Back  L - Chapter 01 Mock Test

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L - Chapter 01 Mock Test
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Q (1): 

What is the definition of an asset?

1.

 A kind of property that yields value or a return.

2.

 A kind of property that yields value but no return.

3.

 A kind of liability that yields value or a return.

4.

 A kind of liability that yields no value or return.
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Q (2): 

Can both the value and loss of value of most kinds of property be measured in precise monetary terms?

1.

 Yes

2.

 No
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Q (3): 

How do insurers compensate owners for the loss of a damaged car?

1.

 By estimating the cost of repairs.

2.

 By estimating the market value of the car.

3.

 By estimating the damage caused.

4.

 By estimating the cost of a new car.
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Q (4): 

How do we estimate the amount of loss when a person dies?

1.

 By estimating the amount of outstanding debts.

2.

 By estimating the person's net worth.

3.

 By estimating the amount of life insurance coverage.

4.

 By estimating the person's annual income.
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Q (5): 

What is the Human Life Value (HLV) concept based on?

1.

 The total amount of money a person has saved over their lifetime

2.

 An individual’s expected net future earnings

3.

 The number of years a person is expected to live

4.

 The amount of insurance a person has already purchased
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Q (6): 

Why is the HLV concept important for a life insurance agent?

1.

 It is the basis for calculating the agent's commission

2.

 It helps the agent to determine how much insurance to recommend to a customer

3.

 It is required by law for all life insurance sales

4.

 It is used to assess the creditworthiness of a customer
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Q (7): 

How is the economic loss to a family calculated using the HLV concept?

1.

 By subtracting the annual income of the deceased person from the annual expenses of the family

2.

 By subtracting the annual expenses of the family from the annual income of the deceased person

3.

 By multiplying the annual income of the deceased person by the prevailing rate of interest

4.

 By multiplying the annual expenses of the family by the prevailing rate of interest
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Q (8): 

How is the HLV concept calculated using a simple thumb rule?

1.

 By taking into account inflation, wage rise, and future earning capacity

2.

 By determining the amount that would generate the annual income the family would need by way of interest

3.

 By dividing the total amount of money a person has saved over their lifetime by the number of years they are expected to live

4.

 By multiplying the annual income of the breadwinner by the prevailing rate of interest
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Q (9): 

What is the net earnings Mr. Rajan's family would lose if he dies prematurely?

1.

 Rs. 12,000

2.

 Rs. 24,000

3.

 Rs. 96,000

4.

 Rs. 1,20,000
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Q (10): 

What is the rate of interest used in the HLV calculation?

1.

 6%

2.

 7%

3.

 8%

4.

 9%
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Q (11): 

What is the Human Life Value of Mr. Rajan?

1.

 Rs. 1,20,000

2.

 Rs. 8,000

3.

 Rs. 12,00,000

4.

 Rs. 1,44,000
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Q (12): 

What is the purpose of determining HLV?

1.

 To determine how much insurance to recommend to the customer

2.

 To determine the customer's net earnings

3.

 To determine the customer's annual contribution for dependents

4.

 To determine the customer's rate of interest
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Q (13): 

What is the recommended amount of insurance in general?

1.

 2 to 5 times annual income

2.

 5 to 10 times annual income

3.

 10 to 15 times annual income

4.

 15 to 20 times annual income
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Q (14): 

What factor(s) determine the actual amount of insurance purchased?

1.

 The age of the person only

2.

 How much insurance one can afford and would like to buy

3.

 The occupation of the person only

4.

 The marital status of the person only
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Q (15): 

How many kinds of situations are there where loss of value of human life can occur?

1.

 One

2.

 Two

3.

 Three

4.

 Four
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Q (16): 

What does life insurance provide protection against?

1.

 Accidents only

2.

 Theft only

3.

 Risk events that can destroy or reduce the value of human life as an asset

4.

 Natural disasters only
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Q (17): 

What kind of risks are covered by general insurance?

1.

 Risks that affect property

2.

 Risks that affect people

3.

 Risks that affect both property and people

4.

 Risks that are not covered by general insurance
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Q (18): 

What is liability insurance?

1.

 Insurance that covers loss of cargo while at sea

2.

 Insurance that covers motor accidents

3.

 Insurance that covers events leading to loss of name and goodwill

4.

 Insurance that covers liability in case of accidents or damage caused by the insured
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Q (19): 

What are personal risks?

1.

 Risks that affect property

2.

 Risks that affect people

3.

 Risks that affect both property and people

4.

 Risks that are not covered by general insurance
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Q (20): 

What is the main difference between life insurance and general insurance?

1.

 (Life insurance policies are contracts of assurance while general insurance policies are usually contracts of indemnity

2.

 (Life insurance policies provide protection against property risks while general insurance policies provide protection against personal risks

3.

 (Life insurance policies are generally short-term while general insurance policies are generally long-term

4.

 (Life insurance policies cover events leading to loss of name and goodwill while general insurance policies do not.
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Q (21): 

What is the uncertainty associated with general insurance contracts?

1.

 (The amount of benefit to be paid in the event of death is fixed at the beginning of the contract.

2.

 (The concerned risk event is uncertain.

3.

 (The probability of happening of the event increases with time.

4.

 (General insurance policies are contracts of assurance.
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Q (22): 

What is the difference between life insurance and general insurance?

1.

 Life insurance policies are contracts of assurance, while general insurance policies are contracts of indemnity.

2.

 Life insurance policies are contracts of indemnity, while general insurance policies are contracts of assurance.

3.

 Life insurance policies provide protection against risks that can destroy or reduce the value of human life, while general insurance policies provide protection against risks that can affect property.

4.

 Life insurance policies provide protection against risks that can affect property, while general insurance policies provide protection against risks that can destroy or reduce the value of human life.
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Q (23): 

How does level premium work in life insurance?

1.

 Premiums increase with age to cover death claims of those dying at higher ages.

2.

 Premiums decrease with age to cover death claims of those dying when young.

3.

 Premiums are fixed and do not increase with age but remain constant throughout the contract period.

4.

 Premiums are not required in life insurance contracts.
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Q (24): 

Why are level premiums required in life insurance contracts?

1.

 Because life insurance policies are contracts of indemnity.

2.

 Because life insurance policies are typically short term and expire annually.

3.

 Because life insurance policies are long term insurance contracts that run for many years.

4.

 Because life insurance policies do not cover risks that can affect property.
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Q (25): 

What is the basis for arriving at the level premium rate in life insurance policies?

1.

 Market trends and competition

2.

 The insurer's profit margin

3.

 The mortality during the term of the policy

4.

 The age of the insured at the time of policy issuance
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Q (26): 

What is the purpose of the Principle of Pooling in life insurance?

1.

 To provide protection against economic loss due to untimely death

2.

 To increase the profit margin of insurance companies

3.

 To make life insurance policies affordable for everyone

4.

 To reduce the risk of premature death
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Q (27): 

What is the policy document in a life insurance contract?

1.

 The evidence of the insurance contract

2.

 The sum assured of the life insurance policy

3.

 The savings component of the policy

4.

 The mortality rate of the policyholders
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Q (28): 

What does the guarantee in life insurance imply?

1.

 Life insurance is a financial security

2.

 The sum insured is not guaranteed

3.

 Life insurance is not managed efficiently

4.

 The policy document is not required
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Q (29): 

How are life insurance contracts often compared?

1.

 With general insurance policies

2.

 With savings and financial products

3.

 With mutual funds and stocks

4.

 With health insurance policies
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Q (30): 

What is the savings component in many life insurance products?

1.

 A small part of an individual's savings

2.

 A separate policy from the risk cover

3.

 A significant part of an individual's savings

4.

 A term insurance policy
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Q (31): 

What is an advantage of insurance as an investment option?

1.

 Higher rate of return compared to other investment options

2.

 Regularity of premium payments encourages spending discipline

3.

 Limited investment options available

4.

 Low liquidity
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Q (32): 

What advantage does an individual have by taking a loan on or surrendering their insurance policy?

1.

 Guaranteed minimum rate of return

2.

 Professional investment management by the insurer

3.

 Income tax benefits

4.

 Protection from creditors’ claims
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Q (33): 

Under what circumstances may insurance be safe from creditors’ claims?

1.

 When the policy is surrendered for cash

2.

 In the event of the insured’s bankruptcy or death

3.

 When the policy is not converted into cash

4.

 When the policy has a low cash value
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Q (34): 

What advantage may be enjoyed by both cash value type life insurance and annuities?

1.

 Higher rate of return compared to other investment options

2.

 Regularity of premium payments encourages savings discipline

3.

 Some income tax advantages

4.

 Professional investment management by the insurer
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Q (35): 

Which concept measures the value of human life based on an individual’s expected net future earnings?

1.

 Diversification

2.

 HLV

3.

 Mutuality

4.

 Guarantee
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Q (36): 

What is an asset?

1.

 A type of liability

2.

 A type of insurance

3.

 A kind of property that yields value or a return

4.

 A type of debt
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Q (37): 

What is the level premium?

1.

 A premium that decreases with age

2.

 A premium that increases with age

3.

 A premium that remains constant throughout the contract period

4.

 A premium that is paid only once
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Q (38): 

What is Mutuality?

1.

 A type of insurance

2.

 A concept to reduce risk in financial markets

3.

 A type of liability

4.

 A type of asset
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Q (39): 

What does the element of guarantee in a life insurance contract imply?

1.

 Life insurance is unregulated

2.

 Life insurance is subject to lenient regulation

3.

 Life insurance is subject to stringent regulation and strict supervision

4.

 Life insurance is guaranteed to provide high returns
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