L05 Applications of Life Insurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on L05 Applications of Life 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 L05 Applications of Life Insurance MCQs are designed to help you grasp the core concepts and excel in solving problems.

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L05 Applications of Life Insurance MCQs | Page 1 of 2

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Q1.
Under Section 6 of the Married Women's Property Act, what is the purpose of creating a trust when a married man takes a life insurance policy?

a.

To ensure the proceeds benefit the husband's creditors

b.

To provide financial security for the wife and children

c.

To allow the husband full control of the policy

d.

To prevent the wife from accessing the policy proceeds

Discuss
Answer: (b).To provide financial security for the wife and children Explanation:Section 6 of the Married Women's Property Act aims to ensure that the benefits of a life insurance policy pass securely to the wife and children through the creation of a trust for their benefit.
Q2.
What happens to the proceeds of a life insurance policy held under the Married Women's Property Act as long as the trust's objectives remain?

a.

The proceeds become part of the husband's estate

b.

The proceeds are subject to court attachments

c.

The proceeds are beyond the control of the husband or his creditors

d.

The husband can access the proceeds at any time

Discuss
Answer: (c).The proceeds are beyond the control of the husband or his creditors Explanation:Under the Married Women's Property Act, as long as the trust's objectives remain, the proceeds of the life insurance policy are beyond the control of the husband or his creditors.
Q3.
What is the significance of appointing a trustee for a life insurance policy under the MWP Act?

a.

To surrender the policy

b.

To allow the policyholder full control of the proceeds

c.

To ensure that the policy can be assigned to another person

d.

To administer the trust property, including investing the insurance proceeds on behalf of the beneficiaries

Discuss
Answer: (d).To administer the trust property, including investing the insurance proceeds on behalf of the beneficiaries Explanation:Appointing a trustee for a life insurance policy under the MWP Act is important to administer the trust property, including investing the insurance proceeds on behalf of the beneficiaries.
Q4.
What happens if a policyholder does not appoint a special trustee for a policy under the MWP Act?

a.

The policy cannot be enforced

b.

The policy becomes void

c.

The sum secured under the policy is paid to the Official Trustee of the State

d.

The policy proceeds are subject to court attachments

Discuss
Answer: (c).The sum secured under the policy is paid to the Official Trustee of the State Explanation:If a policyholder does not appoint a special trustee to administer the benefits under the policy, the sum secured under the policy becomes payable to the Official Trustee of the State.
Q5.
What is the main benefit of setting up a trust under the Married Women's Property Act for life insurance policies?

a.

To ensure the policyholder's control over the policy

b.

To allow the policy to be surrendered at any time

c.

To prevent the beneficiaries from accessing the benefits

d.

To secure the policy benefits from passing to future creditors

Discuss
Answer: (d).To secure the policy benefits from passing to future creditors Explanation:The main benefit of setting up a trust under the Married Women's Property Act is to secure the policy benefits from passing to future creditors.
Q6.
What is the primary purpose of Key-man Insurance for businesses?

a.

To compensate the key person for their financial losses

b.

To provide life insurance for all employees

c.

To protect profits and offset losses in the event of a key person's death or incapacity

d.

To indemnify the company for any financial losses

Discuss
Answer: (c).To protect profits and offset losses in the event of a key person's death or incapacity Explanation:Key-man Insurance is taken by businesses to protect profits and offset losses that may occur due to the death or incapacity of a key person.
Q7.
What is the primary purpose of Key-man Insurance for businesses?How is Keyman Insurance different from traditional life insurance?

a.

To compensate the key person for their financial lossesIt is used to insure all employees of the company

b.

To provide life insurance for all employeesIt compensates with a fixed monetary sum

c.

To protect profits and offset losses in the event of a key person's death or incapacityIt is paid for by the key person

d.

To indemnify the company for any financial lossesIt only covers business-related losses

Discuss
Answer: (b).To protect profits and offset losses in the event of a key person's death or incapacityIt compensates with a fixed monetary sum Explanation:Key-man Insurance is taken by businesses to protect profits and offset losses that may occur due to the death or incapacity of a key person.Keyman Insurance compensates with a fixed monetary sum, which is different from traditional life insurance policies that may pay variable amounts.
Q8.
Who can be considered a key person in the context of Key-man Insurance?

a.

Any employee of the company

b.

Only individuals with high personal income

c.

Directors, partners, salespersons, and others vital to the business

d.

Individuals with no specific skills or knowledge

Discuss
Answer: (c).Directors, partners, salespersons, and others vital to the business Explanation:A key person in the context of Key-man Insurance can be directors, partners, salespersons, and individuals whose loss can have a significant financial impact on the business.
Q9.
What type of losses can Keyman Insurance provide compensation for?

a.

Personal losses of the key person

b.

Company losses unrelated to the key person

c.

Losses related to business projects and lost income

d.

Losses due to company expansions

Discuss
Answer: (c).Losses related to business projects and lost income Explanation:Keyman Insurance can provide compensation for losses related to business projects, lost income, and other losses caused by the key person's incapacity or death.
Q10.
Who pays the premium for Keyman Insurance?

a.

The key person

b.

The government

c.

The beneficiaries

d.

The company or business

Discuss
Answer: (d).The company or business Explanation:The premium for Keyman Insurance is typically paid by the company or business that is insuring the key person.
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