Welcome to the IC 38 Exam Free Mock Test Practice Set-3! 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-3

1. The principle of Utmost Good Faith means:

• a) The insurer and policyholder must be honest with each other
• b) Only the insurer should disclose all details
• c) The policyholder can hide medical history
• d) The insurer should always pay the claim

Answer: a) The insurer and policyholder must be honest with each other

2. Moral hazard refers to:

• a) The risk of dishonesty from the insured
• b) The risk of fire damage
• c) The chance of a natural disaster
• d) The sum assured in an insurance policy

Answer: a) The risk of dishonesty from the insured

3. Actuarial valuation helps an insurance company to:

• a) Calculate premiums and reserves
• b) Hire more agents
• c) Sell more policies
• d) Reduce claim settlement

Answer: a) Calculate premiums and reserves

4. What does permanent disability mean in insurance?

• a) A disability lasting for one year
• b) A condition preventing a person from working permanently
• c) A minor injury
• d) A temporary illness

Answer: b) A condition preventing a person from working permanently

5. Which of the following is a contingent contract?

• a) An insurance contract
• b) A loan agreement
• c) A sale deed
• d) A rental agreement

Answer: a) An insurance contract

6. A group life insurance policy is usually taken by:

• a) Individuals
• b) Employees of a company
• c) Only retired persons
• d) Self-employed individuals

Answer: b) Employees of a company

7. Convertible term insurance allows the policyholder to:

• a) Convert the policy into a permanent insurance plan
• b) Change the premium amount anytime
• c) Cancel the policy at any time
• d) Get a loan without interest

Answer: a) Convert the policy into a permanent insurance plan

8. The main difference between whole life insurance and term insurance is:

• a) Whole life insurance provides lifelong coverage, whereas term insurance provides coverage for a fixed period
• b) Term insurance offers better maturity benefits
• c) Whole life insurance has no death benefits
• d) Term insurance has higher premiums

Answer: a) Whole life insurance provides lifelong coverage, whereas term insurance provides coverage for a fixed period

9. What happens if the policyholder surrenders an endowment policy before maturity?

• a) Receives a surrender value
• b) Gets a full refund of premiums paid
• c) Gets the full sum assured
• d) No benefits are paid

Answer: a) Receives a surrender value

10. A money-back policy provides:

• a) Regular payouts during the policy term
• b) A lump sum only after maturity
• c) Only death benefits
• d) No returns before maturity

Answer: a) Regular payouts during the policy term

11. In motor insurance, which policy is legally mandatory?

• a) Comprehensive insurance
• b) Third-party liability insurance
• c) Own-damage cover
• d) Personal accident cover

Answer: b) Third-party liability insurance

12. Hull insurance is related to:

• a) Ships and boats
• b) Cars
• c) Aircraft
• d) Trains

Answer: a) Ships and boats

13. What is the key benefit of health insurance?

• a) Covers hospitalization and medical expenses
• b) Provides life cover
• c) Gives loans to policyholders
• d) Covers home repairs

Answer: a) Covers hospitalization and medical expenses

14. Home insurance provides coverage for:

• a) The structure of the house and its contents
• b) Only accidental damage
• c) Only theft
• d) Only earthquakes

Answer: a) The structure of the house and its contents

15. A named perils policy in general insurance covers:

• a) Only the risks listed in the policy
• b) All types of risks
• c) Only accidents
• d) Only medical expenses

Answer: a) Only the risks listed in the policy

16. Who is the insurance regulator in India?

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

Answer: a) IRDAI

17. What is the maximum tenure for a term insurance policy in India?

• a) 40 years
• b) 50 years
• c) 25 years
• d) 10 years

Answer: a) 40 years

18. Insurance agents are required to pass:

• a) IC 38 exam
• b) Civil services exam
• c) Banking exam
• d) Stock market certification

Answer: a) IC 38 exam

19. Under Section 45 of the Insurance Act, an insurer cannot reject a claim after:

• a) 3 years of policy issuance
• b) 1 year of policy issuance
• c) 5 years of policy issuance
• d) Anytime

Answer: a) 3 years of policy issuance

20. Which organization resolves insurance-related complaints?

• a) Insurance Ombudsman
• b) SEBI
• c) RBI
• d) Ministry of Finance

Answer: a) Insurance Ombudsman

21. What is indemnity in insurance?

• a) Restoring the insured to their previous financial position
• b) Paying double the sum assured
• c) Increasing the claim amount
• d) Offering a free policy

Answer: a) Restoring the insured to their previous financial position

22. The nominee in an insurance policy is:

• a) The person who will receive the claim amount
• b) The policyholder
• c) The insurance company
• d) The tax officer

Answer: a) The person who will receive the claim amount

23. A grace period is provided for:

• a) Paying late premiums without policy lapse
• b) Claim settlement
• c) Buying a new policy
• d) Cancelling a policy

Answer: a) Paying late premiums without policy lapse

24. Settlement options in life insurance refer to:

• a) Different ways the sum assured can be paid to beneficiaries
• b) The choice to cancel a policy
• c) The method of premium payment
• d) The way an agent earns commission

Answer: a) Different ways the sum assured can be paid to beneficiaries

25. If a claim is fraudulent, the insurer can:

• a) Reject the claim
• b) Pay the claim with a penalty
• c) Increase the claim amount
• d) Pay the full sum assured

Answer: a) Reject the claim

26. Which of the following is NOT a principle of insurance?

• a) Contribution
• b) Indemnity
• c) Profit Maximization
• d) Insurable Interest

Answer: c) Profit Maximization

27. What is the main objective of reinsurance?

• a) To transfer risk from one insurer to another
• b) To increase the insurer’s profit
• c) To decrease policyholder benefits
• d) To eliminate the need for insurance agents

Answer: a) To transfer risk from one insurer to another

28. Which of the following is a contract of adhesion?

• a) The insured must accept the terms as they are
• b) The insured can modify the policy terms
• c) The insurer and insured negotiate the terms equally
• d) The policyholder writes the policy contract

Answer: a) The insured must accept the terms as they are

29. What is proximate cause in insurance?

• a) The direct cause of loss that is covered under the policy
• b) The policyholder’s negligence
• c) The sum assured in the policy
• d) The maximum premium paid by the insured

Answer: a) The direct cause of loss that is covered under the policy

30. Uberrimae fidei in insurance means:

• a) Utmost good faith
• b) Claim settlement
• c) Policy cancellation
• d) Premium refund

Answer: a) Utmost good faith

31. What does a double accident benefit rider provide?

• a) Double the sum assured in case of accidental death
• b) Refund of premiums paid
• c) No extra benefits
• d) Waiver of premium

Answer: a) Double the sum assured in case of accidental death

32. Term insurance policies primarily provide:

• a) Death benefits only
• b) Maturity benefits
• c) Periodic payouts
• d) Bonus on policy renewal

Answer: a) Death benefits only

33. A child insurance plan helps in:

• a) Securing a child’s education and future financial needs
• b) Providing immediate death benefits
• c) Buying property for the child
• d) Offering tax-free maturity

Answer: a) Securing a child’s education and future financial needs

34. Endowment policies are best suited for:

• a) Long-term savings and life cover
• b) Short-term gains
• c) Instant claim settlement
• d) High-risk investments

Answer: a) Long-term savings and life cover

35. What happens if a policyholder does not pay the premium within the grace period?

• a) The policy lapses
• b) The policy continues without coverage
• c) The insurer refunds premiums paid
• d) The insurer reduces the sum assured

Answer: a) The policy lapses

36. Fire insurance follows which principle?

• a) Indemnity
• b) Life cover
• c) Investment return
• d) Profit-sharing

Answer: a) Indemnity

37. Marine insurance covers:

• a) Cargo, ships, and marine liabilities
• b) Only cargo
• c) Only ships
• d) Only passengers

Answer: a) Cargo, ships, and marine liabilities

38. Motor Own Damage Insurance provides coverage for:

• a) Damage to the insured vehicle
• b) Damage to third-party property only
• c) Only accidental death of the driver
• d) Theft of goods

Answer: a) Damage to the insured vehicle

39. A health insurance floater plan covers:

• a) Multiple family members under a single policy
• b) Only the policyholder
• c) Pre-existing diseases immediately
• d) Only hospital expenses

Answer: a) Multiple family members under a single policy

40. Third-party motor insurance is mandatory under which law?

• a) The Motor Vehicles Act, 1988
• b) The Insurance Act, 1938
• c) The Companies Act, 2013
• d) The Consumer Protection Act

Answer: a) The Motor Vehicles Act, 1988

41. Which of the following bodies regulates insurance companies in India?

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

Answer: a) IRDAI

42. The maximum tenure for a life insurance policy is:

• a) Lifetime of the policyholder
• b) 10 years
• c) 50 years
• d) 25 years

Answer: a) Lifetime of the policyholder

43. Microinsurance is designed for:

• a) Low-income individuals
• b) Business executives
• c) High-net-worth individuals
• d) Only students

Answer: a) Low-income individuals

44. The Insurance Ombudsman handles disputes related to:

• a) Insurance claims and services
• b) Banking frauds
• c) Stock market investments
• d) Real estate transactions

Answer: a) Insurance claims and services

45. Which section of the Insurance Act, 1938 restricts claim rejection after three years?

• a) Section 45
• b) Section 80C
• c) Section 10(10D)
• d) Section 24

Answer: a) Section 45

46. A claim under term insurance is payable when:

• a) The policyholder dies during the policy term
• b) The policyholder survives the policy term
• c) The premium is paid for at least 5 years
• d) The policyholder buys another policy

Answer: a) The policyholder dies during the policy term

47. Maturity benefit is provided under:

• a) Endowment policies
• b) Term insurance
• c) Third-party motor insurance
• d) Liability insurance

Answer: a) Endowment policies

48. Waiting period in health insurance means:

• a) A period before certain coverages become active
• b) The claim settlement time
• c) The grace period for premium payment
• d) The policy renewal time

Answer: a) A period before certain coverages become active

49. If a policyholder dies without nominating anyone, who will receive the claim amount?

• a) The legal heirs
• b) The insurer
• c) The government
• d) The insurance agent

Answer: a) The legal heirs

50. What is No Claim Bonus (NCB) in motor insurance?

• a) A discount on premiums for claim-free years
• b) A refund of premiums
• c) An extra cover for accidents
• d) A fixed sum assured

Answer: a) A discount on premiums for claim-free years