MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO LAWS RELATING TO INSURANCE IN INDIA
What does Value at Risk (VaR) represent in insurance?
a) The maximum amount an insurer will pay out
b) The minimum amount an insurer will pay out
c) The amount of risk an insurer is willing to take
d) The potential loss an insurer faces within a specific timeframe at a given confidence level
Answer: d) The potential loss an insurer faces within a specific timeframe at a given confidence level
What does “sum insured” refer to in insurance policies?
a) The total premium paid by the insured
b) The total amount an insurer agrees to pay in case of a claim
c) The value of the insured property or asset
d) The compensation paid by the insured to the insurer
Answer: c) The value of the insured property or asset
When does the condition of average come into play in insurance?
a) When the insured fails to pay the premium on time
b) When the insured property is damaged but underinsured
c) When the insurer fails to settle a claim within the stipulated time
d) When the insured property is damaged beyond repair
Answer: b) When the insured property is damaged but underinsured
What is over-insurance in the context of insurance policies?
a) When the insured property is valued lower than its actual worth
b) When the insured pays excessive premiums for coverage
c) When the insured property is damaged beyond repair
d) When the insurer fails to settle a claim within the stipulated time
Answer: b) When the insured pays excessive premiums for coverage
How do insurance policies typically account for inflation?
a) By adjusting the premium annually
b) By providing coverage based on the depreciated value of the insured property
c) By indexing the sum insured to inflation
d) By excluding coverage for inflation-related losses
Answer: c) By indexing the sum insured to inflation
Which of the following factors is considered under the provision of depreciation in insurance?
a) Increase in the value of the insured property over time
b) Decrease in the value of the insured property due to age or wear and tear
c) Increase in the premium amount over time
d) Decrease in the premium amount due to a lack of claims
Answer: b) Decrease in the value of the insured property due to age or wear and tear
What does the provision of obsolescence refer to in insurance?
a) Compensation for damages caused by outdated technology
b) Compensation for damages caused by natural disasters
c) Increase in the value of the insured property over time
d) Decrease in the value of the insured property due to technological advancements
Answer: d) Decrease in the value of the insured property due to technological advancements
In insurance, what does the term “betterment” typically indicate?
a) Improvement or enhancement of the insured property
b) A reduction in the premium amount over time
c) An increase in the value of the insured property due to depreciation
d) A decrease in the value of the insured property due to inflation
Answer: a) Improvement or enhancement of the insured property
Which of the following provisions is NOT typically found in insurance policies?
a) Coverage for depreciation
b) Coverage for betterment
c) Coverage for obsolescence
d) Coverage for inflation
Answer: d) Coverage for inflation
How does under-insurance affect the insured in the event of a claim?
a) The insured receives the full claim amount regardless of the value of the insured property
b) The insured receives only a portion of the claim amount, proportional to the degree of under-insurance
c) The insured receives compensation for damages caused by natural disasters
d) The insured receives compensation for damages caused by depreciation
Answer: b) The insured receives only a portion of the claim amount, proportional to the degree of under-insurance
In insurance, what is the purpose of “endorsements”?
a) To cancel an existing insurance policy
b) To modify the terms and conditions of an existing insurance policy
c) To renew an existing insurance policy
d) To file a claim with the insurance company
Answer: b) To modify the terms and conditions of an existing insurance policy
Which of the following is an example of a peril covered by insurance?
a) Routine maintenance costs
b) Losses due to war or nuclear hazards
c) Damages caused by intentional acts of the insured
d) Damages caused by wear and tear
Answer: b) Losses due to war or nuclear hazards
What is the primary function of an insurance policy’s “deductible”?
a) To reduce the premium amount payable by the insured
b) To specify the maximum coverage limit of the policy
c) To specify the minimum amount the insured must pay before the insurer covers the remaining loss
d) To determine the compensation amount payable to the insured in case of a claim
Answer: c) To specify the minimum amount the insured must pay before the insurer covers the remaining loss
Which type of insurance covers legal liabilities arising from bodily injury or property damage to third parties?
a) Health insurance
b) Life insurance
c) Liability insurance
d) Property insurance
Answer: c) Liability insurance
How does the “exclusion clause” in an insurance policy affect coverage?
a) It provides additional coverage beyond the policy limits
b) It specifies certain risks or conditions that are not covered by the policy
c) It allows the insured to cancel the policy at any time
d) It determines the premium amount payable by the insured
Answer: b) It specifies certain risks or conditions that are not covered by the policy
What does the term “subrogation” mean in insurance?
a) The process of transferring the rights of the insured to the insurer after a claim is settled
b) The process of determining the premium amount payable by the insured
c) The process of renewing an existing insurance policy
d) The process of assessing the value of the insured property
Answer: a) The process of transferring the rights of the insured to the insurer after a claim is settled
Which type of insurance provides coverage for damage or loss of movable property?
a) Fire insurance
b) Marine insurance
c) Motor insurance
d) Health insurance
Answer: c) Motor insurance
What is the purpose of reinsurance in the insurance industry?
a) To transfer risks from the insurer to the insured
b) To transfer risks from the insured to the reinsurer
c) To transfer risks from the reinsurer to the insurer
d) To transfer risks from one insurer to another insurer
Answer: c) To transfer risks from the reinsurer to the insurer
Which regulatory body oversees the insurance sector in India?
a) Reserve Bank of India (RBI)
b) Securities and Exchange Board of India (SEBI)
c) Insurance Regulatory and Development Authority of India (IRDAI)
d) Ministry of Finance
Answer: c) Insurance Regulatory and Development Authority of India (IRDAI)
What does the term “indemnity” mean in the context of insurance?
a) Compensation provided by the insured to the insurer
b) Compensation provided by the insurer to the insured for covered losses
c) Compensation provided by the reinsurer to the insurer
d) Compensation provided by the insurer to the reinsurer
Answer: b) Compensation provided by the insurer to the insured for covered losses
What does the term “no-claim bonus” refer to in insurance?
a) A bonus provided to the insured for not filing any claims during the policy period
b) Additional coverage provided by the insurer for specific claims
c) A penalty imposed on the insured for frequent claims
d) A bonus provided to the insurer for settling claims promptly
Answer: a) A bonus provided to the insured for not filing any claims during the policy period
Which type of insurance provides coverage for medical expenses incurred by the insured?
a) Health insurance
b) Life insurance
c) Property insurance
d) Liability insurance
Answer: a) Health insurance
What does the term “underwriting” refer to in the insurance industry?
a) The process of assessing and accepting risks for insurance coverage
b) The process of settling claims made by the insured
c) The process of calculating the premium amount payable by the insured
d) The process of renewing an existing insurance policy
Answer: a) The process of assessing and accepting risks for insurance coverage
Which of the following is NOT a type of life insurance policy?
a) Term insurance
b) Whole life insurance
c) Endowment insurance
d) Third-party insurance
Answer: d) Third-party insurance
What is the purpose of the “free look period” in insurance policies?
a) To allow the insured to cancel the policy and receive a refund within a specified period
b) To allow the insurer to review the policy terms and conditions before issuing coverage
c) To allow the insured to switch to a different insurance provider without penalties
d) To allow the insurer to offer additional coverage options to the insured
Answer: a) To allow the insured to cancel the policy and receive a refund within a specified period
Which type of insurance covers losses arising from damage to crops due to natural disasters?
a) Crop insurance
b) Fire insurance
c) Marine insurance
d) Aviation insurance
Answer: a) Crop insurance
What is the purpose of a “rider” in insurance policies?
a) To exclude specific risks from the coverage provided by the policy
b) To provide additional coverage options or benefits to the insured
c) To transfer the rights of the insured to the insurer after a claim is settled
d) To determine the premium amount payable by the insured
Answer: b) To provide additional coverage options or benefits to the insured
Which of the following factors is NOT typically considered when calculating insurance premiums?
a) Age of the insured
b) Occupation of the insured
c) Gender of the insured
d) Color of the insured’s car
Answer: d) Color of the insured’s car
What is the purpose of the “grace period” in insurance policies?
a) To allow the insured to switch to a different insurance provider without penalties
b) To provide additional coverage options or benefits to the insured
c) To allow the insured to pay the premium after the due date without coverage lapsing
d) To allow the insurer to review the policy terms and conditions before issuing coverage
Answer: c) To allow the insured to pay the premium after the due date without coverage lapsing
Which type of insurance provides coverage for losses arising from theft or burglary?
a) Theft insurance
b) Burglary insurance
c) Property insurance
d) Fire insurance
Answer: c) Property insurance
What does the term “cash value” represent in life insurance policies?
a) The amount of cash the insured receives upon policy renewal
b) The total premium paid by the insured over the policy period
c) The amount of money the insured receives if the policy is surrendered before maturity
d) The sum insured payable to the beneficiaries upon the insured’s death
Answer: c) The amount of money the insured receives if the policy is surrendered before maturity
Which type of insurance provides coverage for damage or loss of goods during transit?
a) Marine insurance
b) Fire insurance
c) Crop insurance
d) Life insurance
Answer: a) Marine insurance
What does the term “insurable interest” refer to in insurance?
a) The maximum amount an insurer will pay out
b) The minimum amount an insurer will pay out
c) The financial interest that the insured must have in the insured property or person
d) The process of assessing and accepting risks for insurance coverage
Answer: c) The financial interest that the insured must have in the insured property or person
Which type of insurance provides coverage for damage or loss of residential or commercial properties due to fire?
a) Fire insurance
b) Theft insurance
c) Liability insurance
d) Health insurance
Answer: a) Fire insurance
What does the term “claims settlement ratio” indicate in insurance?
a) The ratio of claims filed by the insured to claims settled by the insurer
b) The ratio of premiums collected by the insurer to claims settled by the insurer
c) The ratio of claims settled by the insurer to claims rejected by the insurer
d) The ratio of premiums collected by the insurer to policies sold by the insurer
Answer: c) The ratio of claims settled by the insurer to claims rejected by the insurer
Which type of insurance provides coverage for damage or loss of valuable items such as jewelry, artwork, or antiques?
a) Personal accident insurance
b) Travel insurance
c) Home insurance
d) Valuables insurance
Answer: d) Valuables insurance
What does the term “waiting period” refer to in insurance policies?
a) The period during which the insured must wait before filing a claim
b) The period during which the insured must wait before coverage becomes effective
c) The period during which the insured must wait before renewing the policy
d) The period during which the insured must wait before the insurer settles a claim
Answer: b) The period during which the insured must wait before coverage becomes effective
Which type of insurance provides coverage for damage or loss of electronic equipment such as computers, laptops, and smartphones?
a) Electronic equipment insurance
b) Cyber insurance
c) Home insurance
d) Health insurance
Answer: a) Electronic equipment insurance
What does the term “adverse selection” refer to in insurance?
a) The process of selecting the most suitable insurance policy for the insured
b) The process of selecting the most suitable insurance provider for the insured
c) The tendency of high-risk individuals to seek insurance more than low-risk individuals
d) The tendency of low-risk individuals to seek insurance more than high-risk individuals
Answer: c) The tendency of high-risk individuals to seek insurance more than low-risk individuals
Which type of insurance provides coverage for damage or loss of goods stored in warehouses or storage facilities?
a) Warehouse insurance
b) Storage insurance
c) Marine insurance
d) Property insurance
Answer: a) Warehouse insurance
What does the term “policyholder” refer to in insurance?
a) The insurance agent selling the policy
b) The beneficiary of the insurance policy
c) The individual or entity that owns the insurance policy
d) The insurance company issuing the policy
Answer: c) The individual or entity that owns the insurance policy
Which type of insurance provides coverage for medical expenses incurred during international travel?
a) Health insurance
b) Travel insurance
c) Life insurance
d) Motor insurance
Answer: b) Travel insurance
What does the term “pre-existing condition” mean in health insurance?
a) A condition that develops after purchasing the insurance policy
b) A condition that is excluded from coverage due to its existence before the policy’s inception
c) A condition that is automatically covered under the policy
d) A condition that requires immediate medical attention
Answer: b) A condition that is excluded from coverage due to its existence before the policy’s inception
Which type of insurance provides coverage for damage or loss of livestock?
a) Livestock insurance
b) Animal insurance
c) Agriculture insurance
d) Property insurance
Answer: a) Livestock insurance
What does the term “actuary” refer to in insurance?
a) A person responsible for investigating insurance claims
b) A person responsible for selling insurance policies
c) A person responsible for calculating insurance risks and premiums
d) A person responsible for enforcing insurance regulations
Answer: c) A person responsible for calculating insurance risks and premiums
Which type of insurance provides coverage for legal expenses incurred during lawsuits?
a) Legal insurance
b) Litigation insurance
c) Liability insurance
d) Professional indemnity insurance
Answer: c) Liability insurance
What does the term “endorsement” mean in insurance policies?
a) A document issued by the insured acknowledging coverage terms
b) A modification or amendment to the terms and conditions of an insurance policy
c) A statement provided by the insurer detailing claim settlement procedures
d) A form of additional coverage provided by the insurer
Answer: b) A modification or amendment to the terms and conditions of an insurance policy
Which type of insurance provides coverage for damage or loss of valuable documents?
a) Document insurance
b) Records insurance
c) Legal insurance
d) Professional indemnity insurance
Answer: a) Document insurance
What does the term “moral hazard” refer to in insurance?
a) The risk associated with natural disasters
b) The tendency of individuals to engage in risky behavior knowing they are insured
c) The uncertainty surrounding future events
d) The likelihood of insurance fraud occurring
Answer: b) The tendency of individuals to engage in risky behavior knowing they are insured
Which type of insurance provides coverage for damage or loss of valuable crops?
a) Crop insurance
b) Agricultural insurance
c) Farm insurance
d) Livestock insurance
Answer: a) Crop insurance
