III IC-24 practice questions

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Question 1Insurance Institute of India professional examination subject IC-24

Under the Marine Insurance Act, 1963, which of the following best describes a 'constructive total loss' of a ship?

The ship is so damaged that the cost of repair would exceed its insured value after the voyage is abandoned Correct answer.
The ship is captured by an enemy and later restored to the owner
The ship is stranded but refloated and repaired at a cost below its insured value
The ship is physically destroyed and no part of the hull remains recoverable

Explanation

A constructive total loss arises where the subject matter is abandoned because actual total loss appears unavoidable or because the cost of preserving it from total loss would exceed its value when saved. Mere physical destruction is an actual total loss, and successful recovery or economical repair negates the claim.

Question 2Insurance Institute of India professional examination subject IC-24

In marine cargo insurance, the 'warehouse to warehouse' clause extends cover from the seller's warehouse to the consignee's warehouse, but cover normally terminates earlier if:

The carrier issues a clean bill of lading
Delivery to the consignee's warehouse is completed before the stated time limit Correct answer.
The goods are stored in a customs bonded warehouse pending clearance
The insured chooses a longer inland route to reduce freight cost

Explanation

The transit clause continues cover during the ordinary course of transit but ends on delivery to the consignee's final warehouse, on delivery to any other warehouse the insured elects to use for storage or distribution, or on expiry of the agreed time limit, whichever occurs first. A clean bill of lading and customs storage do not by themselves terminate cover.

Question 3Insurance Institute of India professional examination subject IC-24

Which principle requires a proposer for life insurance to disclose all material facts that a prudent insurer would regard as influencing the decision to accept the risk or fix the premium?

Contribution
Indemnity
Subrogation
Utmost good faith Correct answer.

Explanation

Utmost good faith obliges both parties to disclose material facts and not to misrepresent them. In life insurance the proposer's health, habits and occupation are material because the insurer cannot inspect the life. Indemnity and subrogation are indemnity principles that do not apply in the same way to life policies.

Question 4Insurance Institute of India professional examination subject IC-24

A fire policy contains an average (underinsurance) condition. A property worth INR 20,00,000 is insured for INR 15,00,000, and a fire causes damage of INR 4,00,000. Applying the condition, the insurer pays:

INR 3,00,000 Correct answer.
INR 1,50,000
INR 4,00,000
INR 2,00,000

Explanation

The average condition reduces the claim in the proportion that the sum insured bears to the value of the property. Here the ratio is 15,00,000/20,00,000, i.e. 75 per cent, so the payment is 75 per cent of INR 4,00,000, which is INR 3,00,000.

Question 5Insurance Institute of India professional examination subject IC-24

In a motor insurance policy, the 'no claim bonus' is best described as:

A refund of premium paid when the vehicle is sold during the policy period
A loading applied to owners with a poor claims record
A discount on the renewal premium granted for each claim-free year, subject to a maximum Correct answer.
A compulsory excess deducted from every claim

Explanation

No claim bonus is a renewal discount earned for each consecutive claim-free year, usually expressed as a percentage of the own damage premium and capped at a maximum slab. It rewards claims-free experience and is forfeited if a claim is made.

Question 6Insurance Institute of India professional examination subject IC-24

Which of the following losses would normally be excluded from a standard personal accident policy?

Dislocation of a joint while playing an organised football match
Injury caused by the insured's own deliberate self-harm Correct answer.
Fracture sustained in a road accident while commuting to work
Death resulting from a snake bite during a trek

Explanation

Personal accident policies cover accidental, external and visible bodily injury and exclude deliberate self-injury, suicide attempts and intentional exposure to needless danger. Road accidents, snake bites and organised sport are ordinarily covered unless specifically excluded.

Question 7Insurance Institute of India professional examination subject IC-24

A reinsurance arrangement in which the ceding insurer retains all losses up to an agreed amount and the reinsurer pays the excess up to a specified limit is known as:

Facultative reinsurance
Quota share reinsurance
Surplus reinsurance
Excess of loss reinsurance Correct answer.

Explanation

Excess of loss reinsurance responds once a single loss or a period's aggregate loss exceeds the cedent's retention, with the reinsurer paying the layer above it up to a limit. Quota share and surplus are proportional treaties based on shares of the sum insured, not on losses exceeding a retention.

Question 8Insurance Institute of India professional examination subject IC-24

Under a standard fire policy, which peril is typically covered as a basic insured peril?

Earthquake
Riot and strike
War and nuclear risks
Lightning Correct answer.

Explanation

The standard fire cover includes fire, lightning and explosion of domestic gas used for domestic purposes. Earthquake, riot and strike, and war or nuclear risks are covered only by add-on extensions or are excluded entirely.

Question 9Insurance Institute of India professional examination subject IC-24

An insured under a health insurance policy fails to disclose a pre-existing cardiac condition at proposal. Two years later a claim arises for a heart attack. The insurer may:

Pay only 50 per cent of the claim as a compromise
Pay the claim in full because two years have elapsed
Cancel the policy but must still pay the current claim
Repudiate the claim and avoid the policy for material non-disclosure, subject to the policy terms and applicable regulations Correct answer.

Explanation

Non-disclosure of a material pre-existing condition entitles the insurer to repudiate the claim and, where the law and policy permit, avoid the contract. Morbidity waiting periods and regulatory limits on pre-existing condition exclusions affect timing, but they do not validate a fraudulent non-disclosure.

Question 10Insurance Institute of India professional examination subject IC-24

The doctrine of subrogation in insurance means that:

The insurer can recover the premium from a third party who caused the loss
The insured must share the loss equally with the insurer
The insurer steps into the insured's legal position to recover the loss from a third party after indemnifying the insured Correct answer.
The insured transfers ownership of the damaged property to the insurer before payment

Explanation

Subrogation gives the indemnifying insurer the right to pursue third parties who caused the loss, once the insured has been fully indemnified, so that the insured does not recover twice. It is a corollary of indemnity and does not apply to non-indemnity covers such as life insurance.

Question 11Insurance Institute of India professional examination subject IC-24

Which of the following is the primary purpose of the tariff and file-and-use regimes in Indian general insurance regulation?

To fix a single premium for all insurers across every class of business
To guarantee that insurers always make an underwriting profit
To ensure that premium rates are adequate, not excessive or unfairly discriminatory, and to protect policyholders Correct answer.
To prevent reinsurers from participating in the domestic market

Explanation

Rate regulation aims at adequacy, reasonableness and non-discrimination so that policyholders are protected and insurers remain solvent. It does not guarantee profits or impose a single uniform rate, and it does not bar reinsurers.

Question 12Insurance Institute of India professional examination subject IC-24

In a claim under a marine hull policy, 'particular average' refers to:

A partial loss of the insured ship or cargo caused by a peril insured against, borne by the owner of the damaged property Correct answer.
A loss shared equally among all cargo owners
The total loss of the entire venture
A voluntary sacrifice of part of the cargo to save the adventure

Explanation

Particular average is an accidental partial loss that falls on the owner of the particular property damaged, as distinct from general average. General average involves a voluntary sacrifice deliberately made for the common safety and shared proportionately by all parties to the adventure.

Question 13Insurance Institute of India professional examination subject IC-24

An employer takes a workmen's compensation (employees' compensation) policy. Which statement about the cover is correct?

It covers the employer's liability for damage to employees' personal property at the workplace
It pays the employer's own medical expenses for stress-related illness
It indemnifies the employer against fines imposed for safety breaches
It covers the employer's statutory liability for accidental injury or occupational disease suffered by employees arising out of and in the course of employment Correct answer.

Explanation

Employees' compensation insurance indemnifies the employer against statutory liability to employees for employment-related accidental injury and prescribed occupational diseases. Fines and penalties are generally uninsurable as a matter of public policy, and the cover is not for property or the employer's own illness.

Question 14Insurance Institute of India professional examination subject IC-24

The 'insurable interest' requirement in life insurance must be satisfied at which point?

At neither the proposal nor the loss
At the time of proposal only Correct answer.
At both the time of proposal and the time of loss
At the time of the loss only

Explanation

In life insurance, insurable interest must exist at the time the policy is taken out, but need not continue at the time of death. This differs from indemnity insurance, where interest is required at both inception and loss.

Question 15Insurance Institute of India professional examination subject IC-24

A liability policy written on an 'occurrence' basis responds to:

Only claims notified and settled within the same policy year
Claims first made against the insured during the policy period, regardless of when the injury occurred
Injury or damage that occurred during the policy period, whenever the claim is subsequently made Correct answer.
Claims reported after the policy has expired under no circumstances

Explanation

Occurrence policies respond to injury or damage that takes place during the policy period even if the claim is made years later. Claims-made policies, by contrast, respond to claims first made during the period, usually with a retroactive date.

Question 16Insurance Institute of India professional examination subject IC-24

Which of the following best explains why life insurance premiums are calculated using mortality tables?

To fix the rate of interest the insurer will credit to policyholders
To determine the solvency margin required by the regulator
To estimate the probability of death at each age so that premiums can be set to fund expected claims and expenses Correct answer.
To decide the commission payable to agents

Explanation

Mortality tables give the expected number of deaths at each age, allowing the insurer to price the risk and accumulate funds to meet claims and expenses. Interest assumptions and expense loadings are separate elements of premium calculation.

Question 17Insurance Institute of India professional examination subject IC-24

In a fire insurance policy, the 'reinstatement' condition allows the insured to claim:

The original purchase price of the property
The cost of replacing the damaged property with new property of the same kind and quality, subject to the sum insured Correct answer.
The market value of the property at the date of loss
The depreciated value after deducting obsolescence

Explanation

Reinstatement provides for replacement with new property of the same kind and quality, without deduction for depreciation, provided the sum insured is adequate and the condition is satisfied. Without it, settlement is normally on an indemnity basis, such as market or depreciated value.

Question 18Insurance Institute of India professional examination subject IC-24

An insurer discovers after issuing a policy that the insured concealed a material fact about the risk. Under the principle of utmost good faith, the insurer's usual remedy is to:

Increase the premium retrospectively without any other action
Reduce the sum insured by half automatically
Avoid the policy from inception and refund the premium, subject to applicable law Correct answer.
Continue the policy but exclude all future claims

Explanation

Material non-disclosure or misrepresentation entitles the insurer to avoid the contract, which means treating it as never having existed and returning the premium. The precise remedy may be modified by statute or regulation, but it is not an automatic premium loading or blanket exclusion.

Question 19Insurance Institute of India professional examination subject IC-24

Which of the following is a characteristic feature of a 'floating policy' in marine insurance?

It covers a series of shipments up to an aggregate limit, with declarations made as shipments occur Correct answer.
It automatically covers war and strike risks
It covers only goods stored in a warehouse
It covers a single shipment for a fixed sum insured

Explanation

A floating policy covers multiple shipments under one contract up to an overall limit, and the insured declares each shipment as it occurs. It is not confined to one shipment or to warehouse storage, and war risks require a separate extension.

Question 20Insurance Institute of India professional examination subject IC-24

An insured has two fire policies covering the same property for INR 10,00,000 each. A loss of INR 6,00,000 occurs. Under the principle of contribution, each insurer will normally pay:

INR 1,00,000
INR 6,00,000
INR 10,00,000
INR 3,00,000 Correct answer.

Explanation

Contribution requires insurers covering the same interest against the same peril to share the loss rateably, so that the insured does not recover more than the loss. With equal sums insured, each pays half of INR 6,00,000, i.e. INR 3,00,000.

Question 21Insurance Institute of India professional examination subject IC-24

Which of the following statements about the 'principle of indemnity' in property insurance is correct?

It entitles the insured to recover the full sum insured regardless of the actual loss
It applies equally to life insurance and property insurance
It allows the insured to profit from a loss if the premium was paid promptly
It places the insured in the same financial position after the loss as before it, subject to the sum insured Correct answer.

Explanation

Indemnity restores the insured to the financial position held immediately before the loss, no better and no worse, subject to the sum insured and policy terms. It prevents profit from loss and does not apply to non-indemnity covers such as life insurance.

Question 22Insurance Institute of India professional examination subject IC-24

A motor third-party liability policy is compulsory in India primarily because:

It protects innocent victims of road accidents by ensuring that compensation is available from a solvent insurer Correct answer.
It guarantees a profit for motor insurers
It replaces the need for own damage cover
It exempts the vehicle owner from all legal liability

Explanation

Compulsory third-party cover exists so that persons injured by motor vehicles can recover compensation from an insurer rather than relying on the driver's ability to pay. It does not eliminate the owner's liability, replace own damage cover, or guarantee insurer profits.

Question 23Insurance Institute of India professional examination subject IC-24

Under a life insurance policy, the 'surrender value' is:

The cash value payable if the policy is discontinued after a specified period, based on the reserve built up Correct answer.
The sum assured payable on death
The premium refunded if the policy lapses in the first year
The amount payable on maturity of the policy

Explanation

Surrender value is the cash amount the policyholder receives on voluntarily terminating a policy that has acquired a surrender value, reflecting the reserve accumulated under the contract. It is distinct from maturity proceeds, death benefit and early-lapse refunds.

Question 24Insurance Institute of India professional examination subject IC-24

An insurer's claims reserve established for losses that have occurred but have not yet been reported is known as:

Solvency margin
Unearned premium reserve
Outstanding premium reserve
Incurred but not reported (IBNR) reserve Correct answer.

Explanation

The IBNR reserve is a provision for claims that have occurred before the valuation date but had not been reported to the insurer by that date. Unearned premium reserve relates to unexpired risk, and the solvency margin is a capital adequacy requirement.

Question 25Insurance Institute of India professional examination subject IC-24

A reinsurance treaty provides that the reinsurer pays 90 per cent of every loss above a retention of INR 5,00,000, up to a limit of INR 45,00,000 per loss. If a single loss of INR 25,00,000 occurs, the reinsurer pays:

INR 20,00,000
INR 25,00,000
INR 18,00,000 Correct answer.
INR 22,50,000

Explanation

The excess over the retention is INR 25,00,000 minus INR 5,00,000, i.e. INR 20,00,000, and the reinsurer pays 90 per cent of that amount, which is INR 18,00,000. The limit of INR 45,00,000 is not reached.

Question 26Insurance Institute of India professional examination subject IC-24

Under the Insurance Act, 1938, what is the maximum period within which an insurer must settle a claim after receiving the surveyor's report for a loss exceeding INR 75,000?

90 days
45 days
60 days
30 days Correct answer.

Explanation

Section 64UM of the Insurance Act, 1938, read with the IRDAI (Insurance Surveyors and Loss Assessors) Regulations, requires the insurer to settle the claim within 30 days of receipt of the surveyor's report. If further investigation is needed, the insurer must inform the insured and settle within 90 days of the report.

Question 27Insurance Institute of India professional examination subject IC-24

Which document issued by an insurer to a surveyor formally appoints the surveyor to assess a loss and specifies the scope of the survey?

The claim form
The surveyor's licence
The letter of appointment Correct answer.
The discharge voucher

Explanation

The letter of appointment is the formal communication from the insurer authorising a licensed surveyor to inspect and assess a reported loss. It identifies the insured, the policy, the loss, and the scope of the surveyor's authority.

Question 28Insurance Institute of India professional examination subject IC-24

In a marine cargo insurance, the 'warehouse to warehouse' clause extends cover from the seller's warehouse to the buyer's warehouse. Which statement about this clause is correct?

Cover attaches when the goods leave the warehouse named in the policy and continues during the ordinary course of transit until they are delivered to the consignee's warehouse. Correct answer.
Cover attaches only when the goods are loaded on the vessel and ceases when they are discharged at the destination port.
Cover attaches when the policy is issued and continues for a fixed period of 30 days regardless of the transit.
Cover attaches only after the goods have been inspected by a surveyor at the port of loading.

Explanation

The warehouse-to-warehouse clause is a transit clause that attaches cover when the insured goods leave the warehouse named in the policy and continues during the ordinary course of transit. Cover terminates on delivery to the consignee's warehouse or on the expiry of the specified time limit after discharge, whichever occurs first.

Question 29Insurance Institute of India professional examination subject IC-24

An insured under a fire policy has taken a policy for INR 10,00,000 on a property whose actual value is INR 20,00,000. A fire causes damage of INR 4,00,000. Applying the average clause, how much will the insurer pay?

INR 1,00,000
INR 4,00,000
INR 2,00,000 Correct answer.
INR 3,00,000

Explanation

Under the average clause, the claim is reduced in the proportion that the sum insured bears to the value of the property. Here the sum insured is half the value, so the insurer pays half of the loss: INR 4,00,000 × (10,00,000 / 20,00,000) = INR 2,00,000.

Question 30Insurance Institute of India professional examination subject IC-24

Which of the following is the correct order of the stages in the insurance claims process?

Policy verification, loss notification, settlement, loss assessment
Loss assessment, loss notification, policy verification, settlement
Loss notification, loss assessment, settlement, policy verification
Loss notification, policy verification, loss assessment, settlement Correct answer.

Explanation

A claim is first notified by the insured, then the insurer verifies that the policy covers the loss, then the loss is assessed (often by a surveyor), and finally the claim is settled. This sequence ensures that coverage is confirmed before assessment and payment.

Question 31Insurance Institute of India professional examination subject IC-24

A proposal for a motor insurance policy contains a question about whether the vehicle has been modified. The insured answers 'no' even though the vehicle has a modified engine. The insurer issues the policy and later discovers the modification after a claim. Which principle is most directly relevant to the insurer's remedy?

Principle of utmost good faith Correct answer.
Principle of subrogation
Principle of contribution
Principle of proximate cause

Explanation

Utmost good faith requires the proposer to disclose all material facts and to answer proposal questions truthfully. A false answer about a modification is a breach of this duty and may entitle the insurer to avoid the policy or repudiate the claim.

Question 32Insurance Institute of India professional examination subject IC-24

In the context of reinsurance, what does a 'facultative' arrangement mean?

The reinsurer automatically covers all risks written by the insurer without individual underwriting.
The insurer retains all losses and the reinsurer pays only a fixed commission.
The insurer and reinsurer negotiate each risk individually, and either party may accept or reject it. Correct answer.
The reinsurer is obliged to accept all risks ceded by the insurer under a treaty.

Explanation

Facultative reinsurance is the reinsurance of individual risks by offer and acceptance, so the ceding insurer may offer a risk and the reinsurer may accept or decline it. This differs from treaty reinsurance, where the reinsurer is obliged to accept risks falling within the treaty terms.

Question 33Insurance Institute of India professional examination subject IC-24

Which of the following best describes the role of a 'loss assessor' in insurance claims?

To represent the insured in legal proceedings against the insurer
To underwrite new risks and determine premium rates
To sell insurance policies on behalf of the insurer
To investigate and quantify the extent of loss on behalf of the insurer Correct answer.

Explanation

A loss assessor, commonly called a surveyor, is appointed by the insurer to inspect the loss, determine its cause and extent, and recommend the claim amount. The surveyor acts as an independent professional and must be licensed by IRDAI.

Question 34Insurance Institute of India professional examination subject IC-24

An insured has a fire policy with a sum insured of INR 5,00,000. A fire causes a loss of INR 1,50,000. The policy has a deductible of INR 25,000. How much will the insurer pay, assuming no other issues?

INR 25,000
INR 1,75,000
INR 1,50,000
INR 1,25,000 Correct answer.

Explanation

A deductible is the first amount of each loss that the insured bears. The insurer pays the loss less the deductible: INR 1,50,000 − INR 25,000 = INR 1,25,000, provided the sum insured is adequate.

Question 35Insurance Institute of India professional examination subject IC-24

Under a health insurance policy, what is the purpose of a 'waiting period'?

To require the insured to pay a higher premium after a claim
To specify a period during which certain illnesses or treatments are not covered Correct answer.
To allow the insurer to cancel the policy without notice
To delay the commencement of cover for all illnesses after policy inception

Explanation

A waiting period is a specified time after policy inception during which cover for certain conditions, such as pre-existing diseases or maternity, is not available. It helps the insurer manage anti-selection and is disclosed in the policy terms.

Question 36Insurance Institute of India professional examination subject IC-24

A motor insurance policy contains an 'excess' of INR 1,000 for own damage claims. The insured suffers damage of INR 8,000. How much will the insurer pay?

INR 1,000
INR 8,000
INR 9,000
INR 7,000 Correct answer.

Explanation

An excess is the amount the insured must bear on each claim before the insurer pays. The insurer pays the loss less the excess: INR 8,000 − INR 1,000 = INR 7,000.

Question 37Insurance Institute of India professional examination subject IC-24

Which of the following is a key difference between a 'named peril' policy and an 'all risks' policy?

A named peril policy covers only the perils listed, while an all risks policy covers all perils except those excluded. Correct answer.
A named peril policy does not require an insurable interest, while an all risks policy does.
A named peril policy is always more expensive than an all risks policy.
A named peril policy covers all perils except those excluded, while an all risks policy covers only listed perils.

Explanation

A named peril policy covers only the perils specifically listed in the policy, so the insured must show that the loss was caused by a listed peril. An all risks policy covers all perils except those expressly excluded, shifting the burden of proof to the insurer to show an exclusion applies.

Question 38Insurance Institute of India professional examination subject IC-24

In insurance, 'moral hazard' refers to:

The risk that interest rates will affect investment returns
The risk that the insured's behaviour becomes less careful because of the existence of insurance Correct answer.
The risk that a natural catastrophe will cause widespread loss
The risk that the insurer will become insolvent

Explanation

Moral hazard arises when the existence of insurance changes the insured's behaviour, making the insured less careful about preventing loss or more likely to exaggerate a claim. Insurers manage it through deductibles, exclusions, and claims investigation.

Question 39Insurance Institute of India professional examination subject IC-24

Which of the following best describes the 'duty of disclosure' in insurance?

The broker must disclose the commission earned to the insurer.
The insurer must disclose all its internal underwriting guidelines to the insured.
The proposer must disclose all material facts that would influence the insurer's decision to accept the risk or fix the premium. Correct answer.
The insured must disclose only facts specifically asked about in the proposal form.

Explanation

The duty of disclosure requires the proposer to volunteer all material facts relevant to the risk, not merely to answer the questions on the proposal form. A material fact is one that would influence a prudent insurer's decision to accept the risk or determine the terms.

Question 40Insurance Institute of India professional examination subject IC-24

A policyholder takes a loan against a life insurance policy. Which statement about the policy loan is correct?

The loan automatically increases the sum assured.
The loan must be repaid only after the policy matures.
The loan is free of interest because it is secured by the policy.
The loan is granted up to the surrender value, and any outstanding loan with interest is deducted from the claim amount. Correct answer.

Explanation

A policy loan is granted against the surrender value of the policy and is secured by the policy. Any outstanding loan and accrued interest are deducted from the maturity or death claim payable.

Question 41Insurance Institute of India professional examination subject IC-24

Which of the following statements about 'reinstatement' of a lapsed life insurance policy is correct?

Reinstatement requires the insurer to issue a new policy with a new date of commencement.
Reinstatement may be allowed within a specified period on payment of arrears with interest and evidence of insurability. Correct answer.
A lapsed policy can never be reinstated.
Reinstatement is automatic on payment of the next premium without any conditions.

Explanation

Most life insurance policies allow reinstatement of a lapsed policy within a specified period, typically five years, on payment of overdue premiums with interest and satisfactory evidence of continued insurability. The original policy terms and date of commencement are generally preserved.

Question 42Insurance Institute of India professional examination subject IC-24

In the context of insurance regulation in India, what is the role of the Insurance Regulatory and Development Authority of India (IRDAI)?

To regulate, promote, and ensure the orderly growth of the insurance industry Correct answer.
To act as the sole insurer for all general insurance business in India
To settle all insurance claims directly between insured and insurer
To set the interest rates charged by banks on loans

Explanation

IRDAI is the statutory regulator established under the IRDA Act, 1999, with the mandate to regulate, promote, and ensure the orderly growth of the insurance and reinsurance industry. It licenses insurers and intermediaries, frames regulations, and protects policyholders' interests.

Question 43Insurance Institute of India professional examination subject IC-24

Which of the following is a characteristic of a 'contributory' group health insurance scheme?

The employer pays the entire premium and the employee pays nothing.
The insurer pays a dividend to the employee at the end of the year.
The employee pays the entire premium and the employer pays nothing.
Both the employer and the employee share the premium cost. Correct answer.

Explanation

In a contributory group health scheme, the premium is shared between the employer and the employees, typically with the employer paying a major portion and the employee contributing the balance. This sharing is a defining feature of contributory schemes.

Question 44Insurance Institute of India professional examination subject IC-24

An insured's factory is damaged by fire, and the insurer pays the claim. The fire was caused by the negligence of a contractor. Which principle allows the insurer to recover the amount from the contractor?

Principle of proximate cause
Principle of contribution
Principle of indemnity
Principle of subrogation Correct answer.

Explanation

Subrogation gives the insurer the right, after paying the claim, to step into the insured's shoes and pursue any rights of recovery against the third party responsible for the loss. It supports the principle of indemnity by preventing double recovery.

Question 45Insurance Institute of India professional examination subject IC-24

Which of the following statements about 'cash before cover' in general insurance is correct?

The premium is payable only after a claim is made.
The premium must be received by the insurer before the cover commences, unless the insurer has granted a credit facility. Correct answer.
The insurer must issue the policy before the premium is received.
The insured may pay the premium at any time during the policy period without affecting cover.

Explanation

The 'cash before cover' principle requires that the premium be received by the insurer before the risk is assumed, unless a credit facility has been specifically granted. This protects the insurer from assuming risk without consideration and is a requirement under IRDAI regulations.

Question 46Insurance Institute of India professional examination subject IC-24

In a fire insurance policy, what is the purpose of the 'removal of debris' clause?

To cover debris removal only when the loss is caused by a named peril
To exclude all costs of debris removal from the claim
To require the insured to remove debris before the insurer pays any claim
To cover the cost of removing debris after a covered loss, up to a specified limit Correct answer.

Explanation

The removal of debris clause covers the reasonable cost of removing debris following a covered loss, usually up to a specified percentage of the claim or sum insured. It recognises that debris removal is a necessary part of restoring the property.

Question 47Insurance Institute of India professional examination subject IC-24

Which of the following is the primary purpose of 'risk inspection' in underwriting?

To market additional policies to the insured
To assess the physical and moral hazards of a risk and recommend risk improvement measures Correct answer.
To settle claims quickly without a surveyor
To determine the premium to be charged after a claim

Explanation

Risk inspection involves a physical survey of the risk to assess physical hazards, such as fire protection and housekeeping, and moral hazards. The inspector recommends risk improvement measures and provides input for underwriting and rating.

Question 48Insurance Institute of India professional examination subject IC-24

An insured under a burglary policy discovers that stock was stolen over several weeks, but the exact date of loss is unknown. Which condition in the policy is most likely to affect the claim?

The condition requiring the insured to insure for full value
The condition requiring immediate notice of loss
The condition requiring the insured to obtain a surveyor's report
The condition requiring the insured to maintain proper books of account Correct answer.

Explanation

Burglary policies typically require the insured to maintain proper books of account and records so that the loss can be quantified. Where the loss is discovered after a series of thefts, the absence of reliable records may make it difficult to establish the amount of loss and prejudice the claim.

Question 49Insurance Institute of India professional examination subject IC-24

In life insurance underwriting, which of the following factors is most relevant to determining the mortality risk of a proposer?

The proposer's age and state of health Correct answer.
The proposer's occupation and income
The proposer's residential address
The proposer's marital status

Explanation

Age and health are the primary factors in mortality risk assessment; mortality tables show that the probability of death increases with age and is affected by medical conditions. Occupation and income are relevant to financial underwriting, but age and health are the core mortality factors.

Question 50Insurance Institute of India professional examination subject IC-24

Which of the following statements about the 'doctrine of proximate cause' is correct?

The insurer pays only if the loss is caused by the last peril in the chain of events.
The insurer pays only if the loss is caused by a single peril with no other contributing factors.
The insurer pays if the dominant, effective cause of the loss is an insured peril, even if other perils contributed. Correct answer.
The insurer pays if the loss is caused by any peril, regardless of whether it is insured.

Explanation

Proximate cause is the dominant, effective cause of a loss that sets the chain of events in motion. If that cause is an insured peril, the loss is covered even if other uninsured perils contributed to the loss.