Archive / Investment Adviser (Level 2) / Life Insurance Products

nism-series-xb-revised-insurance-requirement-higher-existing-cover[ INVESTMENT ADVISER (LEVEL 2) ]

In Adil's case, total financial obligations equal Rs. 1,08,24,712 (PV of 30-year living expenses Rs. 68.25L + home loan Rs. 30L + child corpus Rs. 10L). If Adil's existing life insurance cover was Rs. 75 Lakhs (instead of Rs. 50 Lakhs), what would be his net additional insurance requirement?

[ A ]Rs. 33.25 Lakhs[ CORRECT ]

[ B ]Rs. 44.50 Lakhs

[ C ]Rs. 58.25 Lakhs

[ D ]NIL

Takeaway

If Adil's existing cover were Rs. 75 Lakhs instead of Rs. 50 Lakhs, his net additional insurance requirement would fall to Rs. 33.25 Lakhs, so option A is correct.

Derivation

Total financial obligations remain unchanged at Rs. 1,08,24,712. Additional life insurance required = Rs. 1,08,24,712 - Rs. 75,00,000 (revised existing cover) = Rs. 33,24,712, rounding to Rs. 33.25 Lakhs. This is a sensitivity-style question testing whether candidates understand that only the 'existing cover' subtraction changes when that one input is revised, while the PV of expenses, loan, and child corpus components of total need remain exactly as originally calculated.

Why the others fail

B — Rs. 44.50 Lakhs

This figure results from an arithmetic error in the subtraction rather than the correct Rs. 1,08,24,712 minus Rs. 75,00,000 calculation.

C — Rs. 58.25 Lakhs

Rs. 58.25 Lakhs is the additional cover required when existing insurance is the original Rs. 50 Lakhs, not the revised Rs. 75 Lakhs figure in this variant.

D — NIL

Assumes existing cover exceeds total obligations, which is incorrect since Adil's total needs of Rs. 1.08 Crores still exceed even the higher Rs. 75 Lakhs cover.