q29.
In the context of insurance, why is it important for insurers to have a large number of insured individuals?

a.

To charge higher premiums

b.

To minimize the risk of loss

c.

To ensure that actual losses match expected losses

d.

To exclude high-risk individuals from insurance

Discuss
Answer: (c).To ensure that actual losses match expected losses Explanation:Having a large number of insured individuals in insurance helps ensure that actual losses match expected losses, as indicated by the "Law of large numbers."
Q30.
What happens if the pools of risks and premium pools created by insurance companies are not sufficient to meet their liabilities towards paying claims?

a.

Insurers become more solvent

b.

The system of risk pooling and insurance may fail

c.

Premiums are increased for all insured individuals

d.

The insured individuals receive higher payouts

Discuss
Answer: (b).The system of risk pooling and insurance may fail Explanation:If the pools of risks and premium pools created by insurance companies are not sufficient to meet their liabilities towards paying claims, the system of risk pooling and insurance may fail.
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