Question 1

Which of the following is a key function of a Third Party Administrator (TPA) in Health Insurance?

Accepted Answer

Source: IRDAI Health Insurance Regulations, 2016, Section 64D. Explanation: A TPA acts as an intermediary between the insurer and the insured to facilitate claims processing, cashless hospitalization, and policy servicing. The TPA does not underwrite policies or set premiums; these remain the insurer's responsibility.

Question 2

In Health Insurance, a 'floater policy' is characterized by:

Accepted Answer

Source: IRDAI Health Insurance Regulations, 2016 (amended 2023). Explanation: A floater policy is a single health insurance policy that covers multiple family members under one sum insured, which can be used by any member as needed. This is distinct from individual policies where each member has a separate sum insured.

Question 3

Which of the following best describes the principle of 'indemnity' in Fire Insurance?

Accepted Answer

Source: Insurance Act, 1938, Section 74 (Indemnity). Explanation: The principle of indemnity ensures that the insured is restored to the same financial position as before the loss, but not to a position of profit. The claim settlement cannot exceed the actual loss suffered or the sum insured, whichever is lower.

Question 4

In Marine Insurance, a 'time policy' is best defined as a policy that covers:

Accepted Answer

Source: Marine Insurance Act, 1963, Section 76. Explanation: A time policy covers the insured vessel for a specified period (duration-based), regardless of the voyage undertaken. This is distinct from a voyage policy, which covers a specific journey from one port to another.

Question 5

Under the Motor Vehicles Act, 1988, which type of motor insurance coverage is legally mandatory for all vehicle owners in India?

Accepted Answer

Source: Motor Vehicles Act, 1988, Section 147. Explanation: Third-party liability insurance is the only compulsory motor insurance coverage mandated by law. It covers bodily injury and property damage caused to third parties. Own Damage coverage is optional and protects the insured's own vehicle.

Question 6

Crop Insurance in India is primarily designed to protect farmers against:

Accepted Answer

Source: Pradhan Mantri Fasal Bima Yojana (PMFBY) Guidelines, 2016 (amended 2023). Explanation: Crop insurance covers losses due to natural calamities such as drought, flood, hail, pest attacks, and disease. It is a social security scheme administered by general insurers to protect farmers' income from crop failure.

Question 7

In Fire Insurance, the concept of 'reinstatement value' refers to:

Accepted Answer

Source: IRDAI Fire Insurance Guidelines and Insurance Act 1938, Section 74. Explanation: Reinstatement value is the cost to rebuild or replace the damaged property to its original condition using current market prices and materials. It is higher than the depreciated (book) value because it reflects replacement at today's costs, not historical cost minus depreciation. Fire policies often use reinstatement value to determine the claim settlement amount.

Question 8

A Health Insurance 'floater policy' is characterized by:

Accepted Answer

Source: IRDAI Health Insurance Guidelines (2016, as amended). Explanation: A floater policy is a single health insurance policy that covers multiple family members under one sum insured. The sum insured is shared among all covered members and can be utilized by any family member during the policy period. This is distinct from individual policies where each member has a separate sum insured.

Question 9

Under the principle of indemnity in Fire Insurance, the insurer's obligation is to:

Accepted Answer

Source: Insurance Act 1938, Section 74 (Principle of Indemnity). Explanation: The principle of indemnity requires the insurer to restore the insured to the same financial position they were in before the loss occurred — no more, no less. The insured cannot profit from insurance. In Fire Insurance, indemnity is applied through the reinstatement value method or cash settlement at the lower of claim amount or policy sum insured.

Question 10

In Marine Insurance, a 'time policy' differs from a 'voyage policy' in that a time policy covers:

Accepted Answer

Source: IRDAI Marine Insurance Guidelines and Insurance Act 1938, Section 76. Explanation: A time policy covers the insured vessel for a fixed period (e.g., 12 months), regardless of the number of voyages undertaken during that period. A voyage policy, by contrast, covers a specific voyage from one port to another. Time policies are used for continuous trading vessels; voyage policies for single-trip shipments.

Question 11

Under the Motor Vehicles Act, 1988, which type of motor insurance cover is mandatory for all vehicle owners in India?

Accepted Answer

Source: Motor Vehicles Act, 1988, Section 147. Explanation: Third-party liability insurance is the only compulsory cover mandated by law for all motor vehicles. Own Damage cover is optional. Section 147 makes it illegal to use a motor vehicle on public roads without valid third-party insurance. This protects third parties (other persons, vehicles, property) from financial loss caused by the insured vehicle.

Question 12

A Third Party Administrator (TPA) in Health Insurance is responsible for:

Accepted Answer

Source: IRDAI Health Insurance Guidelines and Insurance Regulatory and Development Authority Act, 1999. Explanation: A TPA acts as an intermediary between the insurer and the insured. The TPA's primary responsibilities include processing and settling health insurance claims, managing network hospitals, verifying claim documents, and coordinating cashless treatment. The TPA does not underwrite policies or set premiums — those are the insurer's functions.

Question 13

Under the Insurance Act, 1938, the principle of indemnity in fire insurance is subject to which key limitation?

Accepted Answer

Source: Insurance Act, 1938, Section 66. Explanation: The principle of indemnity requires that the insured cannot recover more than the actual loss suffered. In fire insurance, indemnity is limited by the reinstatement value (or replacement cost) of the property, not its market value or agreed value if higher. Section 66 states that the measure of indemnity in fire insurance is the reinstatement value of the property at the time of loss. The insured cannot profit from insurance; they can only be restored to their pre-loss financial position. This prevents moral hazard and over-insurance.

Question 14

Under IRDAI regulations, a Third Party Administrator (TPA) in health insurance is responsible for which primary function?

Accepted Answer

Source: IRDAI Health Insurance Regulations, 2016, Section 3 (Definitions) and IRDAI Circular on TPA Operations. Explanation: A Third Party Administrator (TPA) is an entity appointed by the health insurer to manage claim processing, cashless hospitalization, and customer service on behalf of the insurer. The TPA acts as an intermediary between the insured, the insurer, and the healthcare provider. Key functions include: (i) processing and settling claims, (ii) managing cashless facilities at network hospitals, (iii) handling customer grievances, and (iv) maintaining records. The TPA does not underwrite risk; it is purely an operational and administrative entity. The insurer remains liable for all claims and regulatory compliance.

Question 15

A health insurance floater policy differs from individual health policies in that a floater policy covers:

Accepted Answer

Source: IRDAI Health Insurance Regulations, 2016 (amended 2024). Explanation: A health insurance floater policy is a single policy that covers multiple members of a family (or group) under one sum insured, which can be utilized by any member. In contrast, individual policies provide separate sum insured to each person. A floater policy is more economical because the sum insured is shared and can be used flexibly by any family member. For example, a ₹5 lakh floater covers the entire family; if one member uses ₹2 lakh, the remaining ₹3 lakh is available for others. Individual policies provide ₹5 lakh to each person separately.

Question 16

In marine insurance, a 'valued policy' differs from an 'unvalued policy' in which fundamental aspect?

Accepted Answer

Source: Marine Insurance Act, 1963, Sections 27–28. Explanation: In a valued policy, the insured value of the subject matter is agreed upon and stated in the policy at inception. In an unvalued (open) policy, no value is pre-agreed; the value is determined at the time of loss based on evidence. A valued policy provides certainty and avoids disputes over valuation at claim time. Section 27 defines a valued policy; Section 28 defines an unvalued policy. This distinction is critical because it affects claim settlement methodology and the insurable interest calculation.

Question 17

Under the Motor Vehicles Act, 1988, which category of motor insurance coverage is mandatory for all vehicle owners in India?

Accepted Answer

Source: Motor Vehicles Act, 1988, Section 147. Explanation: Third-party liability insurance is the only compulsory motor insurance coverage mandated by law. Own Damage coverage is optional. Section 147 explicitly requires every motor vehicle to be insured against liability to third parties. This is a statutory minimum to protect third parties (pedestrians, other vehicle occupants, property owners) from financial loss caused by the insured vehicle.

Question 18

In crop insurance under the Pradhan Mantri Fasal Bima Yojana (PMFBY), the maximum loss coverage is determined by which factor?

Accepted Answer

Source: PMFBY Guidelines (Ministry of Agriculture & Farmers Welfare, 2023) and IRDAI Crop Insurance Regulations. Explanation: Under PMFBY, crop insurance coverage is determined by the Declared Value of the crop (also called Sum Insured), which is calculated based on the average yield of the crop in the district and the Minimum Support Price (MSP) or market price. The coverage limit is typically 70–90% of the Declared Value, depending on the crop and season. The insurer covers losses due to yield decline caused by natural calamities (drought, flood, hail, pest) or post-harvest losses. The maximum claim payout is capped at the Declared Value or the actual loss, whichever is lower.

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Types of General Insurance — Practice Questions

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