Question 1

In a "Unit Linked Insurance Plan" (ULIP), the investment risk is borne by:

The Insurance CompanyIRDAIThe Bank selling the policyThe Policyholder (Investor)

View 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.

Question 2

The principle of "Uberrimae Fidei" in insurance contracts means:

Indemnity.Insurable Interest.Utmost Good Faith.Let the buyer beware.

View 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.

Question 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)?

Term InsuranceEndowment PolicyMoney Back PolicyWhole Life Insurance

View 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.

Question 4

The "Principle of Indemnity" ensures that the insured is compensated only to the extent of the loss. This principle does NOT apply to:

Marine InsuranceFire InsuranceMotor InsuranceLife Insurance

View 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.

Question 5

In "Treaty Reinsurance":

The reinsurer is not obliged to accept risks.It applies only to life insurance.Each individual risk is negotiated separately.The primary insurer and reinsurer agree to cede and accept all risks falling within specific pre-agreed parameters automatically.

View Explanation

Unlike Facultative Reinsurance (case-by-case), Treaty Reinsurance is an automatic agreement covering a block of business.

Question 6

What is the mandatory lock-in period for a Unit Linked Insurance Plan (ULIP)?

5 YearsNo lock-in3 Years10 Years

View 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).

Question 7

In Motor Insurance, "Third Party Liability" cover is:

Mandatory by law.Available only for commercial vehicles.Covered only in comprehensive policies.Optional.

View 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.

Question 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.

View 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.

Question 9

The "No Claim Bonus" (NCB) in motor insurance is a discount given on:

Third-party liability premiumRegistration chargesService tax componentOwn Damage (OD) premium

View 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.

JAIIB Quiz

Quiz Finished!