Accounts of Life Insurance Companies MCQs 2023
Meaning of Insurance
Insurance is an arrangement which is represented by a policy in which an individual or entity financial protection from insurance company against losses such as theft, fire, accident, illness, death etc., in return for payment of a specified premium.
Insurance is of two types – Life insurance also known as contract of guarantee and general insurance also known as contract of indemnity.
Meaning of Life Insurance
Life Insurance is defined as a contract between the policy holder and the insurance company, where the life insurance company pays a specific sum to the insured individual or his family upon the maturity of the term for which the life is insured or on the death of the insured.
That is why life insurance is called a contract of guaranteed. The life insurance sum is paid in exchange for a specific amount of premium.
Accounts of Life Insurance Companies MCQs 2023
Choose the correct option:
1. The Indian Insurance Act was enacted in the
year:
a) 1938
b) 1956
c) 1972
d) 2002
Ans: a) 1938
2. Life Insurance Corporation (LIC) was
nationalized in the year:
a) 1935
b) 1950
c) 1956
d) 1964
Ans: c) 1956
3. Insurance business in India is regulated by:
a) SEBI
b) RBI
c) IRDA
d)
Government
Ans: c) IRDA
4. Fixed payment at regular intervals made by the
insured for a contract of insurance is called:
a)
Commission
b) Premium
c) Bonus
d) Sum
assured
Ans: b) Premium
5. Life insurance contract is a contract of:
a)
Indemnity
b)
Guarantee
c) Both of
the above
d) None of
the above
Ans: b) Guarantee
6. A valuation balance sheet is prepared by
a) A
trading company.
b) A
banking company.
c) A life
insurance company.
d) A
general insurance company
Ans: c) A life insurance company.
7. Which of the following are the statutory books
of Insurance Companies?
a) Register
of policies
b) The
Register of claims
c) The
Register of Licenced Insurance Agents
d) All of
the above
Ans: d) All of the above
Also Read: Multiple Choice Questions and Answers
- Advanced Financial Accounting MCQs 2023
- Accounts of Banking Companies MCQs
- Accounts of Life Insurance Companies MCQs
- Accounts of General Insurance Companies MCQs
- MCQ on Investment Accounting
- Advanced Financial MCQs (Dibrugarh University 2013 to 2023)
8. In case of life insurance companies, premium
shall be recognised as income when:
a) It is
received
b) It is
due
c) When
policy comes into force
d) Premium
is not an income
Ans: b) It is due
9. In case of life insurance companies, which
account is prepared to ascertain profit?
a) Revenue
account
b) Profit
and Loss
account
c)
Valuation balance
sheet
d) None of
these
Ans: c) Valuation balance
sheet
10. Valuation balance sheet is
a) A
statement of assets and liabilities on a particular date.
b) Prepared
to determine profit by comparing Life Assurance Fund with net liability.
c) A
statement of all assets and liabilities as market value.
d) None of
the above
Ans: b) Prepared to determine
profit by comparing Life Assurance Fund with net liability.
11. In life insurance business , claims may arise
on account of:
a) Death of
policy holder
b) Maturity
c) Death or
maturity
d) None of
these
Ans: c) Death or maturity
12. The agreement of insurance between insurer and
insured is called as:
a) Policy
b) Premium
c) Annuity
d) None of
these
Ans: a) Policy
13. Double insurance is common in _______
Insurance.
a) Life
insurance
b) Fire
insurance
c) Marine
insurance
d) Health
insurance
Ans: a) Life
insurance
14. The consideration in insurance for covering the
risk is called:
a) Claim
b) Premium
c) Annuity
d) None of
these
Ans: b) Premium
15. Match the following:
Whole
life policy |
The sum
assured is given to the beneficiary only on death of policy holder. |
Endowment
policy |
The sum
assured is given on maturity or on the death of the insured. |
Annuity |
Specific
amount is paid to the policy holder till his death. |
Health plus
policy |
Medical
insurance plus benefit of investment. |
16. An arrangement between two insurance companies
whereby one transfers a part of risk to other company is called:
a)
Re-insurance
b) Double
insurance
c) Joint
insurance
d) Maha
insurance
Ans: a) Re-insurance
17. Revenue account is also called:
a) Profit
and loss account
b)
Shareholder’s account
c)
Policyholder’s account
d)
Creditors’ account
Ans: b) Shareholder’s account
18. Match the following:
Schedule
1: Premium (Net) |
Includes
First premium, renewal premiums and single premium |
Schedule
2: Commission |
Includes
commission paid + commission on re-insurance accepted – commission on
re-insurance ceded |
Schedule
3: Operating exp. |
Office
expenses + legal and audit fees + adv. & publicity |
Schedule
4: Benefits paid (net) |
Claims by
death + claims by maturity + annuities paid surrenders + bonus |
State whether the following
statements are true or false:
1. Life
insurance is more appropriate to be called life assurance. [True]
2. All
insurance contracts are contracts of indemnity. [False]
3. Life
insurance contract is a contract of
guarantee. [True]
4. Life
insurance contract is a contract of indemnity. [False]
5. There
is no difference between a wagering contract and contract of insurance. [True]
6. Bonus
payable on maturity of the policy is called reversionary bonus. [False]
7. A
life insurance business is said to have earned profit only if its life
assurance fund exceeds its net liability on all outstanding policies. [False]
8. Life
assurance fund represents profits of the life insurance company. [False]
9. Surrender
value paid is shown in the Revenue account in Schedule 4: Benefits Paid
(Net). [True]
10. A
balance sheet of a life insurance company is called a ‘Valuation balance
sheet’. [False]
11. Life
insurance contracts are contracts of indemnity. False, Contract of Guarantee
Fill in the blanks:
1. Life
insurance is more appropriate to be called life assurance.
2. Life
insurance combines the elements of protection and savings.
3. Revenue
accounts of insurance companies are prepared under the provisions of IRDA Regulation’ 2002.
4. Valuation
balance sheet is prepared in case of life assurance business only to
ascertain surplus or deficit.
5. Annuity
is an expense and it is shown under the head benefits paid (Schedule 4).
6. Consideration
for annuities granted is a source of income for a life insurance companies.
7. Revenue
account of Life Insurance companies: Form
A - RA
8. Profit
and loss account of Life Insurance companies: Form A – PL
9. Balance
sheet of Life Insurance companies: Form
A – BS.
10. Revenue
account of life insurance and general insurance companies have 4 schedules.
11. Reinsurance
premium whether ceded or accepted has been shown on gross basis before
deducting commission.
12. Commission
on reinsurance ceded is an income for
a life insurance companies.
13. Commission
on reinsurance accepted is an expense for
a life insurance companies.
14. Liabilities
under existing policies are determined by actuarial valuation.
15. Insurance
is a contract between two parties where on party is called insurer and
other party is called insured.
16. Bonus
in reduction of premium is both at expense
and income in revenue account.
17. The
purpose of preparing the valuation balance sheet is to ascertain the Profit or loss made by life
insurance business.
18. Valuation
balance sheet is prepared once in every Two years in the case of life insurance business.
19. When
an insurance company finds the risk heavy, part of the risk is insured with
another company. Such a procedure is known as Reinsurance.
20. The
excess of net liability over the ‘Life Assurance Fund’ represents the Deficiency for the
inter-valuation period.
21. The
concept of surrender value of a policy is peculiar to Life insurance only.
22. The
concept of double insurance is peculiar to Life insurance only.
23. TDS
on interest and dividends earned by a life insurance companies should be
included in balance sheet under the head “Advance taxes paid and TDS”.
FAQs
1. What type of account is a life insurance premium account?
Ans: Life insurance premium account is a personal account.
2. Which accounts are prepared by life insurance companies?
Ans: Final account of life insurance business is required to be prepared as per IRDA Regulations, 2002 which consist of: (a) Revenue Account or Policyholder's accout (as per Form A-RA); (b) Profit and Loss Account (Form A-PL); (c) Balance Sheet (Form A-BS).
3. Which type of contract is life insurance?
Ans: Life insurance is a contract of Guarantee.
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