Welcome to the IC 38 Exam Free Mock Test Practice Set-2! This mock test is designed to help you prepare effectively for the IC 38 exam, 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.

Solving these questions will strengthen your conceptual understanding, improve accuracy, and build confidence for the 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-2

1. Insurance is a means of:

• a) Avoiding risks
• b) Reducing risks
• c) Transferring risks
• d) Creating risks

Answer: c) Transferring risks

2. What is a Peril in insurance?

• a) The cause of a loss
• b) The amount of premium
• c) The sum insured
• d) The policy document

Answer: a) The cause of a loss

3. What is the Sum Assured in a life insurance policy?

• a) The total premiums paid
• b) The amount payable upon maturity or death
• c) The bonus amount
• d) The profit of the insurer

Answer: b) The amount payable upon maturity or death

4. The principle of Insurable Interest means:

• a) The policyholder must suffer financial loss if the insured event occurs
• b) The insurer must benefit from the policy
• c) The policyholder can insure anything
• d) The nominee must pay the premium

Answer: a) The policyholder must suffer financial loss if the insured event occurs

5. Which factor does not affect life insurance premium calculations?

• a) Age of the policyholder
• b) Occupation
• c) Medical history
• d) The policyholder’s credit score

Answer: d) The policyholder’s credit score

6. A whole life insurance policy covers a person until:

• a) The age of 60
• b) The policy term ends
• c) Death
• d) 25 years after buying the policy

Answer: c) Death

7. In a Term Insurance Plan, what happens if the policyholder survives the policy term?

• a) They receive the sum assured
• b) They get a bonus amount
• c) They receive nothing
• d) The premium is refunded

Answer: c) They receive nothing

8. A child insurance plan is designed to:

• a) Secure a child’s education and future
• b) Provide medical insurance for children
• c) Cover only accidental deaths
• d) Invest in the stock market

Answer: a) Secure a child’s education and future

9. Which of these is NOT a feature of an Endowment Policy?

• a) Provides both insurance and savings benefits
• b) Pays the sum assured on survival or death
• c) Covers only accidental death
• d) Has a maturity benefit

Answer: c) Covers only accidental death

10. A Unit Linked Insurance Plan (ULIP) combines:

• a) Insurance and investment
• b) Insurance and loans
• c) Health and life insurance
• d) Fire and marine insurance

Answer: a) Insurance and investment

11. Motor insurance in India is regulated under:

• a) The Motor Vehicles Act, 1988
• b) The Banking Regulation Act
• c) The Companies Act
• d) The Consumer Protection Act

Answer: a) The Motor Vehicles Act, 1988

12. Comprehensive car insurance covers:

• a) Only third-party liability
• b) Damage to own vehicle and third-party liability
• c) Only engine damage
• d) Only natural disasters

Answer: b) Damage to own vehicle and third-party liability

13. The waiting period in health insurance refers to:

• a) The time between claim approval and payment
• b) The period before certain illnesses are covered
• c) The period before premium payment
• d) The duration of the policy

Answer: b) The period before certain illnesses are covered

14. Marine insurance covers:

• a) Damage to goods transported by sea
• b) Life of sailors
• c) Health of ship passengers
• d) Road transport insurance

Answer: a) Damage to goods transported by sea

15. A Fire Insurance Policy does NOT cover:

• a) Damage due to fire
• b) Explosion-related damages
• c) Flood damage
• d) Lightning damage

Answer: c) Flood damage

16. A revival period applies when:

• a) A policyholder wants to reinstate a lapsed policy
• b) A nominee is added
• c) A claim is submitted
• d) A policy is cancelled

Answer: a) A policyholder wants to reinstate a lapsed policy

17. What does Nomination in an insurance policy mean?

• a) Selecting a beneficiary
• b) Paying the premium
• c) Claiming maturity benefits
• d) Getting a loan

Answer: a) Selecting a beneficiary

18. The Grace Period in an insurance policy is the:

• a) Maximum policy duration
• b) Time allowed for late premium payment
• c) Waiting period for claims
• d) Policy renewal period

Answer: b) Time allowed for late premium payment

19. A paid-up policy is a policy where:

• a) Premiums are no longer paid, but benefits are reduced
• b) The policy is cancelled
• c) The nominee gets the sum assured immediately
• d) The policyholder gets a refund of all premiums

Answer: a) Premiums are no longer paid, but benefits are reduced

20. Assignment in an insurance policy means:

• a) Transferring policy rights to another person
• b) Adding a nominee
• c) Canceling the policy
• d) Increasing the sum insured

Answer: a) Transferring policy rights to another person

21. A claim settlement ratio indicates:

• a) The number of claims settled by an insurer
• b) The total revenue of an insurance company
• c) The number of policies sold
• d) The number of new customers

Answer: a) The number of claims settled by an insurer

22. The document required for death claim processing is:

• a) Birth certificate
• b) Death certificate
• c) Driving license
• d) Marriage certificate

Answer: b) Death certificate

23. Rejection of a claim can happen due to:

• a) False information in the proposal form
• b) Timely premium payments
• c) Correct medical history
• d) Nominee verification

Answer: a) False information in the proposal form

24. Which insurance policy allows cashless claim settlement?

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

Answer: a) Health insurance

25. Subrogation in insurance means:

• a) The insurer recovers losses from third parties
• b) Policy renewal
• c) Bonus payment
• d) Policy surrender

Answer: a) The insurer recovers losses from third parties

26. What is the primary role of the IRDAI?

• a) Protect the interests of policyholders
• b) Control stock market activities
• c) Regulate real estate transactions
• d) Provide loans to insurance companies

Answer: a) Protect the interests of policyholders

27. The Insurance Ombudsman helps in:

• a) Resolving disputes between insurers and policyholders
• b) Selling insurance policies
• c) Approving new insurance companies
• d) Providing loans to policyholders

Answer: a) Resolving disputes between insurers and policyholders

28. An agent must comply with the Code of Conduct prescribed by:

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

Answer: a) IRDAI

29. Twisting in insurance means:

• a) Misleading a policyholder to replace an existing policy
• b) Offering a discount on premiums
• c) Selling a policy at a lower price
• d) Increasing the sum assured

Answer: a) Misleading a policyholder to replace an existing policy

30. Under the AML (Anti-Money Laundering) Act, insurers must:

• a) Verify customer identity
• b) Avoid selling policies to foreign clients
• c) Only accept cash payments
• d) Ignore suspicious transactions

Answer: a) Verify customer identity

31. The largest public-sector life insurance company in India is:

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

Answer: d) LIC

32. The first private life insurance company in India after liberalization was:

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

Answer: b) ICICI Prudential

33. The term Bancassurance refers to:

• a) Insurance policies sold through banks
• b) Marine insurance policies
• c) Reinsurance between two companies
• d) Loans against insurance policies

Answer: a) Insurance policies sold through banks

34. Reinsurance helps insurance companies by:

• a) Spreading risk among multiple insurers
• b) Increasing the premium amount
• c) Lowering the claim settlement ratio
• d) Reducing the sum assured

Answer: a) Spreading risk among multiple insurers

35. Which of the following is not an insurance company?

• a) LIC
• b) IRDAI
• c) HDFC Life
• d) SBI Life

Answer: b) IRDAI

36. Under Section 80D of the Income Tax Act, policyholders can claim deductions for:

• a) Health insurance premiums
• b) Life insurance premiums
• c) Car insurance premiums
• d) Marine insurance premiums

Answer: a) Health insurance premiums

37. The GST on life insurance premiums is:

• a) 5%
• b) 12%
• c) 18%
• d) 28%

Answer: c) 18%

38. A policy loan can be taken against:

• a) Term insurance
• b) Whole life or endowment policies
• c) Health insurance
• d) Motor insurance

Answer: b) Whole life or endowment policies

39. A surrender value is given when a policyholder:

• a) Terminates the policy before maturity
• b) Pays all premiums on time
• c) Claims a tax benefit
• d) Adds a nominee

Answer: a) Terminates the policy before maturity

40. Free-look period allows policyholders to cancel the policy within:

• a) 5 days
• b) 7 days
• c) 15 days
• d) 30 days

Answer: c) 15 days

41. Critical Illness Rider provides:

• a) A lump sum if diagnosed with a listed critical illness
• b) Compensation for accidental injuries
• c) Premium refunds on maturity
• d) An option to increase the sum assured

Answer: a) A lump sum if diagnosed with a listed critical illness

42. A Waiver of Premium Rider is helpful when:

• a) The policyholder becomes disabled or critically ill
• b) The policyholder misses a premium payment
• c) The policyholder changes jobs
• d) The policy reaches maturity

Answer: a) The policyholder becomes disabled or critically ill

43. Money-back policies provide:

• a) Periodic payouts during the policy term
• b) Full payout only on maturity
• c) No survival benefits
• d) Coverage only for accidental deaths

Answer: a) Periodic payouts during the policy term

44. Guaranteed Surrender Value is:

• a) A fixed percentage of the premiums paid
• b) The full sum assured
• c) A bonus given on surrender
• d) The claim amount

Answer: a) A fixed percentage of the premiums paid

45. Indexation in insurance means:

• a) Adjusting benefits based on inflation
• b) Reducing premiums over time
• c) Increasing the surrender value
• d) Changing the policy term

Answer: a) Adjusting benefits based on inflation

46. The primary duty of an insurance agent is to:

• a) Sell policies based on customer needs
• b) Maximize commissions
• c) Withhold information from customers
• d) Only sell high-premium policies

Answer: a) Sell policies based on customer needs

47. An agent must provide full disclosure about a policy to:

• a) Ensure informed decision-making by the customer
• b) Increase policy sales
• c) Reduce competition
• d) Hide policy exclusions

Answer: a) Ensure informed decision-making by the customer

48. To renew an insurance agent license, an agent must:

• a) Pass the IRDAI renewal exam
• b) Sell at least 100 policies annually
• c) Work for multiple insurance companies
• d) Pay a renewal fee only

Answer: a) Pass the IRDAI renewal exam

49. The Cooling-off Period in insurance allows:

• a) A policyholder to return a policy within a set time frame
• b) The insurer to delay claim payments
• c) The agent to revise policy documents
• d) The insured to switch insurers freely

Answer: a) A policyholder to return a policy within a set time frame

50. An insurance agent should NOT:

• a) Misrepresent policy details
• b) Explain policy terms clearly
• c) Disclose all charges and exclusions
• d) Help customers choose the right policy

Answer: a) Misrepresent policy details