I85PREP
⌘ K
IRDAI POSP Life study materials
IRDAI POSP Life study resources

IRDAI POSP Life practice questions

One question at a time. Build your IRDAI POSP Life understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Life Insurance Products and Terms and Conditions

Under a traditional whole life insurance policy, what is the primary characteristic of the death benefit?

  1. It is payable only after the policyholder survives to a stated maturity age
  2. It is payable whenever death occurs, subject to policy terms being in force Correct answer.
  3. It is payable only if the policyholder dies in an accident
  4. It is payable only if death occurs within a fixed term of years

Explanation

Whole life insurance provides cover for the entire lifetime of the life assured, so the sum assured becomes payable on death whenever it occurs, provided the policy is in force and premiums are paid. It has no fixed expiry date for the risk cover, unlike term insurance.

Question 2Life Insurance Products and Terms and Conditions

In a term insurance policy, the nominee receives the sum assured only when:

  1. The life assured survives the policy term
  2. The life assured dies during the policy term while the policy is in force Correct answer.
  3. The policyholder surrenders the policy after three years
  4. The policyholder takes a loan against the policy

Explanation

Term insurance is pure risk cover: the benefit is triggered by death of the life assured during the term, with the policy in force. Survival to the end of the term normally produces no maturity payment in a pure term plan.

Question 3Life Insurance Products and Terms and Conditions

A money-back policy differs from an ordinary endowment policy mainly because it:

  1. Pays survival benefits in instalments during the term and the balance on maturity Correct answer.
  2. Has no death benefit component at all
  3. Pays nothing at maturity under any circumstances
  4. Can be issued only to persons above sixty years of age

Explanation

Money-back plans return a percentage of the sum assured at specified intervals during the policy term, with the remaining amount paid on maturity or on earlier death. An ordinary endowment pays a single lump sum at maturity.

Question 4Life Insurance Products and Terms and Conditions

What does the free-look period in a life insurance policy allow the policyholder to do?

  1. Cancel the policy at any time during the entire policy term with a full refund
  2. Return the policy within the stated period if the terms are not acceptable and receive a refund as per policy conditions Correct answer.
  3. Transfer the policy to another insurer without any formalities
  4. Delay payment of the first premium without losing cover

Explanation

The free-look period gives the policyholder a defined window after receipt of the policy document to review the terms and return the policy if dissatisfied, with the premium refunded after permitted deductions. It is a one-time review right, not a general cancellation facility.

Question 5Life Insurance Products and Terms and Conditions

A policyholder stops paying premiums and the policy lapses. What does the revival provision allow?

  1. Automatic restoration of cover without any payment or evidence
  2. Transfer of the sum assured to a different life assured
  3. Conversion of the policy into a fixed deposit receipt
  4. Restoration of the policy by paying arrears and satisfying the insurer's revival conditions within the permitted period Correct answer.

Explanation

Revival, also called reinstatement, permits a lapsed policy to be restored by payment of outstanding premiums with interest and, where required, evidence of continued insurability, within the revival period allowed by the policy. It is not automatic.

Question 6Life Insurance Products and Terms and Conditions

In life insurance terminology, the person whose life is covered by the policy is called the:

  1. Life assured Correct answer.
  2. Policyholder's agent
  3. Assignee
  4. Nominee

Explanation

The life assured is the individual on whose life the risk is underwritten and whose death or survival triggers the benefit. The policyholder may be a different person, for example a parent insuring a child.

Question 7Life Insurance Products and Terms and Conditions

Which of the following is the standard treatment of a suicide death occurring within the exclusion period stated in a life insurance policy?

  1. The full sum assured is always payable to the nominee
  2. The insurer may be liable only for a limited refund or specified amount as per the policy clause Correct answer.
  3. The claim is payable only if the nominee files a police complaint
  4. The insurer must pay double the sum assured

Explanation

Life insurance policies typically contain a suicide exclusion for an initial period, during which the insurer's liability is limited to a refund of premiums or a specified amount rather than the full sum assured. After that period the exclusion no longer applies.

Question 8Life Insurance Products and Terms and Conditions

Under a with-profit (participating) life insurance policy, what does the policyholder receive?

  1. A fixed interest rate guaranteed at the outset and unrelated to the insurer's results
  2. Ownership shares of the insurance company listed on a stock exchange
  3. A refund of all premiums paid at the end of every year
  4. A share of the insurer's surplus declared as bonuses in the manner stated in the policy Correct answer.

Explanation

Participating policies entitle the policyholder to bonuses declared out of the surplus of the participating fund, as provided in the policy. Bonuses may be simple reversionary, compound reversionary or terminal, depending on the product.

Question 9Life Insurance Products and Terms and Conditions

A policyholder wants the sum assured to be paid in monthly instalments to the nominee rather than as one lump sum. Which policy feature addresses this need?

  1. An assignment of the policy in favour of the insurer
  2. A settlement option for payment of the claim in instalments Correct answer.
  3. A reduction in the sum assured at inception
  4. A change of the premium payment mode from annual to monthly

Explanation

Settlement options allow the nominee to receive the claim proceeds in instalments, such as a fixed period or fixed amount arrangement, instead of a single payment. The premium payment mode affects how premiums are paid and is unrelated to claim payout structure.

Question 10Life Insurance Products and Terms and Conditions

A rider attached to a life insurance policy is best described as:

  1. A supplementary benefit attached to the base policy for an additional premium Correct answer.
  2. A replacement contract that cancels the base policy
  3. A document that transfers the policy to a bank
  4. A statutory levy collected with the premium

Explanation

Riders are add-on benefits, such as critical illness or accidental death cover, attached to a base life policy on payment of extra premium. They cannot exist independently and do not replace the base contract.

Question 11Life Insurance Products and Terms and Conditions

A life assured aged 40 takes an endowment policy with a sum assured of Rs. 10,00,000 for a 20-year term. He survives the full term and all premiums are paid. What is normally payable at maturity?

  1. Only the total premiums paid, without any benefit
  2. The sum assured plus any declared bonuses, as per the policy Correct answer.
  3. Nothing, because the risk ends at maturity
  4. Double the sum assured in all cases

Explanation

An endowment policy pays the sum assured together with accrued bonuses on survival to maturity, because it combines protection with a savings element. The exact amount depends on the policy terms and bonus declarations.

Question 12Life Insurance Products and Terms and Conditions

A policy has acquired a surrender value. The policyholder stops paying premiums but does not surrender the policy. Under the reduced paid-up option, the policy becomes:

  1. A paid-up policy for a reduced sum assured, with no further premiums payable Correct answer.
  2. A policy that is automatically cancelled with no benefit
  3. A term policy for the original sum assured for the remaining term
  4. A policy that continues with the original sum assured and premiums waived

Explanation

Under the reduced paid-up option, the accumulated surrender value is used to support a reduced sum assured for the remaining term, and the policyholder stops paying premiums. The original sum assured is not maintained.

Question 13Life Insurance Products and Terms and Conditions

An automatic premium loan provision in a life policy is designed to:

  1. Pay the nominee's claim in advance of death
  2. Use the available surrender value to pay unpaid premiums so the policy does not lapse Correct answer.
  3. Waive all future premiums after the first year
  4. Increase the sum assured automatically each year

Explanation

Where the automatic premium loan provision applies, unpaid premiums are met from the policy's available value, treating the amount as a loan against the policy. This prevents unintended lapse while the value lasts.

Question 14Life Insurance Products and Terms and Conditions

A life assured dies by suicide during the exclusion period of a term policy that contains a suicide clause. Which statement best describes the insurer's liability?

  1. The insurer has no obligation of any kind under the policy
  2. The insurer pays the sum assured but deducts future premiums
  3. The insurer's liability is limited as specified in the clause, typically to a refund of premiums paid Correct answer.
  4. The insurer must pay the full sum assured because death has occurred

Explanation

A suicide exclusion clause limits the insurer's liability during the stated period, commonly to a refund of premiums or a defined amount. After the exclusion period ends, the clause ceases to apply and a death claim is treated normally.

Question 15Life Insurance Products and Terms and Conditions

Which of the following best explains why the premium for a whole life policy is generally higher than for a pure term policy of the same sum assured and entry age?

  1. Whole life policies are always issued with more riders
  2. Whole life cover extends to the whole lifetime and builds a savings element, so claims are certain to occur eventually Correct answer.
  3. Term policies are exempt from underwriting
  4. Term policies carry a higher mortality charge than whole life policies

Explanation

Because death is certain, a whole life policy will pay a claim eventually and also accumulates values, so premiums must fund both protection and savings. Term insurance pays only on death within a limited period, and most policies expire without a claim.

Question 16Life Insurance Products and Terms and Conditions

A policyholder named his spouse as nominee. He later assigns the policy to a bank as security for a housing loan. Who is entitled to receive the policy money on the life assured's death while the assignment subsists?

  1. The original nominee, because nomination always overrides assignment
  2. The insurer's shareholders
  3. The assignee bank, to the extent of its interest, with the balance going as per the policy and law Correct answer.
  4. The agent who procured the policy

Explanation

Assignment transfers the rights under the policy to the assignee, so while the assignment subsists the assignee's interest prevails over the nomination. The bank recovers its dues, and any surplus is dealt with as per the policy and applicable law.

Question 17Life Insurance Products and Terms and Conditions

A unit-linked insurance plan (ULIP) differs from a traditional endowment plan in that the investment risk under a ULIP is:

  1. Eliminated because a minimum guaranteed return always applies
  2. Shared equally between the insurer and the policyholder in all cases
  3. Borne by the policyholder, since the fund value varies with the performance of the underlying investments Correct answer.
  4. Borne entirely by the insurer

Explanation

In a ULIP the premiums are allocated to units whose value moves with the underlying fund, so investment risk rests with the policyholder. Traditional endowment plans declare benefits in a manner less directly linked to market movements.

Question 18Life Insurance Products and Terms and Conditions

An annuity contract is primarily designed to:

  1. Compensate for hospitalisation expenses
  2. Indemnify the policyholder against damage to property
  3. Provide a lump sum on the death of the annuitant
  4. Provide regular income payments for a chosen period or for life in exchange for a lump sum Correct answer.

Explanation

An annuity converts a lump sum or series of premiums into periodic payments, addressing the risk of outliving one's savings. It is a living-benefit product, not a lump-sum death or indemnity product.

Question 19Life Insurance Products and Terms and Conditions

A deferred annuity purchased with a single premium begins income payments after ten years. Which risk does such a product primarily address?

  1. The risk of theft of household property
  2. The risk of outliving one's retirement savings Correct answer.
  3. The risk of falling interest rates on a home loan
  4. The risk of dying too early, leaving dependants unprotected

Explanation

A deferred annuity accumulates value until the income start date and then provides regular payments, guarding against longevity risk, that is, the possibility of living longer than one's funds last.

Question 20Life Insurance Products and Terms and Conditions

In a joint life policy covering two lives, the sum assured becomes payable:

  1. On the first death of either life assured, as per the policy terms Correct answer.
  2. Only after the younger life attains age sixty
  3. Only if both lives die in the same accident
  4. Only after both lives have died

Explanation

A joint life policy generally pays the sum assured on the first death among the lives covered, after which the policy usually ends. Some variants provide for payment on the second death, so the exact terms must be checked.

Question 21Life Insurance Products and Terms and Conditions

A policyholder has an in-force policy with a loan outstanding against it. On the death of the life assured, how is the claim settled?

  1. The outstanding loan with interest is adjusted against the claim and the net amount is paid Correct answer.
  2. The full sum assured is paid and the loan is written off
  3. The loan amount is recovered from the nominee's personal assets instead of the claim
  4. The claim is rejected because a loan was taken

Explanation

Where a policy loan is outstanding, the amount due plus interest is recovered from the policy proceeds, and the balance is paid to the nominee. The loan does not invalidate the claim.

Question 22Life Insurance Products and Terms and Conditions

An insurer declares a reversionary bonus on a participating policy. What is the normal effect of this bonus?

  1. It reduces the premium payable in the following year
  2. It is added to the sum assured and becomes payable along with the claim or maturity benefit Correct answer.
  3. It converts the policy into a non-participating policy
  4. It is paid in cash to the policyholder immediately each year

Explanation

A reversionary bonus is not paid in cash during the term; it is added to the sum assured and is paid when the claim or maturity benefit arises. A compound reversionary bonus also earns further bonuses on previously declared amounts.

Question 23Life Insurance Products and Terms and Conditions

A policyholder dies within the policy term, but the insurer discovers that a material fact about his health was deliberately withheld at proposal. Which statement best reflects the likely outcome?

  1. The insurer must pay the sum assured because the policy was in force
  2. The insurer must pay only if the nominee agrees to reduce the sum assured
  3. The insurer must pay but may charge an extra premium after the death
  4. The insurer may repudiate the claim if the non-disclosure was material and the contract can be avoided as per law and policy terms Correct answer.

Explanation

A life insurance contract is based on the principle of utmost good faith, which requires full disclosure of material facts. If a material fact was deliberately suppressed, the insurer may treat the contract as voidable and repudiate the claim, subject to the applicable law and policy conditions.

Question 24Life Insurance Products and Terms and Conditions

A life assured under a participating endowment policy dies in the fifteenth year of a twenty-year term after several reversionary bonuses were declared. Which amount is normally payable?

  1. The sum assured reduced by all bonuses already declared
  2. Only the basic sum assured, with bonuses forfeited on death
  3. The basic sum assured plus reversionary bonuses declared up to the date of death, and possibly a terminal bonus if applicable Correct answer.
  4. Only the total premiums paid to date

Explanation

On death during the term, the claim consists of the basic sum assured plus bonuses that have already vested or been declared, as the policy provides. A terminal bonus, if any, applies according to the specific product's terms.

Question 25Life Insurance Products and Terms and Conditions

A policyholder wants to reduce the risk of the policy lapsing if she forgets to pay a premium, and she also wants to preserve her nomination. Which combination of features best serves these objectives?

  1. Change of premium mode to single premium together with removal of the nominee
  2. Automatic premium loan provision together with a valid nomination recorded with the insurer Correct answer.
  3. Surrender of the policy together with cancellation of the nomination
  4. Reduction of the sum assured together with assignment to a minor

Explanation

The automatic premium loan provision uses available policy value to pay premiums and so prevents lapse, while a valid nomination ensures the proceeds go to the chosen beneficiary. Together they address both lapse protection and smooth claim settlement.

Question 26Life Insurance Products and Terms and Conditions

In a life insurance contract, the amount that the insurer guarantees to pay on the occurrence of the insured event, before any bonuses or riders are added, is called the:

  1. Gross premium
  2. Sum assured Correct answer.
  3. Paid-up value
  4. Surrender value

Explanation

The sum assured is the basic guaranteed benefit fixed at inception and stated on the policy schedule. Bonuses, if any, accrue on top of it, while surrender value and paid-up value are derived amounts payable on other contingencies.

Question 27Life Insurance Products and Terms and Conditions

A person who takes out a life insurance policy on his own life and pays the premiums is best described in the policy as the:

  1. Nominee
  2. Assignee
  3. Policyholder (proposer) Correct answer.
  4. Beneficiary trustee

Explanation

The policyholder, also called the proposer, is the person who enters into the contract with the insurer and is responsible for paying premiums. The nominee is named to receive the benefit but is not a party to the contract.

Question 28Life Insurance Products and Terms and Conditions

Which of the following is a defining feature of a pure term insurance plan?

  1. It pays the sum assured plus accrued bonuses on survival to maturity.
  2. It builds a cash value that the policyholder can surrender for a lump sum.
  3. It pays the sum assured only if death occurs during the policy term. Correct answer.
  4. It guarantees a regular income for life beginning at retirement.

Explanation

A pure term plan provides death cover only and pays nothing if the life assured survives the term. Because there is no savings element, its premium is the lowest among life insurance plans for a given sum assured.

Question 29Life Insurance Products and Terms and Conditions

Under an endowment assurance policy, the sum assured becomes payable:

  1. Only after the policy has been surrendered by the policyholder
  2. Only if the policyholder survives to the maturity date
  3. On survival to maturity, or earlier on death during the term Correct answer.
  4. Only on the death of the life assured during the term

Explanation

An endowment policy is a dual-benefit contract: it pays the sum assured if the life assured dies within the term, and also pays it if the life assured survives to maturity. This combination of protection and savings is why its premium exceeds that of a comparable term plan.

Question 30Life Insurance Products and Terms and Conditions

In a money-back policy, the distinctive benefit structure is that the policyholder receives:

  1. Periodic survival benefits during the term, with the balance paid at maturity or on earlier death Correct answer.
  2. A share of the insurer's profits declared annually as cash dividends
  3. The entire sum assured as a lump sum only at maturity
  4. A refund of all premiums paid if the policy lapses

Explanation

Money-back plans pay a percentage of the sum assured at specified intervals during the term, and the remaining sum assured is paid at maturity or on death during the term. The periodic payouts reduce the amount retained until maturity, which is why the premium is usually higher than a comparable endowment.

Question 31Life Insurance Products and Terms and Conditions

A 35-year-old takes a whole life policy with a sum assured of Rs. 20,00,000. Which statement best describes when the sum assured is payable?

  1. On survival to age 60, after which cover ceases
  2. At the end of a fixed term chosen at inception, whether or not death has occurred
  3. Only if death occurs within the first ten policy years
  4. On the death of the life assured whenever it occurs, subject to the policy being in force Correct answer.

Explanation

Whole life insurance provides cover for the entire lifetime of the life assured, so the sum assured is payable on death whenever it occurs, provided the policy is in force. There is no fixed maturity date at which cover ends, though some variants offer a limited premium payment period.

Question 32Life Insurance Products and Terms and Conditions

A policyholder wants life cover that continues for her entire lifetime while paying premiums only for a limited number of years. Which whole life variant matches this need?

  1. Increasing term assurance
  2. Limited premium payment whole life plan Correct answer.
  3. Single premium immediate annuity
  4. Convertible term plan

Explanation

A limited premium payment whole life plan keeps the death cover in force for life while confining premium payment to a chosen shorter period. This suits buyers who want lifetime protection but wish to stop paying premiums after a set number of years, for example on retirement.

Question 33Life Insurance Products and Terms and Conditions

A participating (with-profit) policyholder receives a reversionary bonus. What is the usual nature of this bonus?

  1. It is credited only to the insurer's shareholders' fund.
  2. It is paid in cash to the policyholder each year.
  3. It is added to the sum assured and becomes payable with the claim. Correct answer.
  4. It reduces the future premium payable by the policyholder.

Explanation

A reversionary bonus is declared as a proportion of the sum assured and is added to the policy's guaranteed benefits, becoming payable along with the sum assured on death or maturity. It is not received as cash during the term, which is why it is sometimes called a compound or simple reversionary bonus depending on the method used.

Question 34Life Insurance Products and Terms and Conditions

An insurer declares a terminal bonus on a participating endowment policy at maturity. This bonus is best described as:

  1. A deduction made from the maturity proceeds to cover expenses
  2. A guaranteed annual addition fixed at policy inception
  3. A one-time additional payment declared when the policy matures or a claim arises Correct answer.
  4. An amount payable only if the policy is surrendered early

Explanation

A terminal bonus is a special one-time addition declared at the time of maturity or death claim on participating policies. It reflects the asset share built up in the with-profit fund and is not guaranteed in advance, so its amount can vary from year to year.

Question 35Life Insurance Products and Terms and Conditions

A policyholder with an endowment policy has paid premiums for several years and now needs funds. Which option allows her to receive an immediate lump sum from the insurer and end the contract?

  1. Taking a policy loan
  2. Making the policy paid-up with reduced sum assured
  3. Converting to a paid-up policy
  4. Surrender of the policy Correct answer.

Explanation

Surrender terminates the policy and returns the surrender value, which is normally available only after premiums have been paid for the minimum period specified in the policy. A policy loan instead keeps the policy in force while providing funds.

Question 36Life Insurance Products and Terms and Conditions

A policyholder has paid premiums for three years on a 20-year endowment policy and then stops paying. Under the non-forfeiture provisions, if the policy has acquired a surrender value, the policy will typically:

  1. Automatically convert into a term plan for the original sum assured
  2. Become void and all premiums paid are forfeited to the insurer
  3. Be transferred to the nominee, who must continue paying the premiums
  4. Continue as a paid-up policy with a reduced sum assured until maturity Correct answer.

Explanation

Once a policy has acquired value, non-forfeiture provisions protect the policyholder when premiums stop. The policy continues as a paid-up policy with a sum assured reduced in proportion to the premiums actually paid, and the reduced benefit is payable at maturity or on death.

Question 37Life Insurance Products and Terms and Conditions

A policyholder wants to take a loan against a traditional endowment policy that has acquired a surrender value. Which statement is correct?

  1. The loan is granted up to a specified percentage of the surrender value, and the outstanding loan with interest is deducted from the claim. Correct answer.
  2. The loan can exceed the surrender value without any security.
  3. The loan permanently reduces the sum assured and no deduction is made at claim time.
  4. The loan is available only after the policy matures.

Explanation

A policy loan is limited to a percentage of the surrender value so that the insurer remains secured. On a death or maturity claim, any outstanding loan with interest is deducted from the amount payable, so the nominee receives the net benefit.

Question 38Life Insurance Products and Terms and Conditions

Which of the following best describes the purpose of a critical illness rider attached to a life policy?

  1. It pays a lump sum on diagnosis of a specified covered illness, subject to the rider terms. Correct answer.
  2. It increases the death benefit by a fixed percentage each year.
  3. It converts the policy into an annuity at retirement.
  4. It waives future premiums if the policyholder loses employment.

Explanation

A critical illness rider provides an accelerated or additional benefit when the life assured is diagnosed with a specified illness that meets the rider's definition. Payment is subject to the survival period and other conditions set out in the rider wording.

Question 39Life Insurance Products and Terms and Conditions

A policyholder wants protection against loss of income if he becomes totally and permanently disabled. Which rider is most appropriate?

  1. Accidental death benefit rider
  2. Waiver of premium rider Correct answer.
  3. Critical illness rider
  4. Term rider

Explanation

A waiver of premium rider ensures that future premiums are waived, and the policy continues in force, if the life assured becomes disabled as defined. This protects the policy from lapsing when earning capacity is lost.

Question 40Life Insurance Products and Terms and Conditions

A life assured dies in a road accident while a policy with an accidental death benefit rider is in force. The base sum assured is Rs. 15,00,000 and the rider sum assured is Rs. 5,00,000. What amount is normally payable?

  1. Rs. 15,00,000
  2. Rs. 10,00,000
  3. Rs. 5,00,000
  4. Rs. 20,00,000 Correct answer.

Explanation

An accidental death benefit rider pays its sum assured in addition to the base death benefit when death results from an accident. The total payable is therefore the base sum assured plus the rider sum assured, Rs. 15,00,000 plus Rs. 5,00,000.

Question 41Life Insurance Products and Terms and Conditions

Which of the following is a characteristic feature of a unit-linked insurance plan (ULIP)?

  1. The entire premium is used to provide death cover only.
  2. The insurer guarantees a fixed maturity amount regardless of fund performance.
  3. The fund value is declared by the insurer as a reversionary bonus.
  4. The policyholder bears the investment risk on the fund value. Correct answer.

Explanation

In a ULIP, premiums are allocated to units whose value moves with the underlying investments, so the investment risk rests with the policyholder. The insurer discloses charges separately and the benefit is the fund value or the sum assured, whichever is higher as per the policy terms.

Question 42Life Insurance Products and Terms and Conditions

In a ULIP, the policyholder chooses to switch from a debt fund to an equity fund. Which statement is correct?

  1. Switching allows reallocation of units between available funds, usually a limited number of times a year, subject to policy terms. Correct answer.
  2. Switching is possible only if the insurer declares a bonus.
  3. Switching changes the sum assured and requires fresh underwriting.
  4. Switching is treated as surrender and a new policy must be issued.

Explanation

ULIPs allow the policyholder to move investments between the funds offered, and the number of free switches per year and any charges are stated in the policy. Switching reallocates existing units and does not create a new contract or alter the life cover.

Question 43Life Insurance Products and Terms and Conditions

An immediate annuity differs from a deferred annuity primarily in that an immediate annuity:

  1. Returns the entire purchase price to the nominee if the annuitant dies early
  2. Is available only to persons below age 30
  3. Begins income payments almost at once after purchase, whereas a deferred annuity begins after a waiting period Correct answer.
  4. Provides life cover equal to the sum assured

Explanation

An immediate annuity starts paying the pension shortly after the purchase price is paid, while a deferred annuity accumulates and starts payments after a specified deferment period. Both are products for converting capital into regular income rather than for death cover.

Question 44Life Insurance Products and Terms and Conditions

Under a joint life policy covering two lives on a first-death basis, the sum assured is payable:

  1. On the death of the first of the two lives assured, and the policy then comes to an end Correct answer.
  2. Only after both lives have died
  3. Only if both lives die in the same accident
  4. In equal halves on the death of each life

Explanation

A joint life policy on a first-death basis pays the sum assured when either of the two lives assured dies first, after which the contract terminates. This structure is common for couples or business partners who want protection on the earlier death.

Question 45Life Insurance Products and Terms and Conditions

A husband and wife want a policy that pays the sum assured only after both of them have died, so that the surviving spouse retains cover. Which product fits this need?

  1. Joint life last-survivor policy Correct answer.
  2. Immediate annuity
  3. Money-back policy
  4. Joint life first-death policy

Explanation

A joint life last-survivor policy pays the sum assured only when the second of the two lives dies, keeping the benefit available for the surviving spouse's needs. It is often used in estate planning and for covering the later death.

Question 46Life Insurance Products and Terms and Conditions

A policyholder dies during the term of a term insurance policy and the insurer discovers that a material fact about his health was deliberately suppressed in the proposal. Which statement is generally correct?

  1. The insurer must pay the full sum assured because the policy was in force.
  2. The insurer may repudiate the claim under the principle of utmost good faith, subject to the policy terms and applicable law. Correct answer.
  3. The claim is automatically paid if the death occurred after two years in all circumstances.
  4. The insurer must pay half the sum assured as a compromise.

Explanation

Life insurance is a contract of utmost good faith, and deliberate suppression of a material fact can entitle the insurer to repudiate the claim. The outcome depends on the policy terms, the materiality of the fact and the legal provisions on revival and claims, which is why accurate disclosure at proposal stage is essential.

Question 47Life Insurance Products and Terms and Conditions

A policyholder wants to reduce the risk of the policy lapsing if she forgets to pay a premium, without losing cover. Which feature best addresses this need?

  1. A grace period of the specified number of days after the due date for paying the premium Correct answer.
  2. A nomination clause
  3. A free-look period after receipt of the policy document
  4. A suicide exclusion clause

Explanation

A grace period allows the premium to be paid within a specified number of days after the due date while the policy remains in force. It protects the policyholder from immediate lapse for a short delay in payment.

Question 48Life Insurance Products and Terms and Conditions

A policyholder exercises the free-look option on a newly issued life policy. What is the normal effect?

  1. The policyholder must accept a lower premium for the remaining term.
  2. The policy continues but the sum assured is doubled.
  3. The policy is converted into a paid-up policy for the full sum assured.
  4. The policy is cancelled and the premium is refunded, less any proportionate risk and charges as specified. Correct answer.

Explanation

The free-look period allows a policyholder to review the policy terms and cancel it within the stated number of days if the terms are not acceptable. On cancellation, the insurer refunds the premium after deducting any proportionate risk premium and charges as specified in the policy.

Question 49Life Insurance Products and Terms and Conditions

A life assured under a participating endowment policy dies in the fifteenth year of a twenty-year term after several reversionary bonuses have been declared. What is normally payable to the nominee?

  1. The sum assured plus the reversionary bonuses declared up to the date of death Correct answer.
  2. Only the original sum assured, with no bonuses
  3. A refund of premiums paid, without interest or bonus
  4. The surrender value as on the date of death

Explanation

On a death claim under a participating endowment policy, the insurer pays the sum assured together with the reversionary bonuses that have already attached to the policy. The surrender value is relevant only if the policy is terminated by surrender, not on a death claim.

Question 50Life Insurance Products and Terms and Conditions

Which of the following best explains the role of the policy document's schedule in a life insurance contract?

  1. It replaces the need for the proposal form and any disclosures by the proposer.
  2. It records the key particulars such as the sum assured, premium, term and parties, and prevails subject to the policy wording. Correct answer.
  3. It contains only the insurer's advertising material about the product.
  4. It lists the names of all other policyholders in the same fund.

Explanation

The schedule sets out the individual details of the contract, including the sum assured, premium, term, nominee and dates, and must be read with the standard policy conditions. It is the personal record of the contract and does not override the disclosure obligations of the proposer.