Life and term insurance

Q1. Which statement best describes “Risk transfer”?

1. The policy term is the number of years the cover lasts. It should usually run until the person’s earning years end.
2. IRDAI is the regulator of insurance in India. It licenses insurers, sets conduct rules and protects policyholders.
3. Risk transfer is moving the financial burden of a loss to an insurer in exchange for a premium. Many people share the cost of the few who suffer a loss.
4. Inflation erosion is the loss in value of a fixed sum over time. A sum that looks large today buys much less in twenty years.

Q2. Which statement best describes “Term plan”?

1. Material disclosure means telling the insurer every fact that could affect its decision to cover you, such as illness, smoking and other policies.
2. The policy term is the number of years the cover lasts. It should usually run until the person’s earning years end.
3. A term plan pays the sum assured to the nominee if the policyholder dies during the term. If the person survives, nothing is paid.
4. A return of premium plan refunds the premiums if the policyholder survives the term, but costs much more than a plain term plan.