Question 1

Under the Insurance Act 1938, a life insurance policy can be revived within how many years from the date of lapse if the policyholder pays all outstanding premiums with interest?

Accepted Answer

Source: Insurance Act 1938, Section 45 and IRDAI Master Circular on Policy Lapse and Revival (2024). A lapsed policy can be revived within 3 years from the date of lapse by paying all outstanding premiums along with interest at the rate prescribed by IRDAI (currently 12% per annum or as notified). Revival after 3 years requires medical underwriting and fresh approval. This is a statutory protection for policyholders.

Question 2

Which type of life insurance policy provides both protection and maturity benefit, with guaranteed returns if the policyholder survives the policy term?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Product Classification (2024). Endowment insurance is a hybrid product that combines death protection with a guaranteed maturity benefit. If the policyholder dies during the term, the sum assured is paid to the nominee. If the policyholder survives, the sum assured plus bonuses (if any) are paid at maturity. This distinguishes it from Term (death only) and Whole Life (no fixed maturity).

Question 3

Under IRDAI regulations, the surrender value of a life insurance policy becomes payable after a minimum of how many years of continuous premium payment?

Accepted Answer

Source: IRDAI Master Circular on Life Insurance Policies (2024) and Insurance Act 1938, Section 45. Surrender value is payable only after the policy has been in force for a minimum of 3 years with all premiums paid on time. This is a statutory protection to prevent early policy lapses and ensure policy stability. Policies lapsed before 3 years have no surrender value entitlement.

Question 4

Which of the following is NOT a characteristic feature of Term Insurance?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products (2024) and Insurance Act 1938. Term insurance is pure risk protection with no maturity benefit or cash value. It provides a fixed sum assured payable only on death during the policy term. Key characteristics: (1) lowest premium among life products, (2) no survival benefit, (3) no surrender value, (4) no loan facility. The correct answer identifies a feature that belongs to Endowment or Whole Life policies, not Term Insurance.

Question 5

Which of the following is a key feature of Money-back Life Insurance policies?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products (2024). Money-back insurance is a variant of Endowment insurance where the insurer returns a portion of the sum assured at regular intervals (typically every 5 or 10 years) during the policy term, while maintaining full death protection. The remaining sum assured plus bonuses are paid at maturity. This distinguishes it from pure Endowment (which pays only at maturity) and provides periodic liquidity to policyholders.

Question 6

An endowment insurance policy differs from a whole life insurance policy in which of the following ways?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products (2024) and Insurance Act 1938. Endowment insurance is a limited-period policy (e.g., 10, 15, 20 years) that provides both death protection and a guaranteed maturity benefit. If the insured dies during the term, the sum assured is paid. If the insured survives to maturity, the sum assured plus bonuses (if any) are paid. Whole life insurance provides lifelong protection with no fixed maturity date. The policy matures only on the death of the insured or at a specified advanced age (e.g., 100 years). Whole life policies may include a surrender value but typically do not have a maturity benefit in the traditional sense.

Question 7

Which of the following statements correctly describes the surrender value of a life insurance policy under the Insurance Act 1938?

Accepted Answer

Source: Insurance Act 1938, Section 45. Surrender value is the amount payable to the policyholder if the policy is surrendered before maturity. Section 45 specifies that a policy acquires a surrender value after the policyholder has paid premiums for at least 3 consecutive years (or as per the policy terms, whichever is later). The surrender value is calculated as a percentage of the premiums paid, minus any outstanding loans or charges. The exact percentage is determined by the insurer's surrender value tables, which must comply with IRDAI guidelines. Surrender value is not available for term insurance policies because they have no cash value.

Question 8

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?

Accepted Answer

Source: IRDAI Master Circular on Unit Linked Insurance Plans (2024). ULIPs are investment-linked life insurance products where premiums are invested in market-linked funds. IRDAI regulations mandate a minimum lock-in period of 5 years. During the first 5 years, if the policyholder surrenders the policy, a surrender charge is applied. After 5 years, the policyholder can surrender the policy at the Net Asset Value (NAV) without surrender charges. This lock-in period protects the insurer and encourages long-term investment discipline.

Question 9

In a term insurance policy, what is the primary characteristic that distinguishes it from whole life insurance?

Accepted Answer

Source: IRDAI Guidelines on Life Insurance Products (2024). Term insurance provides life cover for a specified period (e.g., 10, 20, 30 years). If the insured dies during the term, the sum assured is paid to the beneficiary. If the insured survives the term, no benefit is payable — there is no maturity value or survival benefit. Whole life insurance, by contrast, provides lifelong cover and includes a maturity benefit or surrender value. Term insurance is pure protection with no savings component.

Question 10

Under the Insurance Act 1938, Section 45 also governs the revival of a lapsed life insurance policy. What is the maximum period within which a policyholder can revive a lapsed policy?

Accepted Answer

Source: Insurance Act 1938, Section 45, and IRDAI Guidelines on Policy Lapse and Revival (2024). A policy lapses when the policyholder fails to pay the premium within the grace period (typically 30 days for monthly premiums, 45 days for quarterly/half-yearly, and 60 days for annual premiums). Section 45 provides the right to revive a lapsed policy within a specified period. IRDAI regulations mandate that a policy can be revived within 5 years from the date of lapse, subject to payment of all outstanding premiums with interest and proof of insurability (medical examination if required). After 5 years, the policy cannot be revived and is terminated.

Question 11

A policyholder of a 20-year endowment policy surrenders the policy in the 8th year. Under IRDAI regulations, what is the minimum guaranteed surrender value that must be paid?

Accepted Answer

Source: IRDAI Life Insurance Surrender Value Regulations (as per Insurance Act 1938 Section 45 and IRDAI Master Circular 2024). For a policy that has completed at least 3 full years of premium payment, the surrender value is calculated as a percentage of the reserve value. For an 8-year-old policy (well beyond the 3-year threshold), the minimum guaranteed surrender value is typically 30% of the reserve value or the paid-up value, whichever is higher. However, the exact formula depends on the policy type and insurer's published surrender value tables. For endowment policies specifically, the minimum is not less than 30% of the reserve after 3 years.

Question 12

A ULIP (Unit Linked Insurance Plan) differs from a traditional Endowment policy in which of the following key aspects?

Accepted Answer

Source: IRDAI ULIP Regulations and Life Insurance Product Guidelines. A ULIP is a hybrid product that combines insurance protection with investment exposure. The policyholder's premium is divided into two parts: one for insurance coverage and one for investment in market-linked funds (equity, debt, or balanced). The maturity benefit and death benefit depend on the performance of the underlying fund units. In contrast, a traditional Endowment policy offers guaranteed returns (sum assured plus bonuses) that are not directly linked to market performance. ULIPs carry market risk; Endowments offer guaranteed benefits.

Question 13

Under the Insurance Act 1938, Section 45 permits an insurer to repudiate a life insurance claim within a specific period if the policyholder made material misstatements in the proposal. What is this period?

Accepted Answer

Source: Insurance Act 1938, Section 45. Section 45 states that an insurer cannot repudiate a life insurance policy on the ground of misstatement, omission, concealment, or fraud in the proposal after 3 years from the date of issuance of the policy, except in cases of fraud. This 3-year contestation period is a statutory protection for policyholders — after 3 years, the policy becomes incontestable regardless of misstatements in the proposal.

Question 14

Which of the following statements correctly distinguishes between a Money-back policy and a traditional Endowment policy in terms of benefit structure?

Accepted Answer

Source: IRDAI Life Insurance Product Guidelines and Insurance Act 1938. A Money-back policy returns a portion of the sum assured at regular intervals (typically every 5 or 10 years) during the policy term, with the balance plus bonuses paid at maturity or on death. An Endowment policy pays the full sum assured plus bonuses only at maturity or on death — no interim payments are made. This is the key structural difference: Money-back = periodic returns + final benefit; Endowment = final benefit only.

Question 15

Under the Insurance Act 1938, which section governs the nomination of a beneficiary in a life insurance policy, and what is the key restriction on changing a nomination?

Accepted Answer

Source: Insurance Act 1938, Section 39. Section 39 permits a 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 statutory right independent of assignment.

Question 16

Under IRDAI regulations, what is the minimum policy term for a Term Insurance plan, and what is the key characteristic that distinguishes it from other life insurance products?

Accepted Answer

Source: IRDAI Life Insurance Product Guidelines and Insurance Act 1938. Term Insurance is pure protection with no maturity or survival benefit. The minimum policy term is typically 5 years, though most term plans range from 10 to 40 years. The key characteristic is that if the policyholder survives the entire term, no benefit is paid — the policy simply lapses. If the policyholder dies during the term, the full sum assured is paid to the nominee. This 'pure protection, no savings' structure is what distinguishes Term Insurance from Endowment, Money-back, and other savings-linked products.

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