IC38 Introduction to Insurance MCQs (30 Important Questions with Answers)

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Looking for IC38 Introduction to Insurance MCQs? Here are 30 important practice questions with answers and explanations to help you pass the IC38 exam on your first attempt. Prepare effectively for the IC38 exam with these Introduction to Insurance MCQs. These questions are designed as per exam pattern and will help you strengthen your basics.

IC38 Introduction to Insurance MCQs

IC38 Introduction to Insurance MCQs

Q1. What is the primary purpose of insurance?

A. Investment
B. Savings
C. Risk transfer
D. Tax saving

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Answer: C. Risk transfer
Explanation: Insurance transfers financial risk from the insured to the insurer.

Q2. Insurance works on the principle of:

A. Gambling
B. Speculation
C. Pooling of risk
D. Borrowing

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Answer: C. Pooling of risk
Explanation: Insurance spreads risk across a large number of people.

Q3. Which of the following is NOT a characteristic of insurance?

A. Risk sharing
B. Cooperative device
C. Profit maximization
D. Compensation

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Answer: C. Profit maximization
Explanation: Insurance focuses on risk protection, not profit maximization.

Q4. In insurance, the insured is:

A. The company providing insurance
B. The person covered under the policy
C. The agent
D. The regulator

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Answer: B. The person covered under the policy
Explanation: The insured is the individual whose risk is covered.

Q5. The insurer is:

A. Policyholder
B. Beneficiary
C. Insurance company
D. Surveyor

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Answer: C. Insurance company
Explanation: The insurer is the entity that provides insurance coverage.

Q6. What is premium?

A. Bonus paid to agent
B. Amount paid by insured
C. Claim amount
D. Profit of insurer

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Answer: B. Amount paid by insured
Explanation: Premium is the payment made to obtain insurance coverage.

Q7. Which of the following best defines risk?

A. Certainty of loss
B. Possibility of loss
C. Profit
D. Investment

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Answer: B. Possibility of loss
Explanation: Risk refers to uncertainty or possibility of loss.

Q8. Insurance helps in:

A. Increasing risk
B. Avoiding risk completely
C. Managing risk
D. Creating risk

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Answer: C. Managing risk
Explanation: Insurance helps manage financial consequences of risk.

Q9. Which is an example of life insurance?

A. Motor insurance
B. Fire insurance
C. Term insurance
D. Marine insurance

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Answer: C. Term insurance
Explanation: Term insurance is a type of life insurance policy.

Q10. General insurance includes:

A. Life insurance
B. Health insurance
C. Pension plans
D. Endowment plans

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Answer: B. Health insurance
Explanation: Health insurance is a type of general insurance.

Q11. Insurance contract is a:

A. Void contract
B. Valid contract
C. Illegal contract
D. Unenforceable contract

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Answer: B. Valid contract
Explanation: Insurance is a legally enforceable agreement.

Q12. The person who receives claim amount is called:

A. Insurer
B. Agent
C. Nominee
D. Surveyor

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Answer: C. Nominee
Explanation: Nominee receives benefits after insured’s death.

Q13. What is the term for uncertainty of loss?

A. Profit
B. Risk
C. Premium
D. Claim

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Answer: B. Risk
Explanation: Risk means uncertainty of loss.

Q14. Which of the following is not insurable?

A. Fire risk
B. Death
C. Speculative risk
D. Accident

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Answer: C. Speculative risk
Explanation: Insurance covers pure risks, not speculative risks.

Q15. Insurance is based on:

A. Donation
B. Charity
C. Mutual cooperation
D. Competition

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Answer: C. Mutual cooperation
Explanation: Insurance is a cooperative mechanism.

Q16. Which principle states no profit from insurance?

A. Indemnity
B. Contribution
C. Subrogation
D. Insurable interest

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Answer: A. Indemnity
Explanation: Indemnity ensures compensation equals actual loss.

Q17. What is claim?

A. Premium payment
B. Request for compensation
C. Bonus
D. Tax

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Answer: B. Request for compensation
Explanation: Claim is a request to insurer for loss payment.

Q18. Insurance policy is:

A. Agreement document
B. Receipt
C. Certificate
D. Notice

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Answer: A. Agreement document
Explanation: Policy is written proof of insurance contract.

Q19. Which is NOT a function of insurance?

A. Risk sharing
B. Loss prevention
C. Profit guarantee
D. Financial protection

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Answer: C. Profit guarantee
Explanation: Insurance does not guarantee profit.

Q20. Who regulates insurance in India?

A. RBI
B. SEBI
C. IRDAI
D. NABARD

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Answer: C. IRDAI
Explanation: IRDAI regulates insurance sector in India.

Q21. Which type of risk is insurable?

A. Pure risk
B. Speculative risk
C. Business risk
D. Market risk

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Answer: A. Pure risk
Explanation: Only pure risks are insurable.

Q22. Insurance provides:

A. Profit
B. Compensation
C. Interest
D. Dividend

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Answer: B. Compensation
Explanation: Insurance compensates financial losses.

Q23. The pooling of funds is done to:

A. Increase profit
B. Pay claims
C. Avoid taxes
D. Invest

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Answer: B. Pay claims
Explanation: Premiums are pooled to pay claims.

Q24. Which of the following is a benefit of insurance?

A. Uncertainty
B. Loss
C. Financial security
D. Risk increase

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Answer: C. Financial security
Explanation: Insurance ensures financial protection.

Q25. Which is a non-life insurance?

A. Term plan
B. Endowment plan
C. Motor insurance
D. Whole life plan

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Answer: C. Motor insurance
Explanation: Motor insurance is general insurance.

Q26. Insurance helps individuals to:

A. Avoid all risks
B. Bear losses alone
C. Share losses
D. Increase risks

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Answer: C. Share losses
Explanation: Losses are shared among policyholders.

Q27. Which document contains terms and conditions?

A. Policy document
B. Receipt
C. Proposal form
D. Claim form

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Answer: A. Policy document
Explanation: Policy document includes all terms.

Q28. Premium depends on:

A. Risk level
B. Income only
C. Age only
D. Location only

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Answer: A. Risk level
Explanation: Higher risk leads to higher premium.

Q29. Insurance encourages:

A. Carelessness
B. Savings
C. Risk-taking
D. Gambling

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Answer: B. Savings
Explanation: Insurance promotes disciplined savings.

Q30. The concept of insurance is based on:

A. Individual loss
B. Collective loss sharing
C. Profit making
D. Investment

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Answer: B. Collective loss sharing
Explanation: Insurance works on sharing losses collectively.

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