Principles and Practice of Life Insurance - Practice Test 1, dated 17 Feb.

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Assignment: Write the answers on a separate sheet and submit hard copy or scanned
softcopy by 22nd February 2022. (Post softcopy in PPLI channel in MS Teams.)

1) Find the following references in the list given below:

(a) UNCERTAINTY (b) RISK (c) HAZARD (d) PERIL (e) LOSS

EXPLANATION /EXAMPLE WRITE ANSWER BELOW

(i) Condition that increases risk
(ii) Exposure to risk or danger
(iii) Chance that an outcome will be different from expectation.
(iv) Physical or property damage
(v) Lack of certainty about an event
(vi) Floods, Earthquake
(vii) Smoking
(viii) Death of head of family
(ix) Volcanic eruption
(x) Excessive medical expenses

2) Tick the characteristics, examples of Pure Risks from below?

(i) Loss is the only possible outcome

(ii) No possibility of profit
(iii) Gains or losses may occur
(iv) Single event resulting in large number of deaths
(v) Interest rate fluctuation

3) Tick all the pure risks in the following list.

(i) Living too short

(ii) Fire accident
(iii) Burglary, house break
(iv) Earth quake

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 (v) Loss of share value
(vi) Living too long
(vii) Injury to worker in your factory

4) Which of the following can be ‘Insured’?

(i) Speculative risks

(ii) Catastrophic risks
(iii) Personal risks
(iv) Property risks
(v) Liability risks

(vi) Name the regulator for insurance industry in India?

(a) Insurance Regulatory and Development Authority of India

(b) Life Insurance Corporation of India
(c) General Insurance Corporation of India
(d) Insurance Institute of India

(vii) Insurance is a method of risk ___________?

(a) Mitigation (b) transfer (c) avoidance (d) retention

7) Write the correct answers in an insurance contract?

(i) CUSTOMER (ii) PREMIUM (iii) INSURER
(a) Proposer/ who makes the proposal or offer _____________
(b) Acceptance ____________
(c) Consideration ______________

8) Mr. Vijay wants to take insurance policies for the following, which is NOT acceptable and why?

(a) On the name of his wife

(b) On the name of his daughter
(c) On the name of his teacher
(d) On his own life

Reason_________________________

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9) Mr. Prajwal, aged 45 years, seeks to take insurance on his own life. As he was aware that he
would be charged extra for health issues. He hides the information about his sugar and BP
problems. However, insurer comes to know about it through other sources.

Which principle of insurance is violated in this case? What would happen next?

10) Mr. Parthu has taken a term life insurance policy in the year 2015 for ten years with a Sum
Assured of Rs. 10 lakhs. He has paid premiums regularly. In the year 2020 he died because of
Covid 19.
His family approached the insurance company for compensation of Rs. 10 lakhs. Give the reason
for rejection of claim.

11) Mr. Narsing is a daily wage labourer, with little income. His savings are very less and wants to
protect his family’s financial future. He approached you to suggest a suitable insurance with
bare minimum premium. What would you suggest from the following?

(a) Endowment policy (b) Term insurance policy (c) Whole life policy (d) Annuity plan

12) Which of the following is NOT a participating policy?

(a) Endowment policy (b) Term policy (c) Whole life policy (d) Money back policy

13) Which of the following proposal is likely to be rejected by a life insurance company?

(a) An 18 year old student studying pursuing graduation

(b) A housewife with no income
(c) A person who suffered second heart stroke
(d) A person who has diabetes

14) A person after taking life insurance has become negligent towards taking precautions and thus
developed diabetes and blood pressure. This is a case of ________ hazard.

(a) legal (b) moral (c) physical (d) health

15) Write at least five factors affecting insurability in a life insurance proposal?

Match the following functions in insurance firm. Qn.16 to 20

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 (i) Sales (ii) Underwriting (iii) Policy servicing (iv) Rate making
(v) Claims

16) Determining whether or not to accept the proposal and then at what T&C ________
17) Promoting insurance business and acquiring prospective customers _____________
18) Processing the forms received from customers seeking payment ________________
19) Developing ‘premium tables’ for various insurance products ___________________
20) Maintain proper records of the customers, arranging renewal reminders__________

After taking insurance sometimes, person may feel that they could not get any benefit as no
untoward incident happened. Actually insurance also covered the Secondary Burden of Rsik that
is, it saved the anxiety, tension and mental strain of the insured.

The insured could effectively use his/her time in making more progress in life. Had he/she not
taken insurance, ofcourse nothing went wrong during the said period, but some where they
would have had a fear that their hard earned money and saving would have to disposed off to
provide safety and financial security to their loved ones.

Thus Insurance premium provides solution or financial cover to primary and secondary burden
of risk.
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(i)
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Which of the following risk/s can be covered by insurance?

(i) Loss of vehicle
(ii) Untimely death of breadwinner in the family
(iii) Depreciation of the house in 30 years period
(iv) Loss of funds in share market

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Pavan and Bhuvan each had Rs. 20 lakhs extra money. They wanted to save money. Pavan saved Rs. 15
lakhs in FDs, Gold, Mutual funds and Rs. 5 lakhs he has purchased insurance. Bhuvan saved Rs. 20 lakhs
in FD, Gold, MFs, Real Estate. Who do you think has taken a wise decision and why?

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religion is being and becoming. Swami Vivekananda