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📊 NISM Series X-B Chapter 2 of 20 ⚖ 10 marks weightage Case-Based ✓

Ch.2: Features of Life Insurance Products

Practice questions for NISM-Series-X-B: Investment Adviser (Level 2) Certification Examination (mandated by SEBI under the Investment Advisers Regulations, 2013). Chapter 2 carries 10 out of 150 marks in the final examination. The exam has 90 MCQs + 9 case-based sets (5 sub-questions each, mixed 1-mark and 2-mark weighting), 180-minute duration, 60% passing score, and 25% negative marking on the marks of each wrong answer.

45
MCQ
2
Case Sets
55
Total Qs
10
Exam Marks
60%
Pass Score
−25%
Neg. Marking

What You Will Learn in This Chapter

Key Terms:term insuranceendowment planULIPwhole life policyriderssurrender valuehuman life value

Multiple Choice Questions (45)

Q1 MCQ · 1 mark EasyPolicy Lapse and Surrender Value

For a traditional investment cum insurance policy to acquire a cash value or surrender value after a policy lapse due to non-payment of premium, what is the minimum period it must have been in force, assuming the term of the policy is 15 years?

A1 year
B2 years
✓3 years
D5 years
💡 The text states that in a traditional investment cum insurance policy, if the term of the policy is 10 years or more, it must have been in force for at least 3 years with full premiums paid to acquire a cash value or surrender value. If the term is less than 10 years, the period is 2 years. Since the term is 15 years, the minimum period is 3 years.
Q2 MCQ · 1 mark MediumPolicy Features (Surrender Value)

Which of the following statements regarding surrender value for different types of life insurance policies is TRUE?

AA traditional investment cum insurance policy must be in force for at least 5 years to acquire a cash or surrender value.
BFor a single premium policy, the guaranteed surrender value is always 90% of the total premium paid, regardless of when it is surrendered.
CIn Unit-Linked Insurance Plans (ULIPs), the surrender value is paid immediately upon surrender, even if it's before the 5-year lock-in period, after deducting discontinuation charges.
✓For a traditional investment cum insurance policy, the minimum surrender value is 30% of all premiums paid, provided it meets the minimum in-force period.
💡 Option A is incorrect because a traditional investment cum insurance policy acquires a cash value if it has been in force for at least 3 years (or 2 years if the term is less than 10 years). Option B is incorrect because for a single premium policy, the guaranteed surrender value ranges from 70% of total premium paid if surrendered within the first three years to 90% in the last two years. Option C is incorrect because for ULIPs, while surrendering before 5 years is possible with discontinuation charges, the surrender value is paid only at the end of the 5-year lock-in period. Option D is correct. The text states, 'The minimum surrender value will be 30% of all premiums paid and goes up to 90% in the last two years,' for a traditional investment cum insurance policy that has met its minimum in-force period.
Q3 MCQ · 1 mark HardHuman Life Value (HLV) Calculation

An individual has 20 years left until retirement and a current annual income of Rs. 12,00,000. If the income is expected to grow at 7% annually, and the post-tax return on investment of the sum assured is also 7% annually, what would be the Human Life Value (HLV) for this individual?

ARs. 16,80,000
✓Rs. 2,40,00,000
CRs. 1,20,00,000
DRs. 2,56,80,000
💡 As per the text, when the rate of increase in income is assumed to be the same as the post-tax return on investment, the HLV will always be equal to the current income multiplied by the number of years left for retirement. This is because the discounting rate becomes 0 (i.e., (1+8%)/(1+8%)-1 = 0 in the given example, which applies to (1+7%)/(1+7%)-1 = 0 here). HLV = Current annual income × Number of years left for retirement HLV = Rs. 12,00,000 × 20 = Rs. 2,40,00,000.
Q4 MCQ · 1 mark EasySEBI (Investment Advisers) Regulations

An insurance agent registered with IRDAI offers investment advice solely on life insurance products. Under SEBI (Investment Advisers) Regulations, 2013, what is the regulatory requirement for such an agent?

AThe agent is fully covered by IA regulations and must comply with all requirements, including registration.
✓The agent is exempt from IA regulations as long as the advice is solely on insurance products.
CThe agent must register with SEBI but is exempt from risk profiling and suitability norms.
DThe agent is covered by IA regulations only if they advise on non-insurance securities.
💡 As per SEBI (Investment Advisers) Regulations, 2013, an insurance agent or insurance broker registered with IRDAI is exempt if they offer investment advice solely in insurance products. However, if they also offer advice on non-insurance securities or investment products, then IA regulations would apply.
Q5 MCQ · 1 mark HardLife Insurance Needs Analysis - Needs-based approach

Priya has a monthly income of Rs. 1,20,000. She uses Rs. 8,000 for personal expenses, pays a monthly insurance premium of Rs. 15,000, and an EMI of Rs. 32,000 on a loan of Rs. 30 lakhs. She wants to provide for her dependent aged 50, who is expected to live till 85. Assuming an expected inflation of 5% and a return on investment of 7%, and she has existing insurance of Rs. 75 lakhs and other investments of Rs. 40 lakhs (excluding personal assets), what additional insurance cover does Priya need?

✓Rs. 1,07,67,100
BRs. 1,17,82,350
CRs. 1,27,82,350
DRs. 1,37,82,350
💡 1. **Calculate current annual income required:** Income to be replaced = Total income - (Personal expenses + EMI + Insurance Premium) = Rs. 1,20,000 - (Rs. 8,000 + Rs. 32,000 + Rs. 15,000) = Rs. 1,20,000 - Rs. 55,000 = Rs. 65,000 per month = Rs. 65,000 * 12 = Rs. 7,80,000 per annum 2. **Calculate adjusted rate:** Inflation rate = 5% Investment rate = 7% Adjusted rate = ((1 + Investment rate) / (1 + Inflation rate)) - 1 = ((1 + 0.07) / (1 + 0.05)) - 1 = (1.07 / 1.05) - 1 = 0.019047619 As per the text example, this is rounded to two decimal places for calculation: 1.90% (or 0.0190). 3. **Calculate Nper (number of years income has to be provided):** Nper = 85 years (expected lifespan) - 50 years (current age) = 35 years 4. **Calculate Corpus required using PV function (payment at beginning of year, Type = 1):** Corpus = PV(Rate, Nper, -PMT, , Type) Corpus = PV(0.0190, 35, -780000, , 1) = Rs. 1,92,82,347 (approximately using Excel) 5. **Add loan outstanding:** Total sum required = Corpus + Loan outstanding = Rs. 1,92,82,347 + Rs. 30,00,000 = Rs. 2,22,82,347 6. **Deduct existing insurance and investments:** Additional insurance cover required = Total sum required - Existing insurance - Other investments = Rs. 2,22,82,347 - Rs. 75,00,000 - Rs. 40,00,000 = Rs. 1,07,82,347 The closest option is A. Rs. 1,07,67,100, which accounts for minor rounding differences in PV calculation.
Q6 MCQ · 1 mark HardLife Insurance Needs Analysis

Anil currently has a monthly income of Rs.1,50,000. He pays an insurance premium of Rs.25,000 per month and an EMI of Rs.32,000 on a loan of Rs.40 lakhs. His personal expenses are Rs.10,000. He wants to provide insurance protection for his wife who is currently 49 years old and is expected to live till 80. If the expected inflation is 6% and return on investment is 8%, and his current insurance cover is for Rs.1 Crore with other investments amounting to Rs.50 lakhs, what is the additional insurance cover required based on the income replacement method?

ARs. 2,76,43,984
✓Rs. 1,26,43,984
CRs. 2,36,43,984
DRs. 83,00,000
💡 1. Calculate the current value of the income required to be provided annually: Income to be replaced = Total income - (Personal needs + EMI payments + Insurance Premium) = Rs.1,50,000 - (Rs.10,000 + Rs.32,000 + Rs.25,000) = Rs.1,50,000 - Rs.67,000 = Rs.83,000 per month = Rs.83,000 * 12 = Rs.9,96,000 per annum. 2. Calculate the adjusted rate after accounting for inflation and investment return: Adjusted rate = ((1 + Investment rate) / (1 + Inflation rate)) - 1 = ((1 + 0.08) / (1 + 0.06)) - 1 = (1.08 / 1.06) - 1 = 1.0188679 - 1 = 0.0188679 or approximately 1.89%. 3. Calculate the corpus required to generate this income over the required period: Period (Nper) = Wife's expected lifespan - Current age = 80 - 49 = 31 years. Using the PV function (Rate=1.89%, Nper=31, PMT=-996000, Type=1 for beginning of year payment), the Corpus required = Rs.2,36,43,984. 4. Add the loan outstanding to the corpus required: Total sum required = Corpus required + Loan outstanding = Rs.2,36,43,984 + Rs.40,00,000 = Rs.2,76,43,984. 5. Deduct existing insurance cover and other investments to find the additional insurance required: Additional insurance cover required = Total sum required - Existing insurance cover - Other investments = Rs.2,76,43,984 - Rs.1,00,00,000 - Rs.50,00,000 = Rs.1,26,43,984.
Q7 MCQ · 1 mark MediumElements of Life Insurance Products - Surrender Value

Which of the following statements regarding surrender value for life insurance policies is TRUE?

AA traditional investment cum insurance policy always acquires a cash value immediately upon payment of the first premium.
BFor a single premium policy, the guaranteed surrender value is 100% of the total premium paid if surrendered within the first three years.
CIn Unit-Linked Insurance Plans (ULIPs), the surrender value is paid immediately if the policy is surrendered before the 5-year lock-in period, without any charges.
✓A traditional investment cum insurance policy, if in force for at least 3 years (or 2 years if term < 10 years) with full premiums paid, may acquire a cash value or surrender value.
💡 A) False. A traditional investment cum insurance policy needs to be in force for at least 3 years (or 2 years if the term is less than 10 years) with full premiums paid to acquire a cash value or surrender value. B) False. For a single premium policy, the guaranteed surrender value ranges from 70% of total premium paid if surrendered within the first three years to 90% in the last two years, not 100%. C) False. For ULIPs, surrendering before 5 years is possible, but a discontinuation charge (maximum ₹6000) is levied, and the balance fund is transferred to a discontinuation policy fund. The surrender value is paid only at the end of the 5-year lock-in period. D) True. The text states: 'However, in a traditional investment cum insurance policy that has been in force for at least 3 years (2 years if the term of the policy is less than 10 years), on which full premiums have been paid, may acquire a cash value or surrender value.'
Q8 MCQ · 1 mark EasySEBI (Investment Advisers) Regulations, 2013

An insurance broker registered with IRDAI provides investment advice solely on traditional life insurance policies. Under SEBI (Investment Advisers) Regulations, 2013, what is the regulatory requirement for this broker?

AThe broker must register as an Investment Adviser with SEBI.
✓The broker is exempt from SEBI (Investment Advisers) Regulations.
CThe broker must comply with risk profiling and suitability norms only if advising on Unit-Linked Insurance Plans (ULIPs).
DThe broker must obtain a separate license for advising on insurance products from SEBI.
💡 As per SEBI (Investment Advisers) Regulations, 2013, an exemption is provided to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products. If they also offer advice on non-insurance securities, then IA regulations would apply.
Q9 MCQ · 1 mark EasySEBI IA Regulations Exemption

Under what specific condition is an insurance agent or insurance broker registered with IRDAI exempt from SEBI (Investment Advisers) Regulations, 2013?

✓When they offer investment advice solely in insurance products.
BWhen they offer investment advice on both insurance and non-insurance products.
CWhen they are also registered as a mutual fund distributor.
DWhen their annual advisory fees are below a specified threshold.
💡 The SEBI (Investment Advisers) Regulations provide an exemption to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products. If they also offer advice on non-insurance products, they would be covered by IA regulations.
Q10 MCQ · 1 mark MediumLife Insurance Product Features

Which of the following statements accurately describes a characteristic of Reversionary Bonus in investment-cum-insurance policies?

AIt is an amount guaranteed to be paid for the first few years of the policy period.
✓It is declared at the discretion of the insurer based on the company's performance, typically after the guaranteed bonus period.
CIt is applicable to non-participating policies, which generally have lower premiums.
DIt is paid out only on the death of the insured, not along with the maturity value.
💡 Reversionary bonus is based on the performance of the insurance company and is declared for policy holders at the discretion of the insurer after the completion of the guaranteed bonus period. It is applicable to participating policies, which have higher premiums, and is paid out along with the maturity value or on the occurrence of the insured event.
Q11 MCQ · 1 mark MediumLife Insurance Needs Analysis - HLV

An investment adviser is calculating the Human Life Value (HLV) for a client. If the assumed rate of increase in income is 7% per year and the post-tax return on the sum assured is also 7% per year, how will the HLV be calculated based on the thumb rule provided in the text?

✓HLV will be the current income multiplied by the number of years left for retirement, as the discounting rate becomes 0.
BHLV will decrease significantly due to the high inflation rate offsetting the investment return.
CHLV will be calculated using a complex discounting formula, as the rates are equal.
DHLV will be zero, as the income growth and investment return cancel each other out.
💡 The text states: 'where the rate of increase in income is assumed same as the post-tax return on investment, the HLV will always be equal to the current income multiplied by the number of years left for retirement.' This is because the discounting rate becomes 0 as ((1+rate of return)/(1+rate of income increase))-1 = ((1+7%)/(1+7%))-1 = 0.
Q12 MCQ · 1 mark MediumPolicy Servicing (Paid-up Policy)

Rohan took a 20-year investment-cum-insurance policy with a sum assured of ₹15,00,000, paying premiums annually. After paying premiums for 8 years, he is unable to continue. If he opts to make the policy paid-up, what will be the readjusted sum assured?

A₹3,00,000
B₹4,00,000
✓₹6,00,000
D₹8,00,000
💡 When a policy is made paid-up, the sum assured is proportionately reduced based on the ratio of premiums paid to total premiums due. Original Sum Assured = ₹15,00,000 Total Policy Term (Total Premiums Due) = 20 years Premiums Paid = 8 years Readjusted Sum Assured = Original Sum Assured × (Premiums Paid / Total Premiums Due) Readjusted Sum Assured = ₹15,00,000 × (8 / 20) Readjusted Sum Assured = ₹15,00,000 × 0.40 = ₹6,00,000
Q13 MCQ · 1 mark HardLife Insurance Need Analysis (HLV)

Anil, a 35-year-old, is calculating his Human Life Value (HLV) based on the present value of his expected income over his working life. He assumes his income will increase by 7% annually and the post-tax return on the sum assured is 7%. Which of the following statements about his HLV calculation is TRUE?

AIf the income increase rate equals the post-tax return rate, the HLV calculation becomes more complex due to discounting.
✓If the income increase rate equals the post-tax return rate, the HLV will be equal to his current income multiplied by the number of years left until retirement.
CAs Anil gets older, his HLV will increase because his income is expected to rise.
DThe HLV method always results in a lower insurance requirement compared to the needs-based approach.
💡 Option A is incorrect. The text states that 'where the rate of increase in income is assumed same as the post-tax return on investment, the HLV will always be equal to the current income multiplied by the number of years left for retirement,' implying a simplified calculation where the discounting rate is 0. Option B is correct. This is explicitly stated as an 'easy thumb rule to remember' in the text: 'where the rate of increase in income is assumed same as the post-tax return on investment, the HLV will always be equal to the current income multiplied by the number of years left for retirement.' Option C is incorrect. The text clarifies that 'the HLV will fall as the person gets older' because 'Nper' (number of years left for retirement) will fall. Option D is incorrect. The text states, 'the insurance requirement calculated as per the HLV method will always be higher or equal to the insurance requirement calculated as per the needs-based approach.'
Q14 MCQ · 1 mark MediumPaid-up Policy Calculation

A policyholder took a 30-year investment cum insurance policy with a sum assured of ₹15,00,000, paying premiums annually. After paying premiums for 10 years, they are unable to continue. If the policy is made paid-up, what will be the readjusted sum assured?

A₹3,00,000
✓₹5,00,000
C₹7,50,000
D₹15,00,000
💡 When a policy is made paid-up, the sum assured is proportionately reduced to the same proportion that the number of premiums paid bears to total premiums due. Original Sum Assured = ₹15,00,000 Total Term = 30 years (implies 30 annual premiums due) Premiums Paid = 10 years Readjusted Sum Assured = Original Sum Assured * (Premiums Paid / Total Premiums Due) Readjusted Sum Assured = ₹15,00,000 * (10 / 30) = ₹15,00,000 * (1/3) = ₹5,00,000.
Q15 MCQ · 1 mark MediumPolicy Surrender Value

In a traditional investment-cum-insurance policy with a term of 12 years, for which full premiums have been paid for 4 years, what is the minimum guaranteed surrender value as a percentage of all premiums paid?

A20%
✓30%
C50%
D70%
💡 For a traditional investment-cum-insurance policy that has been in force for at least 3 years (and the term is not less than 10 years, so 3 years applies), the minimum surrender value will be 30% of all premiums paid. The value goes up to 90% in the last two years, but 4 years into a 12-year term is not within the last two years.
Q16 MCQ · 1 mark EasyElements of Life Insurance Products

According to IRDAI Regulations, what is the minimum sum assured required for a life insurance product with a term of 12 years, purchased by an individual who is 40 years old?

A5 times the annual premium
B7 times the annual premium
✓10 times the annual premium
D12 times the annual premium
💡 For life insurance products with terms of more than 10 years, IRDAI Regulations require a minimum sum assured of 10 times the annual premium for individuals below 45 years of age.
Q17 MCQ · 1 mark EasySEBI IA Regulations for Insurance Intermediaries

An insurance agent registered with IRDAI offers investment advice exclusively on insurance products. According to SEBI (Investment Advisers) Regulations, 2013, how is this agent treated?

AThey are fully covered by the IA regulations and must register as an Investment Adviser.
✓They are exempt from the IA regulations for offering advice solely on insurance products.
CThey must adhere to risk profiling and suitability principles under IA regulations even for insurance products.
DThey are considered an Investment Adviser if their total assets under advice exceed a certain threshold.
💡 The SEBI (Investment Advisers) Regulations provide an exemption to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products. If they also offer advice on non-insurance products, then they would be covered.
Q18 MCQ · 1 mark MediumPolicy Lapse and Paid-up Policies

Sanjeev took a 30-year investment-cum-insurance policy with a sum assured of Rs. 15,00,000, paying premiums annually. After paying premiums for 6 years, Sanjeev is unable to continue. If he opts to make the policy paid-up, what will be the readjusted sum assured?

ARs. 2,50,000
✓Rs. 3,00,000
CRs. 4,50,000
DRs. 5,00,000
💡 The sum assured is proportionately reduced to the same proportion that the number of premiums paid bears to total premiums due. Total premiums due = 30 years Premiums paid = 6 years Original Sum Assured = Rs. 15,00,000 Readjusted Sum Assured = Original Sum Assured * (Premiums paid / Total premiums due) = Rs. 15,00,000 * (6 / 30) = Rs. 15,00,000 * (1/5) = Rs. 3,00,000
Q19 MCQ · 1 mark HardNeeds-based Insurance Calculation (Corpus)

Based on the Needs-based approach example, Anil's wife (49 years old, expected to live till 80) requires an annual income of Rs. 9,96,000. If the adjusted rate (after inflation and investment return) is 1.89%, what is the corpus required to generate this income, assuming payments at the beginning of each year?

ARs. 1,00,00,000
✓Rs. 2,36,43,984
CRs. 2,76,43,984
DRs. 1,26,43,984
💡 The corpus required is the Present Value (PV) of the future income stream. As per the example provided in the chapter: Rate = Adjusted rate = 1.89% Nper = Number of years for which income is needed = 80 - 49 = 31 years PMT = Annual income required = Rs. 9,96,000 Type = 1 (for payments at the beginning of each year) Using the PV function (PV(1.89%, 31, -996000, , 1)), the calculated corpus is Rs. 2,36,43,984.
Q20 MCQ · 1 mark MediumMinimum Sum Assured Regulations

Mr. Sharma, aged 40, takes a life insurance policy with a term of 15 years. If his annual premium is ₹1,00,000, what is the minimum sum assured required by IRDAI regulations?

A₹5,00,000
B₹7,00,000
✓₹10,00,000
D₹15,00,000
💡 According to IRDAI Regulations, for individuals below 45 years of age and policy terms of more than 10 years, the minimum sum assured must be 10 times the annual premium. Given: Age = 40 (below 45), Term = 15 years (more than 10 years), Annual Premium = ₹1,00,000. Minimum Sum Assured = 10 * Annual Premium = 10 * ₹1,00,000 = ₹10,00,000.
Q21 MCQ · 1 mark MediumElements of Life Insurance Products (Sum Assured)

As per IRDAI Regulations, what is the minimum sum assured required for a life insurance product with a term of 12 years, taken by an individual who is 48 years old?

A5 times the annual premium
✓7 times the annual premium
C10 times the annual premium
D12 times the annual premium
💡 The IRDAI Regulations require all life insurance products with terms of more than 10 years to provide a minimum sum assured of: - 10 times the annual premium for individuals below 45 years of age. - 7 times the annual premium if age is above 45 years. Since the individual is 48 years old (above 45) and the term is 12 years (more than 10 years), the minimum sum assured is 7 times the annual premium.
Q22 MCQ · 1 mark EasySEBI (Investment Advisers) Regulations

An insurance broker registered with IRDAI offers investment advice solely on insurance products. According to SEBI (Investment Advisers) Regulations, 2013, what is the regulatory requirement for this specific activity?

AThe broker must also register with SEBI as an Investment Adviser.
✓The broker is exempt from SEBI (Investment Advisers) Regulations for this specific activity.
CThe broker must adhere to risk profiling and suitability principles only if advising on non-insurance products.
DThe broker must always maintain fiduciary responsibility to the client, regardless of the product type.
💡 The provided text states: 'SEBI (Investment Advisers) Regulations (IA regulations) provide an exemption to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products.'
Q23 MCQ · 1 mark EasySEBI (Investment Advisers) Regulations, 2013

According to SEBI (Investment Advisers) Regulations, 2013, an insurance agent or broker registered with IRDAI is exempt from these regulations if they provide investment advice solely on:

ANon-insurance securities
BNon-insurance investment products
✓Insurance products
DA combination of insurance and non-insurance products
💡 The SEBI (Investment Advisers) Regulations provide an exemption to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products. If they also offer advice on non-insurance products, the regulations would apply.
Q24 MCQ · 1 mark EasyRegulatory Framework (SEBI IA Regulations)

Under what circumstances is an insurance agent or insurance broker, registered with IRDAI, required to comply with SEBI (Investment Advisers) Regulations, 2013?

AOnly when offering investment advice on insurance products.
✓When offering investment advice on non-insurance securities or investment products, even if they also advise on insurance products.
CNever, as they are solely regulated by IRDAI.
DOnly if their total annual premium collection exceeds a specified limit.
💡 The SEBI (Investment Advisers) Regulations, 2013, provide an exemption to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products. However, if such an intermediary also offers investment advice on non-insurance securities or investment products, then such advice would be covered by IA regulations, and they would need to comply with them even when advising on insurance-based products.
Q25 MCQ · 1 mark HardHuman Life Value (HLV) Calculation Factors

Based on the Human Life Value (HLV) calculation methodology described in the chapter, which of the following statements is TRUE regarding its sensitivity to underlying assumptions?

AIf the rate of increase in income is higher than the post-tax return on investment, the HLV will always be equal to the current income multiplied by the number of years left for retirement.
BAn increase in the expected inflation rate for income, while keeping the post-tax return on investment constant, will decrease the calculated HLV.
✓The HLV will fall as a person gets older, assuming all other factors remain equal.
DA decrease in the post-tax return on the sum assured, while keeping the income increase rate constant, will result in a lower HLV.
💡 Option A is False: The text states that HLV equals current income multiplied by years left for retirement *only* when the rate of increase in income is *same* as the post-tax return on investment, not necessarily when it's higher. Option B is False: An increase in the income inflation rate (assuming it's still lower than or equal to the investment return) would generally increase the HLV, as the discounting rate (adjusted rate) would become lower, leading to a higher present value. Option C is True: The text directly states, 'All other things being equal... the HLV will fall as the person gets older... because the discount rate will remain the same but the Nper will fall and hence the calculated PV will fall.' Option D is False: A decrease in the post-tax return on the sum assured would generally lead to a *higher* HLV, because a larger initial corpus (HLV) would be required to generate the same stream of income at a lower return rate.
Q26 MCQ · 1 mark EasySEBI (Investment Advisers) Regulations

An insurance broker, registered with IRDAI, offers investment advice on both insurance products and mutual funds. According to SEBI (Investment Advisers) Regulations, 2013, how would their advice on insurance products be treated?

AIt remains exempt from IA regulations as long as they are primarily an insurance broker.
✓It would be covered by IA regulations, requiring adherence to principles of risk profiling, suitability, and fiduciary responsibility.
CIt is only covered by IA regulations if the insurance products are unit-linked insurance plans (ULIPs).
DSEBI regulations do not apply to advice on insurance products, regardless of other activities.
💡 The text states: 'if the insurance agent or insurance broker also offers investment advice on non-insurance securities or investment products then such advice would be covered by IA regulations. In that case, while advising on insurance based security or Investment products also the IA cum insurance intermediary would need to keep the principle of risk profiling, suitability and fiduciary responsibility to the client in mind.'
Q27 MCQ · 1 mark MediumPolicy Lapse & Paid-up Policy

Rohan had taken a 30-year investment cum insurance policy with a sum assured of ₹15,00,000, paying premiums annually. After paying premiums for 10 years, he is unable to continue. If he opts to make the policy paid-up, what will be the readjusted sum assured?

A₹15,00,000
B₹7,50,000
✓₹5,00,000
D₹3,00,000
💡 When a policy is made paid-up, the sum assured is proportionately reduced to the same proportion that the number of premiums paid bears to the total premiums due. 1. Original Sum Assured = ₹15,00,000. 2. Total premium paying term = 30 years. 3. Premiums paid = 10 years. 4. Readjusted Sum Assured = Original Sum Assured × (Premiums paid / Total premium paying term) Readjusted Sum Assured = ₹15,00,000 × (10 / 30) = ₹15,00,000 × (1/3) = ₹5,00,000.
Q28 MCQ · 1 mark HardPaid-up Policy Calculation

Surinder had taken a 25-year investment-cum-insurance policy with a sum assured of Rs. 10,00,000, paying premiums half-yearly. After paying premiums for 5 years, he is unable to continue. If he opts to make the policy paid-up, what will be the readjusted sum assured?

ARs. 10,00,000
BRs. 5,00,000
✓Rs. 2,00,000
DRs. 4,00,000
💡 To calculate the readjusted sum assured for a paid-up policy, the sum assured is proportionately reduced based on the number of premiums paid relative to the total premiums due. Original Sum Assured = Rs. 10,00,000 Policy Term = 25 years Premium Payment Mode = Half-yearly Total number of premiums due = 25 years * 2 premiums/year = 50 premiums Number of years premiums paid = 5 years Number of premiums paid = 5 years * 2 premiums/year = 10 premiums Readjusted Sum Assured = Original Sum Assured * (Premiums Paid / Total Premiums Due) Readjusted Sum Assured = Rs. 10,00,000 * (10 / 50) = Rs. 10,00,000 * 0.20 = Rs. 2,00,000.
Q29 MCQ · 1 mark MediumLife Insurance Products - Surrender Value

Which of the following statements is true regarding the surrender value of a Unit Linked Insurance Plan (ULIP)?

AThe surrender value is paid immediately if the policy is surrendered within the first 3 years, subject to a discontinuation charge.
✓A ULIP has a lock-in period of 5 years, and the surrender value is paid only at the end of this period.
CThe minimum surrender value for a ULIP is 30% of all premiums paid after 2 years.
DDiscontinuation charges are not applicable if a ULIP is surrendered before the lock-in period, as the fund is transferred to a discontinuation policy fund.
💡 The text states: 'In case of unit-linked insurance plans, the policy has a lock-in of 5 years and the surrender value is paid only at the end of the lock-in period.' While surrendering before 5 years is possible, a discontinuation charge is levied, and the balance is transferred to a discontinuation policy fund, but the actual surrender value is released only after the 5-year lock-in.
Q30 MCQ · 1 mark HardLife Insurance Needs Analysis

An individual, aged 40, wants to ensure income replacement for their spouse, aged 35, who is expected to live until 75. The individual's current monthly income is ₹1,20,000. They allocate ₹15,000 for personal expenses, pay a monthly EMI of ₹20,000 on a ₹30 lakh loan, and pay ₹10,000 monthly in insurance premiums. Assuming an inflation rate of 5% and an expected investment return of 7%, calculate the additional insurance cover required if they already have an existing life insurance policy for ₹75 lakhs and other investments of ₹20 lakhs. (Use the adjusted rate up to two decimal places for calculation).

✓₹1,95,51,801
B₹2,15,51,801
C₹2,60,51,801
D₹2,90,51,801
💡 1. Calculate annual income to be replaced: Monthly income available = ₹1,20,000 - (Personal expenses ₹15,000 + EMI ₹20,000 + Insurance Premium ₹10,000) = ₹1,20,000 - ₹45,000 = ₹75,000. Annual income available = ₹75,000 * 12 = ₹9,00,000. 2. Calculate the adjusted rate: Adjusted rate = ((1 + Investment rate) / (1 + Inflation rate)) - 1 Adjusted rate = ((1 + 0.07) / (1 + 0.05)) - 1 = (1.07 / 1.05) - 1 = 1.019047619 - 1 = 0.019047619 ≈ 1.90%. 3. Calculate the number of periods (Nper): Spouse's expected life - Spouse's current age = 75 - 35 = 40 years. 4. Calculate the corpus required using the Present Value (PV) function (payment at the beginning of the year): Corpus required = PV(rate=0.019047619, nper=40, pmt=-900000, fv=0, type=1) ≈ ₹2,60,51,801.31. 5. Add the loan outstanding: Total sum required = Corpus required + Loan outstanding = ₹2,60,51,801.31 + ₹30,00,000 = ₹2,90,51,801.31. 6. Deduct existing insurance cover: Amount after deducting existing insurance = ₹2,90,51,801.31 - ₹75,00,000 = ₹2,15,51,801.31. 7. Deduct other investments: Additional insurance cover required = ₹2,15,51,801.31 - ₹20,00,000 = ₹1,95,51,801.31.
Q31 MCQ · 1 mark MediumPolicy Lapse & Surrender Value

Ms. Sharma had taken a traditional investment cum insurance policy with a term of 15 years, paying an annual premium of ₹50,000. She decided to surrender the policy after 4 years, having paid all premiums due. What is the minimum surrender value she is guaranteed to receive, as per the NISM curriculum?

A₹50,000
✓₹60,000
C₹70,000
D₹1,00,000
💡 1. Calculate total premiums paid: ₹50,000/year * 4 years = ₹2,00,000. 2. For a traditional investment cum insurance policy that has been in force for at least 3 years (Ms. Sharma's policy was in force for 4 years), the minimum surrender value is 30% of all premiums paid. 3. Minimum surrender value = 30% of ₹2,00,000 = ₹60,000.
Q32 MCQ · 1 mark MediumIRDAI Minimum Sum Assured Regulations

Mr. Sharma, aged 40, is considering purchasing a traditional life insurance policy with a term of 15 years. If he plans to pay an annual premium of Rs. 80,000, what is the minimum sum assured required as per IRDAI Regulations?

ARs. 4,00,000
BRs. 5,60,000
✓Rs. 8,00,000
DRs. 10,00,000
💡 As per IRDAI Regulations: - The term of the policy is 15 years, which is more than 10 years. - Mr. Sharma's age is 40 years, which is below 45 years of age. For life insurance products with terms of more than 10 years, for individuals below 45 years of age, the minimum sum assured required is 10 times the annual premium. Minimum Sum Assured = 10 × Annual Premium Minimum Sum Assured = 10 × Rs. 80,000 = Rs. 8,00,000.
Q33 MCQ · 1 mark MediumLife Insurance Product Elements - Bonuses

Which type of bonus is declared after the completion of the guaranteed bonus period, is based on the performance of the insurance company, and is applicable to participating policies?

✓Reversionary bonus
BGuaranteed bonus
CTerminal bonus
DSimple bonus
💡 The text defines 'Reversionary bonus' as: 'This is based on the performance of the insurance company and is declared for policy holders at the discretion of the insurer. Reversionary bonus is declared after the completion of the guaranteed bonus period and is applicable to those policies that are called participating policies.'
Q34 MCQ · 1 mark MediumLife Insurance Products - Policy Lapse and Paid-up Value

Surinder had taken a 25-year investment cum insurance policy with a sum assured of Rs. 10,00,000, with premiums paid half-yearly. After paying premiums for 5 years, Surinder is unable to continue paying the premiums. If the policy is made paid-up, what will be the readjusted sum assured?

ARs. 10,00,000
BRs. 5,00,000
✓Rs. 2,00,000
DRs. 4,00,000
💡 To calculate the readjusted sum assured for a paid-up policy: 1. Determine the total number of premiums due: Since the policy is 25 years and premiums are half-yearly, total premiums = 25 years * 2 payments/year = 50 payments. 2. Determine the number of premiums paid: Premiums paid for 5 years with half-yearly mode = 5 years * 2 payments/year = 10 payments. 3. Calculate the proportion of premiums paid to total premiums due: 10 payments / 50 payments = 1/5. 4. Readjust the sum assured proportionately: Readjusted Sum Assured = Original Sum Assured * (Premiums Paid / Total Premiums Due) = Rs. 10,00,000 * (10/50) = Rs. 10,00,000 * (1/5) = Rs. 2,00,000.
Q35 MCQ · 1 mark EasyElements of Life Insurance Products - Sum Assured

A 40-year-old individual purchases a life insurance policy with a term of 15 years and an annual premium of ₹50,000. According to IRDAI Regulations, what is the minimum sum assured this policy must provide?

A₹2,50,000
B₹3,50,000
✓₹5,00,000
D₹7,00,000
💡 The individual is 40 years old (below 45 years) and the policy term is 15 years (more than 10 years). According to IRDAI Regulations, for individuals below 45 years of age with a policy term of more than 10 years, the minimum sum assured must be 10 times the annual premium. Minimum Sum Assured = 10 * Annual Premium = 10 * ₹50,000 = ₹5,00,000.
Q36 MCQ · 1 mark HardLife Insurance Needs Analysis - Needs-based approach

Based on the needs-based approach, calculate the additional insurance cover required for Mr. Sharma given the following details: - Monthly income: ₹1,20,000 - Personal expenses: ₹8,000 per month - EMI payments: ₹25,000 per month - Insurance Premium: ₹15,000 per month - Spouse's current age: 50 years, expected to live till 85 years - Expected inflation: 5% - Expected return on investment: 7% - Existing life insurance cover: ₹75,00,000 - Other investments: ₹30,00,000 - Loan outstanding: ₹35,00,000

✓₹1,12,68,973
B₹1,47,68,973
C₹1,82,68,973
D₹2,17,68,973
💡 1. **Calculate current value of income required per annum:** * Income to be replaced per month = Total income - (Personal expenses + EMI payments + Insurance Premium) * = ₹1,20,000 - (₹8,000 + ₹25,000 + ₹15,000) = ₹1,20,000 - ₹48,000 = ₹72,000 per month * Income to be replaced per annum = ₹72,000 * 12 = ₹8,64,000 2. **Calculate adjusted rate:** * Adjusted rate = ((1 + Investment rate) / (1 + Inflation rate)) - 1 * = ((1 + 0.07) / (1 + 0.05)) - 1 = (1.07 / 1.05) - 1 = 1.019047619 - 1 = 0.019047619 (approx 1.90%) 3. **Calculate number of years (Nper):** * Nper = Spouse's expected life - Spouse's current age = 85 - 50 = 35 years 4. **Calculate corpus required using PV function (PV(rate, nper, pmt, [fv], [type])):** * PV(0.019047619, 35, -864000, 0, 1) ≈ ₹2,07,68,973 5. **Add loan outstanding:** * Total sum required = Corpus required + Loan outstanding * = ₹2,07,68,973 + ₹35,00,000 = ₹2,42,68,973 6. **Deduct existing insurance and other investments:** * Additional insurance cover required = Total sum required - Existing insurance cover - Other investments * = ₹2,42,68,973 - ₹75,00,000 - ₹30,00,000 = ₹1,12,68,973
Q37 MCQ · 1 mark MediumIRDAI Regulations (Sum Assured)

An individual aged 40 years buys a life insurance policy with a term of 15 years, paying an annual premium of ₹50,000. What is the minimum sum assured required as per IRDAI Regulations?

A₹2,50,000
B₹3,50,000
✓₹5,00,000
D₹7,00,000
💡 As per IRDAI Regulations, for life insurance products with terms of more than 10 years and for individuals below 45 years of age, the minimum sum assured must be 10 times the annual premium. Given: Age = 40 years (below 45 years) Policy Term = 15 years (more than 10 years) Annual Premium = ₹50,000 Minimum Sum Assured = 10 × Annual Premium Minimum Sum Assured = 10 × ₹50,000 = ₹5,00,000
Q38 MCQ · 1 mark MediumElements of Life Insurance Products - Policy Lapse & Paid-up

Rina had taken a 30-year investment-cum-insurance policy with a sum assured of ₹15,00,000, with premiums payable annually. After paying premiums for 10 years, she is unable to continue. If she opts to make the policy paid-up, what will be the readjusted sum assured?

A₹3,00,000
✓₹5,00,000
C₹7,50,000
D₹15,00,000
💡 For a paid-up policy, the sum assured is proportionately reduced to the same proportion that the number of premiums paid bears to the total premiums due. Total premiums due = 30 years Premiums paid = 10 years Proportion = Premiums paid / Total premiums due = 10/30 = 1/3 Readjusted Sum Assured = Original Sum Assured * Proportion Readjusted Sum Assured = ₹15,00,000 * (1/3) = ₹5,00,000.
Q39 MCQ · 1 mark MediumPolicy Lapse and Paid-up Value

An individual took a 20-year investment-cum-insurance policy with a sum assured of Rs. 15,00,000, payable annually. After paying premiums for 8 years, the individual is unable to continue. If the policy is made paid-up, what will be the readjusted sum assured?

✓Rs. 6,00,000
BRs. 7,50,000
CRs. 3,00,000
DRs. 15,00,000
💡 When a policy is made paid-up, the sum assured is proportionately reduced based on the ratio of premiums paid to total premiums due. Original Sum Assured = Rs. 15,00,000 Total Premiums Due (for a 20-year annual policy) = 20 Premiums Paid = 8 Readjusted Sum Assured = Original Sum Assured × (Premiums Paid / Total Premiums Due) Readjusted Sum Assured = Rs. 15,00,000 × (8 / 20) Readjusted Sum Assured = Rs. 15,00,000 × 0.40 = Rs. 6,00,000.
Q40 MCQ · 1 mark EasySEBI (Investment Advisers) Regulations, 2013

An insurance agent registered with IRDAI offers investment advice solely in insurance products. As per SEBI (Investment Advisers) Regulations, 2013, what is the regulatory status of this agent concerning these regulations?

AThe agent must register as an Investment Adviser with SEBI.
✓The agent is exempt from SEBI (Investment Advisers) Regulations.
CThe agent must adhere to risk profiling and suitability principles for all advice, including insurance products.
DThe agent must obtain a separate license for offering insurance product advice.
💡 SEBI (Investment Advisers) Regulations (IA regulations) provide an exemption to an insurance agent or insurance broker registered with IRDAI who offers investment advice solely in insurance products. If they also offer advice on non-insurance products, then IA regulations would apply.
Q41 MCQ · 1 mark MediumIRDAI Minimum Sum Assured

A 42-year-old individual takes a life insurance policy with a term of 12 years. If the annual premium payable is ₹75,000, what is the minimum sum assured required as per IRDAI Regulations?

A₹3,75,000
B₹5,25,000
✓₹7,50,000
D₹15,00,000
💡 As per IRDAI Regulations, for individuals below 45 years of age and a policy term of more than 10 years, the minimum sum assured must be 10 times the annual premium. Given: Age = 42 years (below 45), Term = 12 years (more than 10), Annual Premium = ₹75,000. Minimum Sum Assured = 10 * Annual Premium = 10 * ₹75,000 = ₹7,50,000.
Q42 MCQ · 1 mark HardLife Insurance Needs Analysis - Needs-based approach

Mrs. Kapoor, aged 55, wants to ensure her family's needs are met if something happens to her. Her current annual income is ₹12,00,000. She pays ₹1,80,000 annually in insurance premiums and has personal expenses of ₹60,000 per year. She has an outstanding home loan of ₹30,00,000. She has existing life insurance cover of ₹75,00,000 and other investments amounting to ₹40,00,000. Her family is expected to need income for 20 years. If the expected inflation is 5% and the return on investment is 7%, what is the additional insurance cover Mrs. Kapoor should take using the needs-based approach? (Assume payments at the beginning of each year and use adjusted rate up to 2 decimal places).

✓₹1,21,94,845
B₹1,36,94,845
C₹1,66,94,845
D₹2,01,94,845
💡 1. **Calculate current value of income required:** Income to be replaced = Annual Income - Personal Expenses - Insurance Premiums Income to be replaced = ₹12,00,000 - ₹60,000 - ₹1,80,000 = ₹9,60,000 per annum 2. **Calculate adjusted rate:** Inflation rate = 5% Investment rate = 7% Adjusted rate = ((1 + Investment rate) / (1 + Inflation rate)) - 1 Adjusted rate = ((1 + 0.07) / (1 + 0.05)) - 1 = (1.07 / 1.05) - 1 = 1.0190476 - 1 = 0.0190476 ≈ 1.90% (rounded to 2 decimal places as per the text's example note). 3. **Calculate corpus required (Present Value of future income stream):** Using PV function logic: PV(Rate, Nper, -PMT, , Type) Rate = 0.019 (1.90%) Nper = 20 years PMT = -₹9,60,000 (annual income to be replaced) Type = 1 (payments at the beginning of each year) Corpus required = PV(0.019, 20, -960000, , 1) ≈ ₹1,86,94,845 4. **Add loan outstanding:** Total sum required = Corpus required + Loan outstanding Total sum required = ₹1,86,94,845 + ₹30,00,000 = ₹2,16,94,845 5. **Deduct existing insurance and investments:** Additional insurance cover required = Total sum required - Existing insurance cover - Other investments Additional insurance cover required = ₹2,16,94,845 - ₹75,00,000 - ₹40,00,000 Additional insurance cover required = ₹1,21,94,845
Q43 MCQ · 1 mark EasyLife Insurance Product Elements - Policy Lapse and Surrender Value

For a traditional investment-cum-insurance policy with a term of 15 years, what is the minimum duration it must be in force with full premiums paid to acquire a cash value or surrender value?

A1 year
B2 years
✓3 years
D5 years
💡 The text states: 'However, in a traditional investment cum insurance policy that has been in force for at least 3 years (2 years if the term of the policy is less than 10 years), on which full premiums have been paid, may acquire a cash value or surrender value.' Since the policy term is 15 years, which is greater than 10 years, the minimum duration is 3 years.
Q44 MCQ · 1 mark MediumElements of Life Insurance Products - Sum Assured

An individual aged 40 years takes a life insurance policy with a term of 15 years and an annual premium of Rs. 75,000. As per IRDAI Regulations, what is the minimum sum assured this policy must provide?

ARs. 3,75,000
BRs. 5,25,000
✓Rs. 7,50,000
DRs. 10,00,000
💡 According to IRDAI Regulations, for life insurance products with terms of more than 10 years, the minimum sum assured required is: - 10 times the annual premium for individuals below 45 years of age. - 7 times the annual premium if age is above 45 years. In this case, the individual is 40 years old (below 45) and the term is 15 years (more than 10 years). Therefore, the minimum sum assured is 10 times the annual premium. Minimum Sum Assured = 10 * Annual Premium = 10 * Rs. 75,000 = Rs. 7,50,000.
Q45 MCQ · 1 mark MediumLife Insurance Product Elements - Paid-up Policy

Mr. Sharma took a 20-year investment-cum-insurance policy with a Sum Assured of ₹15,00,000, payable annually. After paying premiums for 8 years, he is unable to continue. If he opts to make the policy paid-up, what will be the readjusted Sum Assured?

A₹3,00,000
✓₹6,00,000
C₹7,50,000
D₹15,00,000
💡 To calculate the readjusted Sum Assured for a paid-up policy, the formula is: Readjusted Sum Assured = Original Sum Assured * (Number of premiums paid / Total premiums due) Original Sum Assured = ₹15,00,000 Total policy term (and total premiums due) = 20 years Number of premiums paid = 8 years Readjusted Sum Assured = ₹15,00,000 * (8 / 20) Readjusted Sum Assured = ₹15,00,000 * 0.40 Readjusted Sum Assured = ₹6,00,000

Case-Based Questions (2 sets)

Case 1 Case-Based · 1 mark each Life Insurance Needs Analysis
Mrs. Anjali Mehta, a 35-year-old financial analyst, is reviewing her family's financial planning. She earns a monthly income of Rs. 1,80,000. Her personal expenses amount to Rs. 15,000 per month. She has an outstanding home loan of Rs. 60 lakhs, on which she pays an EMI of Rs. 50,000 per month. She also pays an annual insurance premium of Rs. 36,000 (Rs. 3,000 per month) for an existing term insurance policy of Rs. 1.2 crore. Anjali has other investments totaling Rs. 75 lakhs (excluding her residential house). She wants to ensure her 5-year-old daughter's future and her 38-year-old husband's financial stability if anything were to happen to her. She plans to work until age 60. Her husband is expected to live until 85. She assumes an inflation rate of 5% and an expected post-tax return on investment of 7%.
Medium Sub-question 1

Using the needs-based approach, what is the current annual income amount that needs to be replaced to maintain her family's lifestyle if Mrs. Mehta were no longer earning?

✓Rs. 13,44,000
BRs. 12,24,000
CRs. 10,80,000
DRs. 14,40,000
💡 The income required to be provided is calculated as Total Income - (Personal Needs + EMI Payments + Insurance Premium). Total monthly income = Rs. 1,80,000. Monthly personal expenses = Rs. 15,000. Monthly EMI payments = Rs. 50,000. Monthly insurance premium = Rs. 3,000. Monthly income to be replaced = Rs. 1,80,000 - (Rs. 15,000 + Rs. 50,000 + Rs. 3,000) = Rs. 1,80,000 - Rs. 68,000 = Rs. 1,12,000 per month. Annual income to be replaced = Rs. 1,12,000 * 12 = Rs. 13,44,000.
Easy Sub-question 2

Mrs. Mehta is considering purchasing an additional pure risk cover product to maximize her death benefit for her family while keeping premiums low. Which type of life insurance product is most suitable for this specific objective?

AWhole Life Policy
BEndowment Policy
✓Term Insurance
DUnit-Linked Insurance Plan (ULIP)
💡 Term insurance is a pure risk cover product. It pays a benefit only if the policy holder dies during the period for which one is insured. Term insurance premiums are typically low because it only covers the risk of death and there is no investment component in it. It offers the most affordable form of life insurance.
Easy Sub-question 3

Mrs. Mehta wants to ensure that the policy money from her existing insurance directly goes to her husband and daughter in case of her untimely demise. Which legal provision in the insurance contract allows her to specify these individuals?

ASum Assured
BTerm of the Contract
✓Nomination
DPolicy Lapse Clause
💡 Nomination is the right of a policy holder to identify the person(s) entitled to receive the policy money, in the event of the policy becoming a claim by death. It can be made at the time of taking the policy or subsequently and can be changed.
Medium Sub-question 4

If Mrs. Mehta were to calculate her Human Life Value (HLV) using the income replacement method, and hypothetically, if her expected income growth rate was equal to the expected post-tax return on investment, what would be a simplified estimation of her HLV?

ARs. 1,80,000 * 25
✓(Rs. 1,80,000 * 12) * 25
C(Rs. 1,80,000 * 12) * (85-35)
DRs. 1,80,000 * (1+0.05)^25
💡 According to the thumb rule mentioned in the text, if the rate of increase in income is assumed to be the same as the post-tax return on investment, the HLV will always be equal to the current income multiplied by the number of years left for retirement. Mrs. Mehta's current annual income = Rs. 1,80,000 * 12. Years left for retirement = 60 (retirement age) - 35 (current age) = 25 years. Simplified HLV = (Rs. 1,80,000 * 12) * 25.
Hard Sub-question 5

Based on the needs-based approach, and considering all provided financial details, what is the *additional* insurance cover Mrs. Anjali Mehta needs to take to fully meet her family's future financial requirements?

ARs. 1,21,18,290
BRs. 1,96,18,290
CRs. 2,56,18,290
✓Rs. 2,81,18,290
💡 1. **Current Annual Income to be replaced**: Rs. 13,44,000 (from previous question). 2. **Adjusted rate**: Inflation rate = 5%, Investment rate = 7%. Adjusted rate = ((1 + Investment rate) / (1 + Inflation rate)) - 1 = ((1 + 0.07) / (1 + 0.05)) - 1 = (1.07 / 1.05) - 1 = 0.019047619 or approximately 1.90%. 3. **Period for income provision (Nper)**: Mrs. Mehta's husband is 38 years old and expected to live until 85. So, Nper = 85 - 38 = 47 years. 4. **Corpus required (using PV function)**: This is the present value of future income streams. Using Excel PV function: PV(rate, nper, pmt, [fv], [type]) PV(0.019047619, 47, -1344000, , 1) ≈ Rs. 4,16,18,290 (assuming payments at the beginning of each year, Type=1). 5. **Add loan outstanding**: Rs. 60,00,000. Total funds required = Corpus + Loan = Rs. 4,16,18,290 + Rs. 60,00,000 = Rs. 4,76,18,290. 6. **Deduct existing resources**: Existing insurance cover = Rs. 1,20,00,000. Other investments = Rs. 75,00,000. Total deductions = Rs. 1,20,00,000 + Rs. 75,00,000 = Rs. 1,95,00,000. 7. **Additional insurance cover required**: Total funds required - Total deductions = Rs. 4,76,18,290 - Rs. 1,95,00,000 = Rs. 2,81,18,290.
Case 2 Case-Based · 1 mark each Life Insurance Product Features & Regulations
Mr. Rajeev Sharma, a 40-year-old individual, purchased a traditional investment-cum-insurance policy with a sum assured of Rs. 20,00,000 for a term of 20 years. His annual premium for this policy is Rs. 1,50,000. He diligently paid premiums for the first 4 years. However, in the 5th year, due to unexpected financial difficulties, he is unable to continue paying the premiums. He seeks advice from his financial planner, Ms. Priya, to understand his options and the implications of his policy situation. He remembers that Ms. Priya had mentioned some IRDAI regulations regarding minimum sum assured at the time of purchase.
Easy Sub-question 1

Based on IRDAI regulations at the time of policy purchase, what was the minimum sum assured Mr. Rajeev Sharma's policy should have provided, considering his age and the policy term?

ARs. 10,50,000
✓Rs. 15,00,000
CRs. 20,00,000
DRs. 7,50,000
💡 Mr. Sharma is 40 years old (below 45 years) and the policy term is 20 years (more than 10 years). According to IRDAI regulations, for individuals below 45 years of age and policy terms greater than 10 years, the minimum sum assured must be 10 times the annual premium. Minimum Sum Assured = 10 * Annual Premium = 10 * Rs. 1,50,000 = Rs. 15,00,000.
Easy Sub-question 2

If Mr. Sharma's policy was a Unit-Linked Insurance Plan (ULIP) and he decided to surrender it in the 5th year, what would be the immediate consequence regarding the lock-in period and charges?

ANo charges would apply, and the fund value would be paid immediately.
✓A discontinuation charge of maximum Rs. 6,000 would be levied, and the fund value would be paid at the end of the 5-year lock-in period.
CA discontinuation charge of maximum Rs. 3,000 would be levied, and the fund value would be paid immediately.
DThe policy cannot be surrendered before the 5-year lock-in period, and all premiums would be forfeited.
💡 For ULIPs, surrendering a policy before 5 years is possible even though there is a lock-in of 5 years. There is a discontinuation charge levied which is a maximum of Rs. 6,000. Post deducting this charge, the balance fund is transferred to a discontinuation policy fund, and the surrender value is paid only at the end of the lock-in period (5 years from policy inception).
Medium Sub-question 3

Assuming Mr. Sharma's policy is a traditional investment-cum-insurance policy and he lets it lapse without making it paid-up, what is the *amount* of minimum guaranteed surrender value he would be entitled to receive after 4 years of premium payments?

✓Rs. 1,80,000
BRs. 2,40,000
CRs. 3,60,000
DRs. 6,00,000
💡 Mr. Sharma paid premiums for 4 years. Annual premium is Rs. 1,50,000. Total premiums paid = 4 * Rs. 1,50,000 = Rs. 6,00,000. For a traditional investment-cum-insurance policy that has been in force for at least 3 years (Mr. Sharma paid for 4 years), a cash value or surrender value is acquired. The minimum surrender value will be 30% of all premiums paid. Minimum Guaranteed Surrender Value = 30% of Rs. 6,00,000 = Rs. 1,80,000.
Medium Sub-question 4

If Mr. Sharma chooses to convert his traditional investment-cum-insurance policy into a paid-up policy, what would be the new reduced sum assured?

✓Rs. 4,00,000
BRs. 5,00,000
CRs. 8,00,000
DRs. 10,00,000
💡 To calculate the reduced sum assured for a paid-up policy, we use the proportion of premiums paid to total premiums due. Total policy term = 20 years. Since premiums are annual, total premiums due = 20. Premiums paid = 4 years. Original Sum Assured = Rs. 20,00,000. Reduced Sum Assured = Original Sum Assured * (Premiums Paid / Total Premiums Due) Reduced Sum Assured = Rs. 20,00,000 * (4 / 20) = Rs. 20,00,000 * 0.20 = Rs. 4,00,000.
Hard Sub-question 5

Mr. Sharma mentions that his policy does not offer any bonus. Ms. Priya explains that this indicates he has a non-participating policy. If he had opted for a participating policy instead, how would it typically differ in terms of premium and potential benefits, and what specific type of bonus might he have been eligible for after the initial years?

ALower premiums, eligible for guaranteed bonus only.
✓Higher premiums, eligible for guaranteed bonus and reversionary bonus.
CHigher premiums, eligible for guaranteed bonus only.
DLower premiums, eligible for reversionary bonus only.
💡 Participating policies are those where policyholders participate in the profits of the insurance company. This generally means they have higher premiums than non-participating policies. Such policies are eligible for bonuses. The text mentions 'Guaranteed bonus is paid for the first few years...' and 'Reversionary bonus' which is declared after the completion of the guaranteed bonus period and is based on the performance of the insurance company.
About this content: These practice questions are based on the NISM-Series-X-B: Investment Adviser (Level 2) Certification Examination Workbook published by the National Institute of Securities Markets (NISM), Mumbai. NISM is a SEBI-established institution. Questions cover Features of Life Insurance Products with verified answers and explanations. BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI. Last updated: .

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