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III IC-76 practice questions

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Question 1Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Under the Insurance Act, 1938, within what period must an insurer pay interest on a claim amount delayed beyond the stipulated time for settlement?

  1. At a rate one per cent above the prevailing bank rate Correct answer.
  2. At the bank rate plus two per cent per annum
  3. At the rate notified by the IRDAI each quarter
  4. At the rate of six per cent per annum

Explanation

The Insurance Act, 1938 as amended provides that where a claim is not settled within the prescribed period, the insurer must pay interest at a rate one per cent above the prevailing bank rate. This penal interest is intended to discourage delayed settlement of admissible claims.

Question 2Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In life insurance underwriting, which concept describes the tendency of applicants with poorer-than-average health to seek insurance more actively than healthy applicants?

  1. Adverse selection Correct answer.
  2. Utmost good faith
  3. Insurable interest
  4. Moral hazard

Explanation

Adverse selection arises because individuals who know they face higher risk are more likely to buy or retain cover, skewing the insured pool. Underwriters counter it through medical examination, disclosure requirements and risk classification.

Question 3Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

A fire policy contains an average (underinsurance) clause. The sum insured is Rs 20 lakh against a property valued at Rs 25 lakh, and a loss of Rs 5 lakh occurs. What amount is payable, ignoring deductibles?

  1. Rs 3.20 lakh
  2. Rs 5.00 lakh
  3. Rs 2.50 lakh
  4. Rs 4.00 lakh Correct answer.

Explanation

The average clause applies the proportion sum insured bears to the value at risk: 20/25 = 0.8. Applying this to the loss of Rs 5 lakh gives Rs 4 lakh, leaving the insured to bear the balance as self-insurance.

Question 4Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which principle entitles an insurer that has indemnified the insured to step into the insured's legal position and recover the loss from the negligent third party?

  1. Salvage
  2. Reinstatement
  3. Contribution
  4. Subrogation Correct answer.

Explanation

Subrogation transfers the insured's right of recovery against the responsible third party to the insurer after payment. It supports the indemnity principle by preventing the insured from recovering twice for the same loss.

Question 5Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In marine insurance, which term describes a total loss where the subject matter is destroyed or so damaged that it ceases to be a thing of the kind insured?

  1. Actual total loss Correct answer.
  2. General average
  3. Constructive total loss
  4. Particular average

Explanation

An actual total loss occurs when the insured subject matter is wholly destroyed, irrecoverably lost, or so damaged that it no longer remains the thing insured. Constructive total loss, by contrast, arises where loss appears unavoidable or the cost of recovery exceeds the value.

Question 6Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

A motor third-party liability claim exceeds the policy limit. Which statement best describes the insurer's obligation under the Motor Vehicles Act, 1988 framework?

  1. The insurer is discharged of all liability once the limit is reached
  2. The insurer pays up to the statutory or contractual limit, and the insured is personally liable for the balance Correct answer.
  3. The insurer must pay the entire award and cannot recover any excess from the insured
  4. The Tribunal must reduce the award to the policy limit

Explanation

The insurer's liability is confined to the amount covered by the policy or the statutory minimum, whichever applies. Any compensation awarded beyond that limit remains the personal liability of the insured owner or driver.

Question 7Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which document in a fire insurance contract contains the schedule of property insured, the sum insured and the perils covered, and is read together with the standard policy wording?

  1. The policy schedule Correct answer.
  2. The cover note
  3. The proposal form
  4. The endorsement

Explanation

The policy schedule records the specific details of the particular risk, such as the insured's name, property, sum insured, premium and period. It must be read with the printed policy conditions to constitute the complete contract.

Question 8Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Under the principle of contribution, how are losses apportioned when two property policies with rateable proportion clauses cover the same interest?

  1. Each insurer pays its rateable share so that the insured does not recover more than the loss Correct answer.
  2. The claim is void because double insurance is prohibited
  3. The insurer whose policy was issued first pays the whole claim
  4. The insured may claim the full amount from any one insurer, who then bears the entire loss

Explanation

Contribution requires each insurer to bear its proportionate share of the loss, determined by the sums insured or by the rateable proportion clause. The insured is indemnified fully but cannot profit by recovering more than the actual loss.

Question 9Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In health insurance, what is the purpose of a pre-existing disease waiting period?

  1. To delay cover for conditions that existed before inception until the stated period elapses Correct answer.
  2. To require the insured to undergo a fresh medical test every year
  3. To reduce the sum insured for declared pre-existing conditions
  4. To exclude all claims arising from any illness during the first policy year

Explanation

A waiting period postpones liability for pre-existing diseases for a defined term, commonly two to four years, so that the insurer is not immediately exposed to known conditions. Claims for unrelated illnesses are not affected by this clause.

Question 10Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes the role of the tariff advisory function historically exercised in Indian general insurance?

  1. Regulating the investment of insurance funds
  2. Licensing individual insurance agents
  3. Fixing premium rates and policy terms for specified classes of general insurance business Correct answer.
  4. Adjudicating disputes between insurers and policyholders

Explanation

The tariff advisory function prescribed standard premium rates and policy wordings for certain classes such as fire and motor, promoting uniformity and preventing unhealthy rate competition. Dispute adjudication, licensing and investment regulation lie elsewhere.

Question 11Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

A reinsurance arrangement in which the reinsurer accepts all risks ceded by the insurer up to a fixed monetary limit per risk, without the reinsurer retaining the right to decline individual risks, is known as:

  1. Quota share treaty
  2. Facultative reinsurance
  3. Obligatory treaty reinsurance Correct answer.
  4. Surplus treaty

Explanation

Obligatory treaty reinsurance binds the reinsurer to accept all cessions falling within the agreed terms, and binds the cedant to cede them. The absence of case-by-case acceptance distinguishes it from facultative arrangements.

Question 12Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In liability insurance, which term refers to the maximum amount the insurer will pay for all claims arising from a single occurrence during the policy period?

  1. Deductible
  2. Aggregate limit
  3. Limit of indemnity per occurrence Correct answer.
  4. Co-insurance clause

Explanation

The limit of indemnity per occurrence caps the insurer's liability for each separate event. An aggregate limit, by contrast, caps total payments across all occurrences in the policy period.

Question 13Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

An insured deliberately sets fire to his own insured stock to claim the sum insured. Which principle most directly defeats the claim?

  1. Indemnity
  2. Utmost good faith Correct answer.
  3. Proximate cause
  4. Insurable interest

Explanation

Deliberate self-caused loss breaches the duty of utmost good faith and the policy condition against wilful acts, allowing the insurer to repudiate the claim. The indemnity principle alone would not address the fraudulent conduct.

Question 14Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is the primary function of a cover note issued by an insurer?

  1. To provide temporary evidence of insurance pending issue of the policy Correct answer.
  2. To act as the proposal form signed by the proposer
  3. To serve as the final policy document after underwriting
  4. To record the premium payment history of the insured

Explanation

A cover note gives interim protection from the date stated until the formal policy is issued. It is evidence of a contract already concluded and is not a substitute for the policy itself.

Question 15Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In a personal accident policy, which benefit is typically expressed as a percentage of the capital sum insured for specified injuries such as loss of one eye?

  1. Weekly compensation benefit
  2. Permanent partial disablement benefit Correct answer.
  3. Medical expenses reimbursement
  4. Funeral expenses benefit

Explanation

Permanent partial disablement benefits are paid as a percentage of the capital sum insured according to a schedule of injuries, such as loss of one eye or one limb. Total disablement attracts the full capital sum, while temporary disablement attracts weekly compensation.

Question 16Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes the concept of 'insurable interest' in life insurance?

  1. It must exist at the time of the insured's death
  2. It is not required in life insurance at all
  3. It must exist at the time the policy is effected Correct answer.
  4. It must exist both at inception and at the time of claim

Explanation

In life insurance, insurable interest must be present when the policy is taken out; its continued existence at death is not essential. In property insurance, by contrast, interest must exist at both inception and loss.

Question 17Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In marine insurance, general average contribution is payable when:

  1. Any partial loss occurs to the cargo during the voyage
  2. The cargo is damaged by inherent vice
  3. A voluntary sacrifice or extraordinary expenditure is made to save the adventure from a common peril Correct answer.
  4. The ship is delayed at port due to bad weather

Explanation

General average arises when a deliberate sacrifice or extraordinary expenditure is incurred for the common safety of ship, cargo and freight. The resulting loss is shared proportionately among the parties saved.

Question 18Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which body was established under the Insurance Regulatory and Development Authority Act, 1999 to regulate, promote and ensure orderly growth of the insurance industry in India?

  1. Life Insurance Corporation of India
  2. Insurance Regulatory and Development Authority of India Correct answer.
  3. General Insurance Corporation of India
  4. Insurance Institute of India

Explanation

IRDAI is the statutory regulator created under the IRDA Act, 1999, with functions including licensing, solvency monitoring and protection of policyholders. The other bodies are market participants or professional institutions.

Question 19Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

A proposal for a life policy conceals a known heart condition. The insurer discovers this two years after issue. Which principle most directly supports the insurer's remedy of avoiding the contract?

  1. Utmost good faith Correct answer.
  2. Mitigation of loss
  3. Contribution
  4. Proximate cause

Explanation

Utmost good faith obliges the proposer to disclose all material facts within knowledge that would influence the underwriting decision. Concealment of a known heart condition is a material non-disclosure entitling the insurer to avoid the policy, subject to statutory limits on revival and claim denial.

Question 20Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following statements about the 'salvage' concept in property insurance is correct?

  1. Salvage only applies to marine hull policies
  2. Salvage reduces the sum insured for future policies
  3. The insurer is entitled to the salvage value of damaged property after settling the claim Correct answer.
  4. Salvage value is always retained by the insured without deduction

Explanation

On payment of a total loss claim, the insurer becomes entitled to the salvage of the damaged property, which it may sell to reduce its net outgo. This entitlement preserves the indemnity principle by preventing the insured from recovering twice.

Question 21Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In a unit-linked insurance plan, which risk is borne by the policyholder rather than the insurer?

  1. Risk of insurer insolvency
  2. Expense risk of the insurer
  3. Mortality risk
  4. Investment risk on the segregated fund Correct answer.

Explanation

In ULIPs the policyholder bears the investment risk because the fund value fluctuates with the performance of the underlying assets. Mortality and expense risks are generally borne by the insurer as in traditional products.

Question 22Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which clause in a property policy requires the insured to take reasonable steps to minimise loss after a peril has operated, failing which the claim may be reduced?

  1. Subrogation clause
  2. Arbitration clause
  3. Mitigation (sue and labour) clause Correct answer.
  4. Average clause

Explanation

The mitigation or sue and labour clause obliges the insured to act reasonably to limit the extent of loss and allows recovery of reasonable costs incurred for that purpose. Failure to mitigate can reduce the amount otherwise payable.

Question 23Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

What is the principal purpose of a no-claim bonus in motor insurance?

  1. To increase the sum insured for third-party liability
  2. To extend cover to unnamed drivers automatically
  3. To waive the compulsory deductible in all cases
  4. To reward claim-free years with a premium discount and encourage safe driving Correct answer.

Explanation

The no-claim bonus reduces the own-damage premium where the insured has made no claim during the preceding year. It rewards favourable claims experience and discourages minor claims.

Question 24Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

An insurer issues a policy where the premium is calculated on the basis of a declaration of turnover to be submitted periodically, with adjustment at the end of the period. This arrangement is best described as:

  1. A floating policy
  2. A declaration policy Correct answer.
  3. A valued policy
  4. A blanket policy

Explanation

A declaration policy allows the insured to pay a provisional premium based on an estimated turnover and to declare actual figures periodically, with the premium adjusted at expiry. It suits risks whose exposure fluctuates, such as stock or sales turnover.

Question 25Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is a key difference between a warranty and a representation in insurance contract law?

  1. Both have identical legal consequences in Indian insurance law
  2. A warranty is made before the contract, while a representation forms part of it
  3. A representation must always be in writing, while a warranty may be oral
  4. A warranty is a condition forming part of the contract whose breach may entitle the insurer to repudiate, while a representation is a statement made during negotiations Correct answer.

Explanation

A warranty is incorporated into the contract as a condition, and its breach generally allows the insurer to avoid liability. A representation is a statement made during negotiations and, if untrue, may give a remedy only where it amounts to misrepresentation or non-disclosure of a material fact.

Question 26Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Under the Insurance Act, 1938, what is the maximum period for which an insurer may issue a cover note before a formal policy is issued?

  1. 30 days
  2. 90 days
  3. 60 days Correct answer.
  4. 15 days

Explanation

The Insurance Act, 1938, as amended, limits the validity of a cover note to 60 days. If a policy is not issued within that period, the cover note lapses unless renewed in accordance with the Act. This prevents indefinite provisional cover without a formal contract.

Question 27Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In fire insurance, which of the following is a 'consequential loss' that is typically excluded from a standard fire policy?

  1. Loss of rent from a damaged building
  2. Damage to stock caused by fire
  3. Loss of profit due to business interruption Correct answer.
  4. Cost of fire-fighting equipment used at the site

Explanation

A standard fire policy covers direct physical damage to insured property. Consequential losses such as loss of profit or business interruption are not covered unless a separate consequential loss (business interruption) policy is purchased. Damage to stock, fire-fighting costs, and loss of rent are direct or specifically included covers.

Question 28Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes the principle of 'subrogation' in insurance?

  1. The insurer's obligation to pay the full sum insured regardless of the actual loss
  2. The insurer's right to step into the insured's shoes and recover losses from a third party after paying a claim Correct answer.
  3. The right of the insurer to cancel a policy without notice
  4. The insured's right to claim from more than one insurer for the same loss

Explanation

Subrogation is a principle of indemnity that allows the insurer, after indemnifying the insured, to pursue any legal rights the insured has against a third party responsible for the loss. It prevents the insured from recovering twice and ensures the burden falls on the party at fault. It does not allow double recovery or cancellation without notice.

Question 29Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In a marine hull policy, what is the purpose of the 'sue and labour' clause?

  1. To provide cover for the crew's wages during a strike
  2. To exclude liability for losses caused by labour disputes
  3. To reimburse the insured for expenses incurred to avert or minimize a loss covered by the policy Correct answer.
  4. To require the insured to sue the carrier for losses

Explanation

The sue and labour clause obliges the insured to take reasonable steps to avert or minimize a loss and entitles the insured to recover those expenses from the insurer, even if the expenses exceed the sum insured. It is a duty of mitigation that benefits both parties. It does not relate to suing carriers or excluding labour-related losses.

Question 30Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

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

  1. The premium is paid only after a loss occurs
  2. The policy covers property at multiple locations with a single sum insured that floats across them Correct answer.
  3. The sum insured is fixed and applies to a specific location
  4. The policy automatically terminates on the first claim

Explanation

A floating policy provides a single sum insured that applies to property that may be at different locations or vary in value, with the sum insured 'floating' over the covered assets. It is useful for stocks that move between warehouses. It is not a claims-paid or terminating policy.

Question 31Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In insurance, what is the purpose of the 'average' clause in a property policy?

  1. To calculate the average age of the insured property
  2. To average the premium over the policy period
  3. To average the loss among multiple insurers
  4. To reduce the claim payment proportionately if the sum insured is less than the value of the property at risk Correct answer.

Explanation

The average clause applies when the sum insured is less than the actual value of the property (underinsurance). The insurer pays only that proportion of the loss which the sum insured bears to the value at risk, thereby penalizing underinsurance. It does not average premiums or losses among insurers.

Question 32Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes 'reinsurance'?

  1. The cancellation of an insurance policy
  2. The transfer of risk from an insured to an insurer
  3. The sharing of risk among multiple insureds
  4. The transfer of risk from an insurer to another insurer Correct answer.

Explanation

Reinsurance is the transfer of a portion of risk by an insurer (the ceding company) to another insurer (the reinsurer). It helps the ceding insurer manage large exposures and stabilize results. It is not a transfer from insured to insurer, which is direct insurance.

Question 33Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In a life insurance policy, what is the effect of the 'grace period' for premium payment?

  1. The policy lapses immediately if premium is not paid by the due date
  2. The insurer waives the premium permanently
  3. The policy is automatically converted to a paid-up policy
  4. The policy continues in force for a specified period after the due date, during which the premium can be paid without penalty Correct answer.

Explanation

A grace period allows the policyholder to pay the premium within a specified time after the due date (typically 15 or 30 days) without the policy lapsing. If the policyholder dies during the grace period, the claim is payable after deducting the unpaid premium. It does not waive the premium or automatically convert the policy.

Question 34Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is a key feature of 'third-party administration' (TPA) in health insurance?

  1. The TPA bears the risk of all health insurance claims
  2. The TPA underwrites the health insurance policy
  3. The TPA administers claims and provides cashless hospitalization services on behalf of the insurer Correct answer.
  4. The TPA sets the premium rates for health insurance

Explanation

A TPA acts as an intermediary between the insurer and the insured, handling claim processing, network hospital coordination, and cashless facilities. The insurer retains the underwriting risk and sets premiums. The TPA does not underwrite or bear risk.

Question 35Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Under the Motor Vehicles Act, 1988, what is the minimum period for which a motor third-party liability policy must be issued?

  1. Five years
  2. One year Correct answer.
  3. Six months
  4. Three years

Explanation

The Motor Vehicles Act, 1988, requires a third-party liability policy to be issued for a minimum period of one year. This ensures continuous compulsory cover for third-party risks. Longer periods may be available for comprehensive policies but are not the statutory minimum.

Question 36Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In the context of insurance, what does 'moral hazard' refer to?

  1. The risk of loss due to natural disasters
  2. The risk that the insured's behavior may change adversely after obtaining insurance Correct answer.
  3. The risk of legal liability arising from professional negligence
  4. The risk of financial loss due to market fluctuations

Explanation

Moral hazard is the risk that an insured may act less carefully or engage in fraudulent behavior because insurance protects them from the consequences. It is a behavioral risk, distinct from physical hazards or financial risks. Insurers mitigate it through deductibles, exclusions, and claims scrutiny.

Question 37Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is a characteristic of 'coinsurance' in property insurance?

  1. Two or more insurers share the same risk under separate policies, each liable for its share Correct answer.
  2. The insurer coinsures the risk with a reinsurer
  3. The insured and insurer share the premium equally
  4. A single insurer covers the entire risk

Explanation

Coinsurance occurs when two or more insurers each issue a policy covering the same risk, with each insurer liable for a specified proportion of the loss. This differs from reinsurance, where the original insured is not a party to the reinsurance contract. It does not involve premium sharing with the insured.

Question 38Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

What is the primary purpose of 'reinsurance' for an insurer?

  1. To avoid regulatory compliance
  2. To reduce the insurer's exposure to large losses and stabilize financial results Correct answer.
  3. To eliminate the need for underwriting
  4. To increase the insurer's market share

Explanation

Reinsurance protects the ceding insurer against catastrophic or large individual losses, thereby stabilizing underwriting results and protecting solvency. It does not eliminate underwriting or regulatory requirements. Market share growth is not the primary purpose.

Question 39Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In a health insurance policy, what is a 'pre-existing disease'?

  1. A disease covered only under a group policy
  2. A disease that is hereditary in nature
  3. A disease contracted after the policy is issued
  4. A condition diagnosed or treated within a specified period before the policy's inception Correct answer.

Explanation

A pre-existing disease is a condition that the insured had been diagnosed with or treated for within a defined look-back period (often 48 months) before buying the policy. Insurers typically impose a waiting period before covering such conditions. It is not limited to hereditary diseases or post-policy conditions.

Question 40Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes 'utmost good faith' in insurance contracts?

  1. The contract must be in writing
  2. The insurer must always pay claims without investigation
  3. The insured must disclose all material facts truthfully and the insurer must act in good faith Correct answer.
  4. The insured must pay premiums on time

Explanation

Utmost good faith (uberrimae fidei) requires both parties to disclose all material information relevant to the risk. The insured must not conceal facts, and the insurer must deal fairly. It does not mean claims are paid without investigation, nor is it limited to premium payment or written form.

Question 41Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In insurance, what is a 'warranty'?

  1. A statement made during negotiations that is not part of the contract
  2. A guarantee by the insurer to pay all claims
  3. A representation about the past
  4. A promise by the insured that certain conditions will be fulfilled, and breach may allow the insurer to avoid liability Correct answer.

Explanation

A warranty is a contractual term by which the insured promises that a particular condition will be met or a fact is true. Breach of a warranty can entitle the insurer to deny liability, depending on the terms and applicable law. It differs from a representation, which is a pre-contractual statement.

Question 42Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is a function of the Insurance Regulatory and Development Authority of India (IRDAI)?

  1. To underwrite insurance policies directly
  2. To set premium rates for all insurance products
  3. To settle insurance claims
  4. To regulate and promote the orderly growth of the insurance industry Correct answer.

Explanation

IRDAI is the statutory regulator established under the IRDA Act, 1999, to regulate, promote, and ensure orderly growth of the insurance sector. It does not underwrite policies, settle claims, or fix all premium rates; rates are generally determined by insurers subject to regulatory oversight.

Question 43Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In a life insurance policy, what is the 'surrender value'?

  1. The amount payable if the policy is terminated before maturity Correct answer.
  2. The amount of loan available against the policy
  3. The amount of premium paid
  4. The amount payable on maturity

Explanation

Surrender value is the cash value payable to the policyholder if they choose to terminate the policy before maturity. It is typically available after a minimum period and is less than the maturity amount. It is distinct from the maturity benefit, premium paid, or policy loan.

Question 44Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes 'cashless hospitalization' in health insurance?

  1. The insured receives cash in advance for treatment
  2. The hospital provides free treatment to the insured
  3. The insurer directly settles the hospital bill with the network hospital Correct answer.
  4. The insured pays the hospital bill and is reimbursed later

Explanation

Cashless hospitalization allows the insured to receive treatment at a network hospital without paying upfront, as the insurer settles the bill directly with the hospital. It is subject to policy terms and pre-authorization. Reimbursement and free treatment are different concepts.

Question 45Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In marine insurance, what does the term 'particular average' refer to?

  1. The average speed of the vessel
  2. A general contribution by all cargo owners to a loss
  3. A partial loss suffered by a particular interest, borne by its owner or insurer Correct answer.
  4. A loss caused by a particular peril

Explanation

Particular average refers to a partial loss that affects only one particular interest (e.g., cargo or hull) and is not shared by all parties. It is borne by the owner of that interest or their insurer. It contrasts with general average, where all parties contribute.

Question 46Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is a key principle of 'indemnity' in insurance?

  1. The insurer must pay the full sum insured regardless of loss
  2. The insured should be restored to approximately the same financial position as before the loss Correct answer.
  3. The insured should profit from a loss
  4. The insured must pay a penalty for claiming

Explanation

Indemnity means the insured is compensated for the actual loss suffered, no more and no less, restoring them to their pre-loss financial position. It prevents profit from insurance. It does not require payment of the full sum insured or impose penalties for claiming.

Question 47Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In the context of insurance, what is a 'deductible'?

  1. The amount the insured must bear before the insurer pays a claim Correct answer.
  2. A discount on premium
  3. A type of reinsurance
  4. The amount the insurer pays before the insured's share

Explanation

A deductible (or excess) is the amount the insured must pay out of pocket before the insurer covers the remaining loss. It reduces small claims and moral hazard. It is not a premium discount or a reinsurance arrangement.

Question 48Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following best describes 'experience rating' in insurance?

  1. A method of reinsurance
  2. Setting premiums based on the insurer's age
  3. Setting premiums based on the insured's past claims experience Correct answer.
  4. Rating the insured's experience in the industry

Explanation

Experience rating adjusts premiums based on the historical loss experience of the insured or a group. Favorable experience may lead to lower premiums, while poor experience may increase them. It is a rating method, not a reinsurance technique.

Question 49Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

In insurance, what is the purpose of a 'retention' in reinsurance?

  1. The amount of profit retained by the broker
  2. The amount of premium retained by the reinsurer
  3. The amount of risk the ceding insurer keeps for its own account Correct answer.
  4. The amount of claim retained by the insured

Explanation

Retention is the portion of risk that the ceding insurer retains and does not cede to reinsurers. It determines the insurer's net exposure and is a key element in reinsurance planning. It is not about premium, claims, or broker profit.

Question 50Insurance Institute of India Professional Examination – IC-76 subject content (not enumerated in source)

Which of the following is a characteristic of a 'unit-linked insurance plan' (ULIP)?

  1. The policyholder bears the investment risk Correct answer.
  2. The investment risk is borne by the insurer
  3. The returns are guaranteed
  4. The premium is fixed for the entire term

Explanation

In a ULIP, a portion of the premium is invested in market-linked units, and the policyholder bears the investment risk. Returns are not guaranteed and depend on the performance of the underlying investments. The insurer may bear mortality risk but not investment risk.