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IC-38 Life Insurance Important MCQs Part 2 | Latest IRDA Exam Questions 2025

IC-38 Life Insurance — Important MCQs (Part 2)

Questions 51–100 — Click Show Answer for the correct option and brief explanation.

51Which of these is a non-participating life insurance policy?
  • A.Participating endowment
  • B.With-profits whole life
  • C.Non-participating term assurance
  • D.Money-back participating plan
Answer: C
Non-participating contracts do not receive bonuses from insurer surplus.
52What is a 'money-back' policy?
  • A.Policy that pays periodic survival benefits and balance at maturity
  • B.Term plan with no maturity
  • C.ULIP only
  • D.Group policy
Answer: A
Useful for liquidity; total benefits may be lower than equivalent pure endowment sums.
53Which is true about assignment of life policy?
  • A.Nomination transfers policy ownership
  • B.Assignment transfers rights/ownership to another person
  • C.Assignment cancels the policy
  • D.Assignment is illegal
Answer: B
Commonly used as collateral for loans.
54Which is NOT typically a charge in ULIP?
  • A.Fund management charge
  • B.Mortality charge
  • C.Commission charge to nominee
  • D.Policy administration charge
Answer: C
ULIP charges include mortality, fund management, admin and others; commissions to agents are separate.
55What does 'vesting' of bonuses mean?
  • A.Declaration of bonuses annually
  • B.Bonuses becoming part of guaranteed benefits (vested) after declaration
  • C.Revoking bonuses
  • D.None of the above
Answer: B
Distinguishes future contingent surplus from already vested additions.
56Which of the following actions can an insurer take during underwriting?
  • A.Refuse cover
  • B.Load premium
  • C.Accept with special terms
  • D.All of the above
Answer: D
Underwriting seeks to price and control risk appropriately.
57What is 'grace period' typically used for?
  • A.Extra time to pay overdue premium without policy lapsing
  • B.Time to file claim
  • C.Period to change nominee
  • D.Time to surrender policy
Answer: A
Commonly 30 days for monthly premiums; specifics in policy.
58Which is true about 'paid-up' status?
  • A.Policy benefits increase
  • B.Sum assured reduces proportionally after premiums stop but policy continues
  • C.Policy lapses immediately
  • D.Nomination is cancelled
Answer: B
Paid-up rules depend on policy type and number of premiums paid.
59Which tax benefit relates to life insurance premium paid?
  • A.Section 80C
  • B.Section 115BB
  • C.Section 194A
  • D.Section 10(10D)
Answer: A
Maturity proceeds may be exempt under section 10(10D) if conditions met.
60What is 'surrender value' composed of?
  • A.Guaranteed surrender value + vested bonuses (if any)
  • B.Only premiums paid
  • C.Only future bonuses
  • D.Only loan outstanding
Answer: A
Applies when policy voluntarily terminated after minimum premium-paying years.
61Which is a typical exclusion in life insurance?
  • A.Death due to suicide within specified initial period
  • B.Death due to natural causes after 10 years
  • C.Maturity payment
  • D.Bonus declaration
Answer: A
Exact clause depends on product wording and regulation.
62What is 'revival' of a lapsed policy?
  • A.Renewing a policy at expiry automatically
  • B.Restoring cover by paying overdue premiums and meeting insurer conditions
  • C.Converting to another insurer
  • D.Stopping future premiums
Answer: B
Procedure/period specified in policy and regulator guidelines.
63Which one describes 'rider' in life insurance?
  • A.Core policy benefit
  • B.Optional add-on benefit purchased for extra premium
  • C.Administrative fee
  • D.Tax deduction
Answer: B
Riders should be read carefully for exclusions and limits.
64What is the effect of 'loan against policy' on death benefit?
  • A.No effect
  • B.Death benefit reduced by outstanding loan and interest
  • C.Loan cancels policy
  • D.Nominee receives loan amount separately
Answer: B
Borrowing facility subject to limits and interest as per policy terms.
65Which is a feature of unit-linked insurance plans (ULIPs)?
  • A.Guaranteed returns
  • B.Investment linked to funds and market performance
  • C.No mortality charge
  • D.Not an insurance product
Answer: B
Policyholder bears market risk; charges can affect returns.
66What is 'nomination' primarily intended for?
  • A.Assigning ownership rights
  • B.Designating person to receive benefits on death
  • C.Changing policy terms
  • D.Tax planning
Answer: B
Nominee receives proceeds but legal rights can involve heirs under law.
67Which of these is a 'benefit illustration' in life insurance?
  • A.Document showing historical returns only
  • B.Projection of possible future benefits under different scenarios
  • C.Premium receipt
  • D.Claim form
Answer: B
Not a guaranteed promise, but an explanatory projection required by regulators for transparency.
68Which is true about 'contestability period'?
  • A.Insurer can contest claims indefinitely
  • B.Initial period (e.g., 2 years) during which insurer may investigate misstatements
  • C.Related to surrender only
  • D.Applies only to group policies
Answer: B
After contestability ends, insurer typically cannot reject claims for misstatements except in cases of proven fraud.
69What is 'single premium' life policy?
  • A.Policy with one-time lump sum premium payment
  • B.Monthly premium plan
  • C.Policy without sum assured
  • D.Group policy
Answer: A
Suitable for investors wanting to fund a policy upfront.
70Which document proves policyholder’s ownership and terms?
  • A.Proposal form only
  • B.Policy document (policy bond)
  • C.Premium receipt only
  • D.Agent’s business card
Answer: B
Always retain policy documents and statements for reference and claims.
71Which is true about 'group life insurance'?
  • A.Issued to individuals only
  • B.Issued to a group under a master policy (e.g., employer and employees)
  • C.Never provides death benefit
  • D.Always non-insurance
Answer: B
Administration differs from individual policies; portability limited.
72What is 'terminal bonus' in participating policies?
  • A.Periodic interim bonus
  • B.One-time addition payable at maturity or claim
  • C.Penalty for late premium
  • D.Nomination fee
Answer: B
It is in addition to reversionary bonuses where declared by insurer.
73Which is a key duty of an insurance agent?
  • A.Misrepresent product features
  • B.Advise and sell suitable products while disclosing material facts
  • C.Guarantee investment returns
  • D.Withhold policy documents
Answer: B
Regulatory code prescribes agent behavior and disclosures.
74What is 'reversionary bonus'?
  • A.Interim loan
  • B.Annual bonus added to sum assured in participating policies
  • C.Penalty for surrender
  • D.Claim rejection
Answer: B
They increase the benefit payable at maturity or death depending on vesting.
75Which is an example of exclusion commonly found in life policies?
  • A.Death from specified hazardous activities unless disclosed and accepted
  • B.Payment of maturity
  • C.Nomination acceptance
  • D.Policy issue
Answer: A
Disclosure is critical; surcharges or exclusions may apply for risky occupations/hobbies.
76Which of the following increases life insurance premium?
  • A.Younger age
  • B.
  • C.Shorter term
  • D.Lower coverage
Answer: B
Underwriting assesses multiple risk factors when pricing premium.
77What is 'policyholder's equity of surrender'?
  • A.Right to demand company profits
  • B.Amount policyholder receives if policy surrendered after minimum period
  • C.Loan offered by insurer
  • D.Nominee entitlement
Answer: B
May be lower in early years due to surrender penalty and acquisition costs.
78Which is NOT correct about 'free look period'?
  • A.Allows cancellation after issuance
  • B.Applies only when policy delivered to insured
  • C.No refund allowed at all
  • D.Insurer may deduct stamp duty/expenses from refund
Answer: C
Regulators prescribe minimum free look durations and refund rules.
79Which is true about 'bonus reversionary'?
  • A.Paid only on lapse
  • B.Declared periodically and added to policy benefits
  • C.Only for ULIPs
  • D.Equivalent to surrender value
Answer: B
They increase guaranteed benefits in participating plans.
80Which describes 'insurable interest' at the time of policy inception?
  • A.It is not required
  • B.Proposer must have financial or emotional interest subject to loss on death of insured
  • C.Only insurer needs interest
  • D.Nominee must have insurable interest
Answer: B
Prevents wagering contracts and protects insurer from moral hazard.
81What is 'sum assured' related to in a policy?
  • A.Total premiums paid
  • B.Amount guaranteed to be paid on claim or maturity (as per contract)
  • C.Tax liability
  • D.Policy term
Answer: B
May be enhanced by bonuses in participating policies.
82Which is true about 'policy revival' documentation?
  • A.No documents required
  • B.May require proof of insurability/medical evidence depending on period lapsed
  • C.Only nomination proof required
  • D.Only agent signature required
Answer: B
Insurer policies differ; check revival conditions in policy contract.
83What does 'IRDAI' primarily ensure?
  • A.Regulation and promotion of insurance business and protection of policyholders
  • B.Banking regulation
  • C.Stock market supervision
  • D.Currency issuance
Answer: A
IRDAI also prescribes consumer protection norms and agent qualifications.
84Which is correct about 'claim intimation'?
  • A.Not required
  • B.Must be given promptly to insurer as per policy to start settlement process
  • C.Only needed after 1 year
  • D.Only for group policies
Answer: B
Notification procedures and documentation listed in policy must be followed.
85Which is a reason for claim rejection during contestability?
  • A.Non-disclosure of material fact at proposal
  • B.Nominee change
  • C.Policy surrender
  • D.Payment of premium
Answer: A
Insurer investigates proposals and may decline if material facts withheld.
86Which is true about 'policy renewal'?
  • A.Applies only to single premium policies
  • B.Refers to paying next premium to keep policy in force for another term
  • C.Always automatic without payment
  • D.Never possible
Answer: B
Some products have limited renewal options; premium schedule defined in policy.
87What is 'policy administration charge'?
  • A.Charge for managing and administering the policy by insurer
  • B.Penalty fee only
  • C.Tax collected by government
  • D.Claim settlement fee
Answer: A
In ULIPs, admin charges reduce fund value; in traditional plans they may be part of premium structure.
88Which of these is included in 'death benefit'?
  • A.Sum assured only
  • B.Sum assured plus vested bonuses and any applicable riders
  • C.Only surrender value
  • D.Only loan amount
Answer: B
Exact inclusions depend on policy terms and rider definitions.
89Which is the main purpose of 'risk classification' by insurers?
  • A.To group policies by premium only
  • B.To assess and price different levels of risk fairly
  • C.To deny all risky applicants
  • D.To increase policy term
Answer: B
Allows sustainable pricing across risk pools.
90Which best describes 'mortality table'?
  • A.Table of premium rates only
  • B.Statistical table showing probability of death at each age used for pricing
  • C.List of insured persons
  • D.Claim form index
Answer: B
Insurers use updated mortality tables to reflect changing life expectancy.
91Which is an advantage of term insurance?
  • A.Low premiums for high cover during term
  • B.Guaranteed maturity amount
  • C.Bonuses
  • D.Loan facility always high
Answer: A
Best for income replacement; no maturity in typical term plans.
92What is 'acquisition cost' in insurance context?
  • A.Cost to insurer for issuing and acquiring the policy (commissions, admin)
  • B.Claim payment only
  • C.Tax paid by policyholder
  • D.Premium refund
Answer: A
These costs often result in lower early surrender values.
93Which is true about 'grace period' and death during that period?
  • A.Insurer automatically rejects claim
  • B.Insurer may settle claim after deducting overdue premium
  • C.Policy is void
  • D.Nothing happens
Answer: B
This protects policyholder family despite delayed premium payment.
94What is the main aim of a 'surrender value' regulation?
  • A.To deny policyholders any return
  • B.To ensure fair compensation to policyholders on voluntary termination after minimum years
  • C.To increase premiums
  • D.To change nomination
Answer: B
Surrender values reflect guaranteed and vested elements like bonuses.
95Which of the following is true about 'bonus declaration'?
  • A.Bonuses are guaranteed for non-participating plans
  • B.Bonuses in participating plans depend on insurer surplus and are not guaranteed
  • C.All policies receive equal bonuses
  • D.Bonuses are tax penalties
Answer: B
Past performance does not guarantee future bonuses.
96Which is correct about 'information privacy' for policyholders?
  • A.Insurers must keep customer information confidential and follow data protection rules
  • B.Insurers can freely sell data without consent
  • C.No privacy obligations exist
  • D.Only agents handle data privacy
Answer: A
Policyholder consent and secure handling are essential for trust and compliance.
97What is 'policy illustration' used for?
  • A.To hide costs
  • B.To show projected benefits, premiums and charges under various scenarios
  • C.To process claims
  • D.To change nominee
Answer: B
Regulators often mandate standardized illustrations for transparency.
98Which is true about 'trusts' and life policies in nominee/assignment context?
  • A.Trusts cannot be assigned policy benefits
  • B.Policy benefits can be assigned to a trust; legal and tax consequences follow
  • C.Nominee is always the legal owner
  • D.Assignment to trust is illegal
Answer: B
Assignment changes ownership rights; documentation required and tax rules apply.
99Which practice helps avoid moral hazard in life insurance?
  • A.Allow unlimited assignment without notice
  • B.Require insurable interest at inception and contestability periods
  • C.No underwriting
  • D.Guaranteed claim without checks
Answer: B
These measures ensure genuine insurance relationships and deter wagering contracts.
100Which is true about 'policyholder servicing' obligations of insurers?
  • A.Insurers have no service obligations
  • B.Insurers must provide clear information, timely claims settlement and grievance redressal as per regulations
  • C.Only agents handle servicing
  • D.Servicing is optional
Answer: B
Good servicing enhances trust and compliance with consumer protection standards.
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