Top Insurance Interview Questions and Answers

What is Insurance?

Insurance is a contract (policy) where an individual or entity receives financial protection or reimbursement against potential losses from an insurance company. In return for regular payments (premiums), the insurer agrees to compensate for specified losses or damages.

Insurance Policies

An insurance policy is a legally binding contract outlining the terms and conditions of insurance coverage. It details the coverage provided, premiums, and other relevant information.

Insurance Coverage

Insurance coverage defines what is protected under an insurance policy and the extent of that protection. It specifies the amount the insurer will pay in case of a claim, subject to the policy's terms and conditions.

Types of Insurance Coverage

• Life Insurance: Provides a death benefit to designated beneficiaries.
• General/Non-life Insurance: Covers various risks (property, health, auto, etc.).

Insurance Premiums

Premiums are the regular payments made by the policyholder to the insurance company in exchange for coverage. They're calculated based on the assessed risk, considering factors like the likelihood and potential cost of claims.

Beneficiaries in Insurance

A beneficiary is a person or entity designated to receive the insurance payout in case of a covered event (e.g., death of the insured in a life insurance policy).

Revocable vs. Irrevocable Beneficiaries

Insured vs. Insurer

Contestable Period

The contestable period is an initial period (usually one to two years) during which the insurance company can investigate the policy and potentially deny coverage if it discovers misrepresentation or fraud by the policyholder.

No-Claim Bonus (NCB)

An NCB is a reward for policyholders who don't file claims during a policy period. It typically results in reduced premiums for subsequent policy terms. NCBs are often transferable between insurers or to new policies.

Tips for Buying Insurance

• Determine the appropriate coverage amount.
• Disclose all relevant information accurately.
• Compare policies and premiums from different insurers.

Declaration Page

The declaration page summarizes the key details of an insurance policy (policyholder information, coverage details, premiums, etc.). It is updated whenever changes to the policy are made.

Personal Accident Policy Benefits

Personal accident policies typically cover various events such as:

• Accidental death.
• Permanent disability.
• Temporary disability.
• Medical expenses.
• Hospitalization.

Loss Payee

A loss payee is a person or entity (like a bank) that is entitled to receive insurance payments in case of a loss. This is common when assets are financed (like a car loan).

Deductibles in Insurance

A deductible is the amount a policyholder must pay out-of-pocket before the insurance company begins paying benefits. It's a cost-sharing mechanism used to reduce premiums and prevent minor claims.

Annuities

An annuity is a contract that provides a stream of payments (typically regular payments over time) to a policyholder, often used for retirement income.

Reasons for Buying Travel Insurance

Travel insurance protects against unforeseen events and potential financial losses while traveling:

• Medical emergencies.
• Trip cancellations or interruptions.
• Lost or stolen baggage.
• Other travel-related issues.

Top Insurance Interview Questions and Answers (Part 2)

Travel Insurance Coverage

Travel insurance offers valuable protection against various travel-related risks and potential financial losses.

• Trip Cancellation/Interruption: Covers costs associated with canceling or cutting short a trip due to unforeseen circumstances (illness, emergencies, etc.).
• Medical Emergencies: Covers medical expenses incurred during travel, including hospitalization and emergency treatment. Often includes an emergency medical evacuation clause.
• Lost or Stolen Belongings: Provides reimbursement for lost or stolen luggage or personal belongings.
• Other Coverage: Many policies cover flight delays, missed connections, and other disruptions.

Co-insurance

Co-insurance is a cost-sharing mechanism in insurance where the policyholder pays a percentage of the claim amount after meeting a deductible. It's designed to encourage responsible claim filing and share the cost of medical expenses or damages between the insured and the insurer.

Types of Insurance

Many types of insurance exist to protect against various risks:

• Life insurance
• Health insurance
• Auto insurance
• Homeowners insurance
• Travel insurance
• Disability insurance
• Liability insurance

Surrender Value

Surrender value is the amount an insurance company pays if a policyholder cancels a policy before its maturity date. It's typically less than the total premiums paid, reflecting the loss of potential future benefits.

Paid-Up Value

Paid-up value is the guaranteed amount payable if you cease premium payments on certain insurance policies before maturity. The amount is reduced proportionally to the duration of premium payments made.

Loss Payee

A loss payee is the person or entity (e.g., a bank) who receives the insurance payment in case of a loss. This is common in situations where an asset is financed (like a car loan).

Replacing an Insurance Policy

Replacing an existing policy with a new one should be considered carefully. Consider factors like the amount of premiums already paid, potential loss of benefits, and the new policy's terms. A new policy may also trigger a new contestability period.

Claiming an Insurance Policy

1. Complete a claim form accurately.
2. Contact your insurance provider or agent.
3. Provide necessary documentation (e.g., receipts, police report).
4. Pay any applicable fees or deductibles.

Consequences of Non-Payment of Premiums

Failure to pay premiums may result in the policy lapsing. A grace period is usually given. If premiums are not paid, the policy may be canceled, often allowing for reinstatement with payment of back premiums and any applicable penalties. For some policies (like life insurance), a paid-up value might be offered.

Participating vs. Non-Participating Policies

Beneficiary Claim with Missing Policyholder

A beneficiary can claim a life insurance policy if the policyholder has been missing for an extended period (typically seven years or more) and has been legally declared dead by a court.

Paying Premiums Through an Agent

Paying premiums through an agent is generally safe if done through official channels and documented appropriately. Always request and retain official payment receipts.

General Insurance Policies

General insurance (non-life insurance) covers various types of risks, such as property damage, liability, accidents, and travel.

Free Look Period in Insurance

The free look period is a short timeframe (typically 10-15 days) after purchasing a life insurance policy where you can cancel it and receive a full refund without penalty.

Elimination Period in Health Insurance

The elimination period in health insurance is the waiting period between the start of an illness or injury and when benefits begin. Policies with longer elimination periods generally have lower premiums.

Multiple Life Insurance Policies

Yes, an individual can hold multiple life insurance policies and receive payouts from each policy, subject to the terms and conditions of each respective policy. Each policy has to be assessed separately and would be subject to its conditions.

Assessment Year vs. Previous Year (Income Tax)

Limited Premium Payment Periods

Some life insurance policies allow you to pay premiums over a shorter period than the policy's full term (e.g., paying for 10 years on a 20-year policy). This results in higher premiums during the payment period.

"No Physical Exam" Policies

Some life insurance policies allow you to apply without a medical examination. This is convenient, but premiums are typically higher because of the increased risk for the insurance company.