Question 1

What is the minimum period after which a life insurance policy can be revived if it has lapsed due to non-payment of premium?

Accepted Answer

Source: Insurance Act 1938, Section 45 and IRDAI Master Circular on Life Insurance Policies. A lapsed policy can be revived within 5 years from the date of lapse, subject to the policyholder's payment of all outstanding premiums with interest and satisfying the insurer's underwriting requirements. Revival after 5 years is not permitted as a matter of right.

Question 2

Under the Insurance Act 1938, which section governs the nomination of a person to receive life insurance policy proceeds?

Accepted Answer

Source: Insurance Act 1938, Section 39. Section 39 empowers a policyholder to nominate one or more persons to receive policy proceeds in the event of the policyholder's death. The nomination can be made at the time of proposal or any time before maturity, and can be changed or cancelled by the policyholder.

Question 3

Which of the following best describes the 'Contestability Period' in a life insurance policy as per the Insurance Act 1938?

Accepted Answer

Source: Insurance Act 1938, Section 45. The Contestability Period is a 2-year period from the date of issuance (or revival) of the policy during which the insurer may contest the policy on the grounds of misstatement, omission, concealment, or fraud in the proposal. After 2 years, the insurer cannot contest the policy except on grounds of fraud. This period protects both the insurer's interests and ensures finality for the policyholder.

Question 4

Under IRDAI regulations, after how many years of continuous premium payment does a life insurance policy acquire a Surrender Value?

Accepted Answer

Source: IRDAI Master Circular on Life Insurance Policies and Insurance Act 1938, Section 45. A life insurance policy acquires a Surrender Value after 3 full years of continuous premium payment (or 3 policy anniversaries). Before 3 years, the policy has no surrender value, though the policyholder may be entitled to a Paid-Up Value if at least 2 years of premiums have been paid.

Question 5

Which of the following is a key feature that distinguishes Term Insurance from Whole Life Insurance?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products and Insurance Act 1938. Term Insurance provides coverage for a fixed period (e.g., 10, 20, or 30 years) and pays the Sum Assured only if death occurs during the term. Whole Life Insurance provides lifelong coverage and includes a maturity benefit payable at age 100 or upon earlier death. Term Insurance has no maturity or surrender value; Whole Life has both.

Question 6

In life insurance terminology, 'Sum Assured' refers to which of the following?

Accepted Answer

Source: Insurance Act 1938 and IRDAI Glossary of Insurance Terms. Sum Assured is the fixed amount of money that the insurer agrees to pay to the policyholder or nominee upon the occurrence of the insured event (death, maturity, or disability as per policy terms). It is the core benefit amount and is determined at the time of policy issuance.

Question 7

Under IRDAI regulations, what is the minimum period after which a life insurance policy can be revived after lapse, without medical underwriting in most cases?

Accepted Answer

Source: IRDAI Master Circular on Life Insurance Policies (2024) and Insurance Act 1938, Section 45. A lapsed policy can be revived within a specified period (typically 5 years from the date of lapse) by paying all outstanding premiums with interest, without requiring fresh medical underwriting in most cases. Revival beyond this period may require medical examination. The exact revival period and conditions are specified in the policy document and IRDAI guidelines.

Question 8

In life insurance terminology, 'Surrender Value' refers to which of the following?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products and Insurance Act 1938, Section 41. Surrender Value is the amount payable to the policyholder when a policy is voluntarily terminated before maturity. It is calculated as a percentage of premiums paid (after deducting charges and expenses) and is guaranteed only after the policy has been in force for a specified period (typically 3 years for most policies). This is distinct from Paid-Up Value, which applies when premiums cease but the policy continues with reduced sum assured.

Question 9

Which of the following is NOT a characteristic of Term Insurance as defined in life insurance terminology?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products and Insurance Act 1938. Term Insurance is a pure protection product with the following characteristics: (1) Coverage for a fixed term (e.g., 10, 20, 30 years); (2) High sum assured relative to premium; (3) No maturity benefit or cash value if the insured survives the term; (4) Lowest premium among life insurance products. A maturity benefit payable on survival is NOT a feature of term insurance — this feature is present in endowment and money-back policies.

Question 10

In life insurance, 'Paid-Up Value' differs from 'Surrender Value' in which of the following ways?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products and Insurance Act 1938, Section 41. Paid-Up Value is the reduced sum assured that continues to be payable on death or maturity when a policyholder stops paying premiums but does not surrender the policy. The policy remains in force with a proportionally reduced benefit. Surrender Value, by contrast, is the cash amount payable when the policy is voluntarily terminated. The key difference: Paid-Up Value keeps the policy active (with reduced benefit), while Surrender Value terminates the policy and returns cash.

Question 11

Under the Insurance Act 1938, Section 45 provides that an insurer cannot repudiate a claim on the ground of misstatement or non-disclosure after a specified period. What is this period?

Accepted Answer

Source: Insurance Act 1938, Section 45. Section 45 stipulates that an insurer cannot repudiate a claim on the ground of misstatement, concealment, or non-disclosure after 3 years from the date of commencement of the policy (or from the date of revival, if the policy was revived). This is a critical consumer protection provision that limits the insurer's right to deny claims based on information gaps. However, the insurer can still repudiate claims for fraud at any time.

Question 12

Under the Insurance Act 1938, which section governs the nomination of a beneficiary in a life insurance policy, and what is the key limitation on when a nomination can be changed?

Accepted Answer

Source: Insurance Act 1938, Section 39. Section 39 empowers the policyholder to nominate a person to receive policy proceeds. A nomination can be changed at any time before the policy matures or the claim is admitted. Once a claim is admitted or the policy matures, the nomination cannot be altered. This is a fundamental statutory right that protects both the policyholder's intent and the nominee's security.

Question 13

Under the Insurance Act 1938, what is the statutory definition of 'sum assured' in a life insurance policy, and how does it differ from the 'maturity benefit' in an endowment policy?

Accepted Answer

Source: Insurance Act 1938 and IRDAI Life Insurance Product Guidelines. The 'sum assured' is the guaranteed amount payable by the insurer upon the death of the policyholder during the policy term, as stated in the policy document. The 'maturity benefit' in an endowment policy is the sum assured plus any bonuses (simple or compound) accumulated during the policy term, payable if the policyholder survives to the end of the policy term. Thus, maturity benefit is always greater than or equal to the sum assured, while sum assured is the base guaranteed amount. In a term insurance policy, only the sum assured is payable (no maturity benefit).

Question 14

Under IRDAI regulations, what is the minimum lock-in period for a Unit-Linked Insurance Plan (ULIP) before the policyholder can surrender the policy without penalty, and what is the statutory basis for this requirement?

Accepted Answer

Source: IRDAI (Unit Linked Insurance Products) Regulations, 2019. The minimum lock-in period for ULIPs is 5 years from the date of policy issuance. During this period, the policyholder cannot surrender the policy without incurring surrender charges. After 5 years, the policyholder can surrender the policy and receive the surrender value without any penalty. This lock-in period is designed to protect the long-term investment nature of ULIPs and to prevent short-term market volatility from affecting the policyholder's decision.

Question 15

In the context of life insurance policy assignment under Section 38 of the Insurance Act 1938, which of the following statements is INCORRECT regarding the rights transferred to the assignee?

Accepted Answer

Source: Insurance Act 1938, Section 38. Assignment is the transfer of all rights, title, and interest in a life insurance policy from the policyholder (assignor) to another person (assignee). Upon valid assignment, the assignee acquires full ownership of the policy and all associated rights, including the right to surrender, take loans, and receive maturity/claim proceeds. The assignee does NOT acquire the right to nominate a beneficiary — nomination rights remain with the original policyholder unless explicitly transferred through a separate nomination deed. Assignment is irrevocable once communicated to the insurer.

Question 16

Under Section 45 of the Insurance Act 1938, within what period can an insurer repudiate a life insurance claim on the grounds of misstatement or non-disclosure, and what is the statutory exception to this period?

Accepted Answer

Source: Insurance Act 1938, Section 45. An insurer can repudiate a claim within 3 years from the date of issuance of the policy if the policyholder made any misstatement or non-disclosure of material facts. However, if the policy has been in force for 3 years or more, the insurer cannot repudiate the claim except on grounds of fraud. This is a critical consumer protection provision that balances insurer verification rights with policyholder security.

Question 17

Under IRDAI regulations, what is the statutory definition of 'paid-up value' in a life insurance policy, and under what circumstances can a policyholder access this value?

Accepted Answer

Source: IRDAI Life Insurance Product Guidelines and Insurance Act 1938, Section 113. The 'paid-up value' is the reduced sum assured that a policyholder becomes entitled to if they stop paying premiums after a minimum period (usually 3 years for traditional policies, 5 years for ULIPs) but do not formally surrender the policy. The policy continues in force with the paid-up sum assured, and the policyholder can revive it by paying outstanding premiums with interest. The paid-up value is calculated as a proportion of the original sum assured based on the number of premiums paid. Unlike surrender value, paid-up value does not require the policyholder to terminate the policy; the policy remains in force with reduced benefits.

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