IC-38 Life Insurance — Important MCQs (Part 1)
50 Questions — Show answer per question. (Exam-oriented, concise explanations)
1What is the primary purpose of life insurance?
Answer: B
Life insurance replaces income and protects dependents; investment is secondary in some policies.
2Which one is a typical life insurance policy that combines insurance and savings?
Answer: B
Endowment blends protection and savings; term covers only risk for a term.
3What does 'sum assured' mean?
Answer: B
It is the core guaranteed benefit (not counting bonuses or additional benefits).
4Which policy provides cover for a fixed period and pays only on death during that term?
Answer: B
Term is cheapest way to get high cover for a period.
5What is 'sum insured' in life policies often referred to as?
Answer: B
Terminology: sum insured = sum assured in life policies.
6What is 'maturity benefit'?
Answer: B
Applies to endowment and money-back and ULIPs on survival to term end.
7The term 'bonus' in participating life policies means:
Answer: B
Bonuses can be reversionary, terminal, or interim depending on insurer policy.
8Which document evidences the contract between insurer and insured?
Answer: B
Proposal form + premium payment + acceptance lead to issue of policy document.
9What is 'lapse' of a policy?
Answer: B
Some policies can be revived within revival period; otherwise no cover.
10What is 'paid-up value'?
Answer: B
Paid-up reduces sum assured proportional to premiums paid; bonus stopped or reduced.
11Which of the following is a life insurance rider covering accidental death?
Answer: B
Riders add extra risk cover for additional premium.
12Which tax section gives deduction on life insurance premium paid (India)?
Answer: A
Maturity proceeds may be tax-exempt under 10(10D) if conditions met.
13Which section deals with tax exemption of insurance proceeds on maturity/death?
Answer: B
Conditions include premium not exceeding specified % of sum assured for entry after certain dates.
14What is 'nomination' in life insurance?
Answer: B
Nominee receives proceeds, though legal heirs may have rights; rules vary by jurisdiction.
15Assignment of a policy means:
Answer: A
Assignments must usually be notified to insurer and recorded on policy.
16Which insurer department primarily assesses life risk before acceptance?
Answer: B
Underwriter decides acceptance, premium, or rejection and may apply special terms.
17What is 'free look period'?
Answer: B
Timeframe varies by regulation; used when policy issued and customer wants to cancel.
18Which one is not a life insurance product?
Answer: C
Health is under general insurance (non-life) though riders exist on life plans.
19What is 'suicide clause' in life policies?
Answer: B
Exact terms defined in policy; insurers protect against moral hazard initially.
20What does 'surrender value' mean?
Answer: A
Surrender value often equals guaranteed surrender value plus vested bonuses for participating plans.
21Which is true about 'term rider'?
Answer: B
Common for spouse or child coverage riders too.
22Which of these is NOT a principle of insurance?
Answer: D
Life insurance pays predetermined benefit, not indemnity for loss amount.
23What is 'insurable interest'?
Answer: B
In life insurance, insurable interest typically exists in relation between proposer and life assured at time of policy inception.
24What is 'reinstatement' or 'revival' of policy?
Answer: B
Revival period allowed varies; underwriting may be required.
25Which is true about ULIP (Unit Linked Insurance Plan)?
Answer: B
ULIPs have fund management charges and mortality charges; market risk borne by policyholder.
26What is 'mortality charge'?
Answer: B
Seen in ULIPs and regular policies; varies with age and sum assured.
27Which one is true about 'free look' period in India?
Answer: B
Regulator prescribes minimum free look period; specifics in policy document.
28Which is correct about maturity proceeds under Section 10(10D)?
Answer: B
Recent changes set limits for policies issued after certain dates; check current tax rules.
29Which is an example of group life insurance?
Answer: B
Insurer issues master policy to employer; individual certificates to members.
30What is 'contestability period' for life policies?
Answer: A
After contestability period ends, insurer cannot deny claims on basis of misstatement except fraud.
31Which of the following is true about 'grace period'?
Answer: B
If insured dies during grace, claim may be paid after deducting due premium.
32What is 'double accident' benefit?
Answer: B
Exact naming varies; cover is additional to base death benefit.
33Which of these is a non-forfeiture option?
Answer: D
These options prevent complete loss of value on stopping premiums after minimum period.
34Which body regulates insurance in India?
Answer: B
IRDAI issues guidelines, licenses, and protects policyholder interests.
35Who can nominate a policy in India?
Answer: A
Rules vary for minor nominees and assignment situations; always follow policy provisions.
36Which is true about 'policy loan'?
Answer: A
Loan reduces death/maturity benefits if outstanding at claim; interest charged by insurer.
37What is 'grace period' typical duration for monthly premiums?
Answer: B
If death occurs in grace, insurer may deduct due premium from claim.
38Which of these is true for 'participating policy'?
Answer: B
Bonuses depend on insurer performance and are not guaranteed unless specified.
39Which is the key difference between 'whole life' and 'term' policies?
Answer: A
Whole life often used for estate planning; premiums may be higher than term.
40What is 'sum assured multiple' in some group policies?
Answer: B
Common in employer group term policies for easy administration.
41What does 'terminal bonus' refer to?
Answer: B
It supplements reversionary bonuses in participating plans.
42What is the 'proposal form' in insurance?
Answer: B
Honest disclosure of material facts is essential (utmost good faith).
43Which is true regarding 'material fact'?
Answer: B
Medical history and hazardous occupations are classic material facts.
44What is 'survival benefit' in some policies?
Answer: B
Money-back policies give periodic survival payouts and remaining sum on maturity.
45Which is true about 'free look' difference between life and unit-linked policies?
Answer: B
Always verify product-specific free look period in policy document.
46Which one is included under 'death benefit'?
Answer: A
Exact composition depends on policy terms (participating vs non-participating).
47What does 'IRDAI' stand for?
Answer: A
IRDAI formulates regulations, supervises insurers and protects policyholder interests.
48Which is true about 'policy term'?
Answer: A
Policy and premium paying terms are defined in policy brochure; may differ.
49Which of the following increases the premium charged by insurer?
Answer: B
Insurer assesses risk factors; premium loading applied for higher risk.
50Which statement about 'survival period' is correct?
Answer: B
Check policy for survival clause in critical illness or specific plans.
