IC-38 Insurance Agent Exam 50 MCQ Questions with Answers – Practice Set 3
IC-38 Insurance Agent Exam MCQ Questions | 50 Important Questions with Answers | IRDAI Insurance Agent Exam Preparation
Preparing for the IC-38 Insurance Agent Exam requires a clear understanding of insurance terminology, principles, products, policy servicing, claims, distribution, customer protection and the responsibilities of insurance agents.
This IC-38 Practice Set 3 contains 50 multiple-choice questions, each with four options and the correct answer immediately after the question. The set is designed as a revision resource for candidates preparing for the insurance agent examination.
Important Note: These are original practice questions prepared for educational purposes. They are not actual or leaked examination questions. Candidates should always refer to the latest applicable official IC-38 study material and examination resources.
IC-38 Insurance Agent Exam MCQ Questions – Practice Set 3
1. What is the fundamental economic function of insurance?
A. To eliminate uncertainty completely
B. To provide financial protection against specified risks
C. To create speculative opportunities
D. To guarantee business profits
Answer: B. To provide financial protection against specified risks
2. Which of the following is an example of a natural risk?
A. Theft by an employee
B. Earthquake
C. Forgery
D. Shoplifting
Answer: B. Earthquake
3. Which of the following is an example of a human-made peril?
A. Cyclone
B. Flood
C. Fire caused deliberately
D. Earthquake
Answer: C. Fire caused deliberately
4. What is uncertainty in insurance?
A. The inability to know with certainty whether or when a particular loss will occur
B. A guaranteed financial benefit
C. A fixed insurance premium
D. A completed claim
Answer: A. The inability to know with certainty whether or when a particular loss will occur
5. Which of the following is a financial consequence of an insured loss?
A. Repair expenditure after covered property damage
B. A person's favourite hobby
C. A change in weather
D. A change in colour preference
Answer: A. Repair expenditure after covered property damage
6. What is the pooling mechanism in insurance based upon?
A. Collection of contributions from many exposed individuals to meet losses of some members
B. Collection of money from one person only
C. Elimination of all accidents
D. Guarantee of profit for every policyholder
Answer: A. Collection of contributions from many exposed individuals to meet losses of some members
7. Why are large numbers of similar risks useful to an insurer?
A. They can improve the predictability of aggregate losses
B. They guarantee that no claims will arise
C. They eliminate the need for premiums
D. They remove every form of uncertainty
Answer: A. They can improve the predictability of aggregate losses
8. Which of the following best describes insurance as a social device?
A. It distributes the financial burden of losses among a group of exposed persons
B. It eliminates every form of personal risk
C. It guarantees employment
D. It guarantees investment profits
Answer: A. It distributes the financial burden of losses among a group of exposed persons
9. Which risk is normally considered insurable when it meets appropriate underwriting requirements?
A. A definite and measurable pure risk
B. A guaranteed investment profit
C. A speculative stock-market gain
D. A business opportunity
Answer: A. A definite and measurable pure risk
10. Why does an insurer need adequate information about a proposed risk?
A. To assess the likelihood and potential severity of loss
B. To determine the customer's favourite product
C. To avoid issuing documents
D. To guarantee future profits
Answer: A. To assess the likelihood and potential severity of loss
11. Which principle establishes that the policyholder must have a legally recognised interest in the insured subject matter?
A. Contribution
B. Insurable interest
C. Subrogation
D. Proximate cause
Answer: B. Insurable interest
12. Why is insurable interest important?
A. It helps distinguish insurance from wagering
B. It guarantees a claim
C. It eliminates premiums
D. It guarantees investment returns
Answer: A. It helps distinguish insurance from wagering
13. Which principle requires disclosure of facts that could influence an insurer's decision?
A. Utmost good faith
B. Contribution
C. Indemnity
D. Salvage
Answer: A. Utmost good faith
14. What is a material fact?
A. A fact that could influence the insurer's decision regarding acceptance, terms or pricing of a risk
B. Any personal preference of the customer
C. An irrelevant newspaper report
D. A fact that can never affect underwriting
Answer: A. A fact that could influence the insurer's decision regarding acceptance, terms or pricing of a risk
15. Which party can have a duty to disclose material information in an insurance transaction?
A. The proposer or insured, as applicable
B. Only the surveyor
C. Only the bank
D. Only the nominee
Answer: A. The proposer or insured, as applicable
16. What is the main purpose of the principle of indemnity?
A. To compensate for covered loss subject to policy terms rather than provide a profit from the loss
B. To provide unlimited compensation
C. To guarantee an investment return
D. To pay every financial loss
Answer: A. To compensate for covered loss subject to policy terms rather than provide a profit from the loss
17. Which type of insurance is generally associated with the principle of indemnity?
A. Many forms of general insurance
B. Every form of life insurance
C. All investment products
D. Bank deposits
Answer: A. Many forms of general insurance
18. What does subrogation prevent in an appropriate indemnity claim?
A. The insured from recovering twice for the same loss
B. The insurer from investigating a claim
C. The customer from paying premiums
D. The insurer from collecting evidence
Answer: A. The insured from recovering twice for the same loss
19. Under subrogation, an insurer may acquire rights against:
A. A third party responsible for the loss, to the extent permitted
B. Every insurance agent
C. The regulator automatically
D. Every policyholder
Answer: A. A third party responsible for the loss, to the extent permitted
20. Contribution is mainly relevant when:
A. More than one policy covers the same interest and risk, subject to applicable conditions
B. No policy exists
C. A policyholder has no insurable interest
D. There is no loss
Answer: A. More than one policy covers the same interest and risk, subject to applicable conditions
21. What is the primary purpose of the principle of proximate cause?
A. To identify the effective cause of a loss when determining coverage
B. To calculate the customer's age
C. To determine the agent's salary
D. To calculate income tax
Answer: A. To identify the effective cause of a loss when determining coverage
22. What is meant by "causa proxima"?
A. The proximate or dominant cause
B. The most distant cause
C. The smallest cause
D. The final payment
Answer: A. The proximate or dominant cause
23. What is a contingent event?
A. An event that may or may not occur
B. An event that has already occurred
C. A guaranteed event
D. A compulsory payment
Answer: A. An event that may or may not occur
24. Why is insurance considered a contract?
A. It creates legally recognised rights and obligations between the parties
B. It is only an informal promise
C. It has no terms
D. It never requires consideration
Answer: A. It creates legally recognised rights and obligations between the parties
25. What is the role of an offer in forming a contract?
A. It indicates willingness to enter into a contract on specified terms
B. It automatically settles a claim
C. It guarantees acceptance
D. It cancels an existing policy
Answer: A. It indicates willingness to enter into a contract on specified terms
26. What is acceptance in a contract?
A. Agreement to the terms of an offer
B. Rejection of every condition
C. Cancellation of a claim
D. Payment of a tax
Answer: A. Agreement to the terms of an offer
27. Which of the following may affect the validity of consent to a contract?
A. Fraud or misrepresentation
B. The customer's favourite colour
C. The weather on the date of application
D. The agent's travel distance
Answer: A. Fraud or misrepresentation
28. What is misrepresentation?
A. Providing a false or misleading statement relating to a relevant matter
B. Providing accurate information
C. Paying the correct premium
D. Renewing a policy
Answer: A. Providing a false or misleading statement relating to a relevant matter
29. What is concealment in insurance?
A. Deliberately withholding relevant information that ought to be disclosed
B. Issuing a policy document
C. Paying a premium
D. Filing a legitimate claim
Answer: A. Deliberately withholding relevant information that ought to be disclosed
30. What is an insurance premium?
A. The amount payable for obtaining insurance coverage
B. The amount paid only after a claim
C. The insurer's annual profit
D. The customer's claim amount
Answer: A. The amount payable for obtaining insurance coverage
31. Which factor can influence the premium for an insurance risk?
A. Characteristics and level of risk being insured
B. Customer's favourite sport
C. Agent's personal preference
D. Colour of the policy document
Answer: A. Characteristics and level of risk being insured
32. What is an insurance tariff or rate broadly related to?
A. The basis used for determining the price of insurance risk
B. The policyholder's bank balance
C. The agent's educational qualification
D. The number of policy pages
Answer: A. The basis used for determining the price of insurance risk
33. What is risk inspection in underwriting?
A. Examination of relevant features of a proposed insured risk
B. Verification of an agent's attendance
C. Inspection of a bank branch
D. Examination of tax returns only
Answer: A. Examination of relevant features of a proposed insured risk
34. Why might an insurer request additional information during underwriting?
A. To obtain sufficient information to make an informed risk assessment
B. To delay every proposal
C. To guarantee a claim
D. To cancel every application
Answer: A. To obtain sufficient information to make an informed risk assessment
35. What is the purpose of underwriting guidelines?
A. To provide a framework for consistent assessment and acceptance of risks
B. To eliminate the need for risk assessment
C. To guarantee acceptance of every proposal
D. To determine customer hobbies
Answer: A. To provide a framework for consistent assessment and acceptance of risks
36. What is a claim form?
A. A document used to provide information for processing an insurance claim
B. A document used only for buying shares
C. A policy advertisement
D. A premium discount certificate
Answer: A. A document used to provide information for processing an insurance claim
37. Why may an insurer appoint a surveyor or loss assessor in certain claims?
A. To assess the circumstances and extent of loss where applicable
B. To sell another insurance policy
C. To determine the customer's income tax
D. To guarantee payment of every claim
Answer: A. To assess the circumstances and extent of loss where applicable
38. What is salvage in general insurance?
A. The remaining value of property after a loss
B. The original premium
C. The policyholder's income
D. The insurer's investment income
Answer: A. The remaining value of property after a loss
39. Why is salvage relevant in some property claims?
A. Its value may be relevant when assessing the amount of loss
B. It always cancels the policy
C. It guarantees a bonus
D. It replaces the premium
Answer: A. Its value may be relevant when assessing the amount of loss
40. What is a cashless facility in health insurance?
A. A facility under which eligible covered treatment may be settled directly with a network healthcare provider, subject to policy terms
B. A facility that makes all medical treatment free
C. A facility that removes policy exclusions
D. A method of avoiding documentation
Answer: A. A facility under which eligible covered treatment may be settled directly with a network healthcare provider, subject to policy terms
41. What is a network hospital?
A. A healthcare provider that has an arrangement with an insurer or relevant health service provider for specified services
B. Every hospital in the country
C. A government tax office
D. An insurance branch office
Answer: A. A healthcare provider that has an arrangement with an insurer or relevant health service provider for specified services
42. What is a waiting period in health insurance?
A. A specified period during which certain coverage may not be available, according to policy terms
B. A period when premiums are automatically refunded
C. A period when every claim is guaranteed
D. A period when the policyholder cannot contact the insurer
Answer: A. A specified period during which certain coverage may not be available, according to policy terms
43. What is a pre-existing disease generally concerned with?
A. A medical condition that existed before the relevant policy coverage, as defined by applicable policy terms
B. A disease that develops only after policy expiry
C. A condition affecting property
D. A motor accident
Answer: A. A medical condition that existed before the relevant policy coverage, as defined by applicable policy terms
44. What is motor third-party insurance primarily concerned with?
A. Liability arising from specified third-party risks involving a motor vehicle
B. Damage to the driver's personal belongings only
C. Life insurance of the vehicle
D. Investment returns from the vehicle
Answer: A. Liability arising from specified third-party risks involving a motor vehicle
45. What does personal accident insurance generally relate to?
A. Specified accidental bodily injury, disability or death benefits according to policy terms
B. Damage to a building only
C. Loss of business profits only
D. Investment in securities
Answer: A. Specified accidental bodily injury, disability or death benefits according to policy terms
46. What is the purpose of policy servicing?
A. To provide necessary assistance and process permitted changes or requests during the policy lifecycle
B. To sell only new policies
C. To reject all customer requests
D. To eliminate policy conditions
Answer: A. To provide necessary assistance and process permitted changes or requests during the policy lifecycle
47. Which of the following is an example of a policy servicing request?
A. Updating eligible customer details according to applicable procedures
B. Changing the law
C. Removing every policy exclusion
D. Guaranteeing a claim
Answer: A. Updating eligible customer details according to applicable procedures
48. Why should an agent avoid making unrealistic promises about an insurance product?
A. Because misleading promises can result in customer dissatisfaction and inappropriate sales
B. Because insurance products have no benefits
C. Because customers cannot ask questions
D. Because agents cannot explain policies
Answer: A. Because misleading promises can result in customer dissatisfaction and inappropriate sales
49. What is the importance of explaining policy terms before purchase?
A. It helps the customer make an informed decision about the insurance product
B. It guarantees future claims
C. It removes all exclusions
D. It increases the policy term automatically
Answer: A. It helps the customer make an informed decision about the insurance product
50. Which behaviour demonstrates professionalism by an insurance agent?
A. Providing accurate information and directing the customer to the applicable policy terms
B. Hiding exclusions
C. Promising guaranteed claim settlement
D. Encouraging false information in a proposal
Answer: A. Providing accurate information and directing the customer to the applicable policy terms
Important IC-38 Topics Covered in Practice Set 3
This practice set focuses on several areas that candidates should understand while preparing for the IC-38 Insurance Agent Exam:
Insurance as a risk-management mechanism
Risk pooling
Law of large numbers
Insurable interest
Material facts
Utmost good faith
Indemnity
Subrogation
Contribution
Proximate cause
Insurance contracts
Offer and acceptance
Misrepresentation
Concealment
Premium
Insurance pricing
Underwriting
Risk inspection
Underwriting guidelines
Claims
Surveyors and loss assessment
Salvage
Health insurance terminology
Cashless facilities
Network hospitals
Waiting periods
Pre-existing diseases
Motor third-party insurance
Personal accident insurance
Policy servicing
Ethical insurance sales
IC-38 Exam Preparation Tips
Understand Concepts Instead of Memorising Only
The IC-38 syllabus contains many insurance terms and principles. Candidates should understand the meaning of each concept and practise applying it to simple real-world situations.
Revise Insurance Principles Regularly
Important principles such as insurable interest, utmost good faith, indemnity, subrogation, contribution and proximate cause should be revised repeatedly.
Study Insurance-Specific Sections
In addition to common insurance concepts, candidates should study the applicable Life, Health or General Insurance material depending on the category of examination they are preparing for.
Practise MCQs
After completing each topic, solve multiple-choice questions to identify areas where further revision is required.
Use the Latest Official Material
Practice sets should supplement—not replace—the latest official IC-38 study material and relevant examination resources.
Frequently Asked Questions About IC-38 Exam Preparation
What is the purpose of IC-38 study material?
IC-38 study material provides foundational knowledge relevant to insurance agents and covers common insurance concepts along with line-of-business-specific topics.
What are the important principles of insurance?
Important principles commonly studied in insurance include insurable interest, utmost good faith, indemnity, subrogation, contribution and proximate cause.
Why is underwriting important?
Underwriting helps an insurer assess proposed risks and determine whether and on what terms the risk may be accepted.
What is the difference between a peril and a hazard?
A peril is generally a cause of loss, while a hazard is a condition that can increase the probability or severity of a loss.
Why is customer communication important for an insurance agent?
Clear and accurate communication helps customers understand the relevant features, conditions, limitations and obligations associated with an insurance product.
Conclusion
This IC-38 Insurance Agent Exam 50 MCQ Practice Set 3 provides another collection of original practice questions covering insurance fundamentals, risk management, insurance principles, contracts, underwriting, claims, health insurance terminology, policy servicing and ethical customer interaction.
Candidates can use this set for IC-38 exam revision, insurance agent practice tests and self-assessment.
For effective preparation, combine MCQ practice with the latest applicable official study material and revise both the common and relevant line-of-business sections.
Keep practising with PDFnotebooks for more IC-38 MCQ questions, insurance exam practice sets, competitive examination resources, study notes and question banks.
