Practice questions Insurance Planning – CFP

Dear all, here are some more questions to practice for insurance, suggested by readers of this blog.

1.

A Client has a 20-year moneyback policy with Sum Assured of Rs. 200000, Premium per annum 13,672. 20% will be paid to the policyholder at the end of the 5^th year, 10^th and the 15^th year and 40% for the 20^th year. The client has received the 3^rd moneyback. You estimate the gross returns presently in the policy considering reversionary bonus of Rs. 50/1000 Sum Assured. You compare the cost benefit if the client pays all premiums & survives the policy & also gets Rs. 150/1000 Sum Assured as loyalty Bonus. You conclude that ______

1. The additional inflow on 5 future premiums less opportunity cost would be 12% return
2. The additional inflow on 5 future premiums less opportunity cost would be more than 19% return
3. The additional inflow on 5 future premiums less opportunity cost would be 30% returns or more
4. The overall return improves marginally by 1.15% p.a.

 

2.

A family spends 35000 pm. There is a loan outstanding of 42 lakhs. The client’s son wants to study abroad after 5 years and 50 lakhs is the cost against which he has a saving of 27 lakhs. Find Inflation adjusted life cover for replacing the client, for 5 years of family expense & such life expenses @ 40% for souse’s 30 years survival. Inflation is 5.5% and Return is 9.5%

1. 109 Lakhs
2. 101 Lakhs
3. 106 Lakhs
4. 91 Lakhs

3.

A client has a cash asset of 70 Lakhs, a housing loan of 52 lakhs. 6 years hence wants 1 cr to set up child business and 10 years hence wants 50 Lakh for daughter’s marriage. What is the life cover required? Inflation adjusted monthly expense 50000 now for his family & that of the spouse 35 years survival continuing after 10 years. Inflation is 7% & investment rate is 11%

1. 220 Lakh
2. 299 Lakh
3. 144 Lakh
4. 162 Lakh

4.

A client has a car loan of 10 lakhs with an EMI of 21494/m @ 10.5% and 2 years left for the loan. He also has a personal loan of 3.2 lakhs with an EMI of 11569/m @ 18% and 2 years left. He receives a sudden inflow of 4 lakhs which he can put in 10% FD for 2 years. Will you advice to repay the loan & invest the EMI systematically every month in a tax efficient instrument @ 9%?

1. Yes the accumulated amount after 2 years would be more by atleast 20,000 with lower tax than FD
2. No, FD maturity will be 8,47,000 against total outflow of 7,93,500 in 2 years in loan
3. No the FD interest would be 1,47,000 where as he may save 98,000 in interest
4. Not nice to leave 10% for 9%

• FV OF FD
• PV = 4,00,000
• N = 2
• I/Y = 10
• FV1 = 4,84,000
• INVESTMENT OF SURPLUS AMOUNT
• FIND PV OF CAR LOAN
• FIND PV OF PERSONAL LOAN
• REPAY PERSONAL LOAN AND USE REMAINING AMOUNT TO PAY CAR LOAN
• FIND PMT FOR REMAINING CAR LOAN
• AMOUNT OF INVESTMENT = 21494 +11569 – NEW CAR LOAN PMT
• FINAL ACCUMULATION:
• PMT = AMT OF INVESTMENT
• N = 24
• I/Y = MNR OF 9%
• FV2 = ?
• INCREASE IN WEALTH = FV2 – 484000

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