Welcome to the IC 38 Exam Free Mock Test Practice Set-1! This mock test is designed to help you prepare effectively for the IC 38 exam, which is essential for becoming a licensed insurance agent in India. The questions in this test cover important topics such as insurance principles, regulations, ethics, and policy types, aligned with the official exam pattern.

By solving these questions, you will strengthen your conceptual understanding, improve accuracy, and build confidence for the actual exam. Make the most of this mock test to assess your knowledge and enhance your exam readiness!

IC 38 Exam Free Mock Test Practice Set-1

1. What is the primary purpose of insurance?

• a) To increase the wealth of the insured
• b) To provide financial protection against risks
• c) To help in tax evasion
• d) To promote savings

Answer: b) To provide financial protection against risks

2. Which principle of insurance ensures that the insured is placed in the same financial position after a loss?

• Subrogation
• b) Contribution
• c) Indemnity
• d) Utmost good faith

Answer: c) Indemnity

3. The principle of Utmost Good Faith applies to:

• a) Only the insurer
• b) Only the policyholder
• c) Both insurer and policyholder
• d) Neither insurer nor policyholder

Answer: c) Both insurer and policyholder

4. Which of the following is NOT a type of life insurance policy?

• Term insurance
• b) Health insurance
• c) Whole life insurance
• d) Endowment plan

Answer: b) Health insurance

5. Insurance works on the principle of:

• a) Gambling
• b) Mutual cooperation
• c) Profit maximization
• d) Free market competition

Answer: b) Mutual cooperation

6. Which life insurance policy provides coverage for a specific period?

• a) Whole life policy
• b) Term insurance policy
• c) Endowment policy
• d) Money-back policy

7. The policyholder pays premiums regularly, and if they survive the term, they receive maturity benefits. This is an example of:

• a) Whole life insurance
• b) Endowment plan
• c) Term insurance
• d) Health insurance

Answer: b) Endowment plan

8. In a Money-Back Policy, when does the insured receive the payout?

• a) Only after death
• b) At regular intervals during the policy term
• c) Only after maturity
• d) No payout is given

Answer: b) At regular intervals during the policy term

9. Which type of policy is best suited for retirement planning?

• a) Term insurance
• b) Unit Linked Insurance Plan (ULIP)
• c) Pension plan
• d) Whole life insurance

Answer: c) Pension plan

10. A policy where part of the premium is invested in the stock market is called:

• a) Term insurance
• b) Endowment plan
• c) Unit Linked Insurance Plan (ULIP)
• d) Whole life insurance

Answer: c) Unit Linked Insurance Plan (ULIP)

11. General insurance covers:

• a) Human life
• b) Property, health, and liability risks
• c) Only motor vehicles
• d) Only fire accidents

Answer: b) Property, health, and liability risks

12. Which type of insurance provides compensation for hospital expenses?

• a) Term insurance
• b) Motor insurance
• c) Health insurance
• d) Travel insurance

Answer: c) Health insurance

13. Which type of insurance is mandatory for vehicle owners in India?

• a) Life insurance
• b) Third-party motor insurance
• c) Comprehensive motor insurance
• d) Health insurance

Answer: b) Third-party motor insurance

14. Fire insurance provides coverage against:

• a) Floods
• b) Earthquakes
• c) Loss or damage due to fire
• d) Accidental injuries

Answer: c) Loss or damage due to fire

15. In marine insurance, the person who takes insurance is called:

• a) Insured
• b) Insurer
• c) Beneficiary
• d) Policyholder

Answer: a) Insured

16. A claim is valid only if the loss is due to a:

• a) Pre-existing condition
• b) Insured event
• c) Any natural cause
• d) Any voluntary action

Answer: b) Insured event

17. The amount payable to the nominee in case of the policyholder’s death is called:

• a) Sum insured
• b) Premium
• c) Bonus
• d) Surrender value

Answer: a) Sum insured

18. The period during which a policyholder can cancel a new policy without penalty is called:

• a) Maturity period
• b) Free-look period
• c) Claim period
• d) Grace period

Answer: b) Free-look period

19. If a policyholder does not pay a premium on time, the extra time given is called:

• a) Maturity period
• b) Free-look period
• c) Grace period
• d) Revival period

Answer: c) Grace period

20. The person or entity responsible for paying the insurance premium is called:

• a) Nominee
• b) Insurer
• c) Policyholder
• d) Beneficiary

Answer: c) Policyholder

21. A claim that is made after the policy has lapsed is:

• a) Payable in full
• b) Payable with interest
• c) Rejected
• d) Converted into a new policy

Answer: c) Rejected

22. The nominee in a life insurance policy is the:

• a) Policyholder
• b) Person who will receive the claim amount
• c) Insurance company
• d) Bank

Answer: b) Person who will receive the claim amount

23. What is the first step in the insurance claim process?

• a) Paying the sum insured
• b) Investigating the claim
• c) Submitting the claim form
• d) Cancelling the policy

Answer: c) Submitting the claim form

24. What is the role of an insurance agent?

• a) Only collect premiums
• b) Only settle claims
• c) Advise customers and sell policies
• d) Act as an underwriter

Answer: c) Advise customers and sell policies

25. A policy lapse occurs when:

• a) The policy is renewed
• b) The insured fails to pay the premium on time
• c) The policy is upgraded
• d) The insurer refuses to provide a policy

Answer: b) The insured fails to pay the premium on time

26. Which organization regulates the insurance sector in India?

• a) SEBI
• b) IRDAI
• c) RBI
• d) NABARD

Answer: b) IRDAI

27. IRDAI stands for:

• a) Insurance Regulation and Development Authority of India
• b) Insurance Research and Development Authority of India
• c) Indian Rural Development Authority of Insurance
• d) Insurance Regulatory and Development Association of India

Answer: a) Insurance Regulation and Development Authority of India

28. The Insurance Act, 1938 governs:

• a) Banking operations
• b) Stock market trading
• c) Insurance businesses in India
• d) Agriculture policies

Answer: c) Insurance businesses in India

29. Under IRDAI regulations, an agent can work for:

• a) Only one life insurance company
• b) Multiple life insurance companies
• c) Any number of insurance companies
• d) No restriction on the number of companies

Answer: a) Only one life insurance company

30. The minimum capital required to start an insurance company in India is:

• a) ₹50 crores
• b) ₹100 crores
• c) ₹500 crores
• d) ₹10 crores

Answer: b) ₹100 crores

31. Under which section of the Income Tax Act can a policyholder claim deductions for life insurance premiums?

• a) Section 80D
• b) Section 80C
• c) Section 24
• d) Section 10(10D)

Answer: b) Section 80C

32. The maximum tax deduction available under Section 80C for life insurance premium is:

• a) ₹50,000
• b) ₹1,00,000
• c) ₹1,50,000
• d) ₹2,50,000

Answer: c) ₹1,50,000

33. Who can be a nominee in a life insurance policy?

• a) Only spouse
• b) Only children
• c) Any person chosen by the policyholder
• d) Only parents

Answer: c) Any person chosen by the policyholder

34. If a policyholder dies without a nominee, who receives the insurance amount?

• a) The insurance company
• b) The government
• c) The legal heirs of the policyholder
• d) The policyholder’s employer

Answer: c) The legal heirs of the policyholder

35. Tax benefits on maturity proceeds of a life insurance policy fall under:

• a) Section 10(10D)
• b) Section 80C
• c) Section 24
• d) Section 80D

Answer: a) Section 10(10D)

36. What is Reinsurance?

• a) Buying multiple policies
• b) Insurance for insurance companies
• c) Canceling an insurance policy
• d) Insurance for individuals

Answer: b) Insurance for insurance companies

37. Which of the following is a public sector life insurance company in India?

• a) HDFC Life
• b) ICICI Prudential
• c) SBI Life
• d) LIC

Answer: d) LIC

38. The process of assessing risk before issuing an insurance policy is called:

• a) Underwriting
• b) Claim processing
• c) Nomination
• d) Policy Servicing

Answer: a) Underwriting

39. The full form of TPA in health insurance is:

• a) Third Party Administrator
• b) Total Policy Assurance
• c) Tax Payment Agreement
• d) Travel Protection Assistance

Answer: a) Third Party Administrator

40. A floater health insurance policy covers:

• a) Only one individual
• b) Multiple family members under one policy
• c) Only senior citizens
• d) Only critical illness

Answer: b) Multiple family members under one policy

41. The surrender value of an insurance policy is:

• a) The amount payable on maturity
• b) The amount payable if the policy is terminated before maturity
• c) The premium paid
• d) The claim amount

42. A revival period is related to:

• a) Renewal of an expired policy
• b) Extending the policy duration
• c) Claim processing
• d) Tax deductions

Answer: a) Renewal of an expired policy

43. What is Co-payment in health insurance?

• a) The insured pays a part of the claim amount
• b) Full payment by the insurer
• c) No payment required from the insured
• d) Double payment of premium

Answer: a) The insured pays a part of the claim amount

44. Maturity benefit is received in which type of life insurance policy?

• a) Term insurance
• b) Whole life insurance
• c) Endowment plan
• d) Fire insurance

Answer: c) Endowment plan

45. Accidental Death Benefit Rider provides:

• a) Additional sum insured in case of death due to accident
• b) Waiver of premiums
• c) Extension of the policy term
• d) Health benefits

Answer: a) Additional sum insured in case of death due to accident

46. An insurance agent’s primary role is to:

• a) Sell policies and provide financial advice
• b) Process insurance claims
• c) Manage stock market investments
• d) Provide loans

Answer: a) Sell policies and provide financial advice

47. The Code of Conduct for insurance agents is issued by:

• a) RBI
• b) SEBI
• c) IRDAI
• d) Ministry of Finance

Answer: c) IRDAI

48. Which of these skills is essential for an insurance agent?

• a) Strong communication and customer service
• b) High mathematical skills only
• c) Legal knowledge only
• d) Stock market trading

Answer: a) Strong communication and customer service

49. An insurance agent is required to:

• a) Disclose all material facts about the policy
• b) Hide information that may prevent a sale
• c) Only focus on commissions
• d) Sell policies without verifying customer needs

Answer: a) Disclose all material facts about the policy

50. The main reason for policy mis-selling is:

• a) Lack of financial knowledge among customers
• b) Agents providing false information to sell policies
• c) Higher competition in the insurance industry
• d) Government regulations

Answer: b) Agents providing false information to sell policies