Insurance Services (VSAQs)
Commerce-2 | 4. Insurance Services – VSAQs:
Welcome to VSAQs in Chapter 4: Insurance Services. This page includes the most important FAQs from previous exams. Each answer is provided in simple English and presented in the exam format. This approach helps you prepare effectively and aim for top marks in your final exams.
VSAQ-1: What is an Endowment Policy?
An Endowment Policy is like a savings plan wrapped in an insurance cover. Imagine you start a plan where you save money regularly for a set number of years, like until you turn 60. This plan not only helps you save, but it also provides financial protection. If you live until the end of the plan, you get a lump sum amount, which could be used for retirement or any other financial goal. However, if something unfortunate happens and you pass away before the plan ends, your family will receive the money instead. This makes an endowment policy a mix of investment and insurance—helping you save for the future while also protecting your loved ones.
VSAQ-2: What is Surrender Value?
Surrender Value is like cashing out early from a savings plan. Imagine you’ve been saving in an insurance policy for a few years, but now you need the money urgently, or you decide to stop the policy. When you surrender the policy, the insurance company gives you a certain amount of money. This amount is usually less than what you’ve paid into the policy because there are fees and charges involved. The surrender value represents what the policy is worth at the time you decide to end it before the agreed term.
VSAQ-3: What is the IRDA?
The Insurance Regulatory and Development Authority (IRDA) is like the watchdog for the insurance industry in India. Think of it as the referee in a football match, ensuring everyone plays by the rules. Established under the IRDA Act, 1999, this body is responsible for making sure that insurance companies operate fairly and that the interests of policyholders are protected. The IRDA sets guidelines, monitors companies, and ensures that the insurance market runs smoothly and efficiently. It’s headquartered in Hyderabad and oversees both life and non-life insurance sectors in India.
VSAQ-4: What is a Time Policy?
A Time Policy is like renting insurance for a specific period. Imagine you have a valuable piece of equipment or goods that you only use for a certain time each year, like a boat during summer. A time policy provides insurance coverage for that specific period, ensuring that your asset is protected against damages during that time. This type of policy is especially useful for assets that aren’t in constant use, giving you peace of mind that they’re covered only when you need it.