1. In a "Unit Linked Insurance Plan" (ULIP), the investment risk is borne by:
The Policyholder (Investor)
The Bank selling the policy
IRDAI
The Insurance Company
Explanation:
ULIPs combine insurance and investment. The premiums are invested in market-linked funds (equity/debt), and the value of the corpus fluctuates with market performance. Thus, the investment risk lies with the policyholder.
2. The principle of "Uberrimae Fidei" in insurance contracts means:
Utmost Good Faith.
Indemnity.
Let the buyer beware.
Insurable Interest.
Explanation:
Insurance contracts require "Utmost Good Faith," meaning both the insurer and the insured must disclose all material facts relevant to the risk. Hiding information can lead to the policy being voided.
3. Which type of life insurance policy provides coverage for a specific period and pays out ONLY if the policyholder dies during that term (no maturity benefit)?
Whole Life Insurance
Endowment Policy
Money Back Policy
Term Insurance
Explanation:
Term Insurance is a pure protection plan. It offers a high sum assured at a low premium because there is no savings or investment component, and no payout if the insured survives the term.
4. The "Principle of Indemnity" ensures that the insured is compensated only to the extent of the loss. This principle does NOT apply to:
Life Insurance
Motor Insurance
Marine Insurance
Fire Insurance
Explanation:
Life Insurance is not a contract of indemnity because human life cannot be valued in monetary terms. The sum assured is paid regardless of the actual financial "loss" caused by death.
5. In "Treaty Reinsurance":
It applies only to life insurance.
The primary insurer and reinsurer agree to cede and accept all risks falling within specific pre-agreed parameters automatically.
Each individual risk is negotiated separately.
The reinsurer is not obliged to accept risks.
Explanation:
Unlike Facultative Reinsurance (case-by-case), Treaty Reinsurance is an automatic agreement covering a block of business.
6. What is the mandatory lock-in period for a Unit Linked Insurance Plan (ULIP)?
3 Years
10 Years
5 Years
No lock-in
Explanation:
Current regulations mandate a 5-year lock-in period for ULIPs, during which the policyholder cannot withdraw funds without surrendering the policy (with charges).
7. In Motor Insurance, "Third Party Liability" cover is:
Mandatory by law.
Available only for commercial vehicles.
Covered only in comprehensive policies.
Optional.
Explanation:
Under the Motor Vehicles Act, Third Party Liability insurance is mandatory for all vehicles plying on public roads. It covers liability for death/injury to a third party or damage to third-party property.
8. In a ULIP, the "Mortality Charge" is deducted to cover:
The commission paid to the agent.
The fund management expenses.
The cost of providing life insurance cover (death benefit).
The administrative costs of the policy.
Explanation:
Mortality charge is the cost of insurance protection. It is deducted from the fund value by cancelling units and depends on the sum assured and the age of the policyholder.
9. The "No Claim Bonus" (NCB) in motor insurance is a discount given on:
Third-party liability premium
Service tax component
Registration charges
Own Damage (OD) premium
Explanation:
NCB is a reward for not making a claim in the preceding year(s). It applies only to the Own Damage component of the premium, not the mandatory Third-Party component.