The IC 02 Mock Test on this page gives you 100 MCQs mapped directly to the Insurance Institute of India Licentiate syllabus for Practice of Life Insurance. You need 60 correct answers to pass. No negative marking applies. Attempt all 100 questions. Start your free test right now and measure your readiness today.
IC 02 Exam Pattern – Everything You Need to Know
The IC 02 exam tests your knowledge of life insurance practice across 100 multiple choice questions in 2 hours. You must score at least 60 out of 100 (60%) to pass. No marks are deducted for wrong answers, so attempt every single question.
| Parameter | IC 02 Exam Detail |
|---|---|
| Full Paper Name | Practice of Life Insurance |
| Exam Code | IC 02 (also written IC02) |
| Conducted By | Insurance Institute of India (III) |
| Exam Level | Licentiate Examination |
| Total Questions | 100 Multiple Choice Questions (MCQs) |
| Exam Duration | 2 hours (120 minutes) |
| Passing Marks | 60 out of 100 |
| Negative Marking | None |
| Credit Points on Passing | 20 credit points |
| Exam Mode | Online (Computer-Based Test) |
| Question Types | Concept-based, case study, calculation-based |
| Age Calculation Methods Tested | Age Next Birthday (ANB) and Age Last Birthday (ALB) |
IC 02 Syllabus – All 11 Chapters This Mock Test Covers
This IC 02 Practice of Life Insurance mock test covers all 11 chapters from the Insurance Institute of India prescribed workbook. No chapter can be skipped because each carries direct questions in the actual III licentiate exam.
Chapter 1 – Life Insurance Industry in India
Questions from this chapter cover insurance company operations, agent appointments, bancassurance channels, the impact of the 1999 liberalization opening up to private insurers, and Postal Life Insurance (PLI) as a public sector scheme. The role of IRDAI in regulating the sector also features here.
Chapter 2 – Life Insurance Plans and Products
This is the highest-weightage chapter in the IC 02 exam. Questions test your ability to identify and distinguish between 8 plan types:
- Term insurance plans – pure protection, no maturity benefit, lowest premium
- Whole life plans – coverage for the entire lifetime of the insured
- Endowment insurance plans – death benefit plus maturity benefit on survival
- Money back plans – survival benefit payments at periodic intervals during the policy term
- Child insurance plans – built around the child’s education or marriage milestone
- Joint life plans – cover 2 lives under 1 policy, first death triggers the payout
- Keyman insurance – policy taken by a business on the life of a key employee to cover financial loss on their death
- MWP Act policy – policy taken under the Married Women’s Property Act to protect benefits exclusively for the wife and children
Chapter 3 – Premium Calculation and Bonus Types
Calculation-based questions on this chapter are high-frequency in the IC 02 exam. You must know the premium components and all bonus types:
- Net premium – mortality cost only, based on mortality tables
- Gross premium – net premium plus expense loading plus contingency loading
- Mode rebate – annual mode gets the highest rebate, monthly mode gets none
- Sum assured rebate – higher sum assured attracts a lower per-unit premium
- Reversionary bonus – declared annually as a percentage of sum assured, accrues over the policy term
- Terminal bonus – paid only at maturity or on death, not during the policy term
- Interim bonus – paid when a claim arises between 2 bonus declaration dates
- Guaranteed addition – a fixed amount added per year for specific plan types
Chapter 4 – Policy Document, Conditions, and Non-Forfeiture Options
This chapter covers the legal structure of the life insurance policy bond and the rights policyholders hold when they cannot continue premium payments:
- Free look period – 15 days from receipt of policy bond (30 days for policies sold through distance marketing) to return the policy for a full refund
- Grace period – 30 days for annual, semi-annual, and quarterly modes; 15 days for monthly mode
- Paid-up value – reduced sum assured that continues in force when premium payment stops after the policy acquires surrender value
- Surrender value – cash value payable when the policyholder exits before maturity; minimum 3 years of premium payment required in traditional plans
- Guaranteed surrender value (GSV) – minimum amount legally guaranteed to the policyholder on surrender
- Extended term insurance – the paid-up value is used to buy a term cover for the full original sum assured for a shorter period
- Free cover limit – the maximum amount up to which an insurance company provides cover without requiring a medical examination
Chapter 5 – Riders and Add-on Benefits
Rider questions in IC 02 focus on 5 core add-on benefits attached to the base life insurance policy:
- Accidental death benefit (ADB) rider – additional sum assured paid if death is caused by an accident
- Accidental disability benefit rider – provides income or lump sum if the insured becomes permanently disabled due to an accident
- Critical illness rider – lump sum payment on first diagnosis of specified illnesses such as cancer, heart attack, or kidney failure
- Waiver of premium rider – future premiums are waived if the policyholder becomes permanently disabled
- Income benefit rider – provides a monthly income to the family after the insured’s death for a specified period
Chapter 6 – Unit-Linked Insurance Plans (ULIPs)
ULIP questions in the IC 02 mock test are concept-heavy and cover the following areas that frequently appear in the actual exam:
- ULIP lock-in period – 5 years as mandated by IRDAI; partial withdrawal allowed only after the 5-year lock-in
- Net Asset Value (NAV) – the per-unit value of the ULIP fund, calculated daily
- Bid-offer spread – eliminated by IRDAI regulations; earlier used as a charge in ULIPs
- ULIP charges – premium allocation charge, policy administration charge, fund management charge, mortality charge, and surrender charge
- Fund options – equity fund, balanced fund, debt fund, liquid fund; policyholder bears the investment risk
- Fund switching – movement of accumulated units from one fund to another; a limited number of free switches are allowed annually
- Death benefit in ULIP – higher of sum assured or fund value or 105% of all premiums paid
- Surrender value in ULIP – becomes payable after 5 years of policy operation (after the lock-in period)
Chapter 7 – Nomination and Assignment
These are among the most frequently confused topics in the IC 02 exam. Know the legal distinctions exactly:
- Nomination (Section 39, Insurance Act 1938) – the policyholder names a person to receive the policy proceeds on death; does not transfer ownership; the nominee holds the amount as a trustee for the legal heirs
- Assignment (Section 38, Insurance Act 1938) – transfers the rights, title, and interest in the policy to the assignee; cancels the existing nomination automatically
- Absolute assignment – unconditional transfer of all rights to the assignee; used in cases like home loan security
- Conditional assignment – rights revert to the policyholder on fulfillment of a condition, such as repayment of a loan
- MWP Act policy nomination – only the wife or children named at inception can benefit; no loan can be taken on an MWP Act policy unless trustees are authorized
Chapter 8 – Annuity and Pension Plans
Annuity questions in the IC 02 licentiate exam test 5 core concepts:
- Immediate annuity – pension payments start immediately after a lump sum investment
- Deferred annuity – premiums are paid during an accumulation phase; pension starts at a future vesting date
- Annuitising – the act of instructing the insurance company to begin periodic pension payments
- Commutation – the option to take up to one-third of the corpus as a lump sum at vesting; the rest must be used to buy an annuity
- Joint life annuity with last survivor – full or reduced pension continues to the spouse after the annuitant’s death
- Deferment period – the years between policy inception and the vesting date when no pension is paid
Chapter 9 – Group Insurance and Employee Benefit Schemes
This chapter covers 5 employer-sponsored schemes that appear repeatedly in the IC 02 exam:
- EDLI (Employees Deposit Linked Insurance) – life insurance benefit linked to the EPF account of employees under the Employees’ Provident Funds Act
- Gratuity – a statutory terminal benefit payable to employees who complete at least 5 years of continuous service; payable on resignation, retirement, or death
- Leave encashment – the cash equivalent of accumulated but unused leave paid to an employee; group insurance schemes cover this liability for employers
- Superannuation – employer-funded pension scheme for employees; contributions invested through a group superannuation trust
- Group term insurance – employer pays premium for a term cover over all eligible employees; the employer can claim premium as a business expense
- Free cover limit in group insurance – the maximum cover amount per member up to which no individual evidence of insurability is required
Chapter 10 – Underwriting Life Insurance
Underwriting questions test your understanding of how insurance companies assess and classify risk before issuing a policy:
- Adverse selection – the tendency of high-risk individuals to seek more insurance coverage than low-risk individuals
- Moral hazard – the risk that a policyholder may behave irresponsibly after taking out insurance, knowing the insurer will bear the financial consequences
- Risk classification – standard lives, substandard lives (extra premium or exclusion), and declined risks
- Extra premium – an additional premium charged for substandard risks identified during underwriting, such as hazardous occupation or adverse medical history
- Medical underwriting – requires medical examination when the sum assured crosses the free cover limit threshold
- Non-medical underwriting – simplified health declarations used for lower sum assured proposals below the free cover limit
Chapter 11 – Claims in Life Insurance
The claims chapter covers the 3 main claim types and the exact documents required for each:
- Death claim – payable on the death of the life assured during the policy term; documents include the original policy bond, death certificate, identity proof of nominee, and claim form
- Maturity claim – payable when the insured survives to the policy end date; deductions include outstanding loan with interest and overdue premiums
- Survival benefit claim – applicable in money back plans; periodic payments made at specified intervals during the policy term
- Early claim – death within 3 years of policy issue; insurers can investigate for fraud, misrepresentation, or non-disclosure before settlement
- Insurance Ombudsman – handles policyholder grievances up to Rs. 30 lakh in dispute value; accessible through IGMS (Integrated Grievance Management System)
IC 02 Chapter-Wise Question Distribution in Actual Exam
| Chapter No. | Topic | Approx. Questions | Difficulty Level |
|---|---|---|---|
| 1 | Life Insurance Industry in India | 6 to 8 | Easy |
| 2 | Life Insurance Plans and Products | 12 to 15 | Medium |
| 3 | Premium Calculation and Bonuses | 10 to 12 | Hard (numerical) |
| 4 | Policy Document and Non-Forfeiture Options | 8 to 10 | Medium |
| 5 | Riders and Add-on Benefits | 5 to 7 | Easy to Medium |
| 6 | ULIPs | 8 to 10 | Medium to Hard |
| 7 | Nomination and Assignment | 8 to 10 | Medium (conceptual) |
| 8 | Annuity and Pension Plans | 7 to 9 | Medium |
| 9 | Group Insurance and Employee Benefits | 8 to 10 | Medium |
| 10 | Underwriting Life Insurance | 6 to 8 | Medium |
| 11 | Claims in Life Insurance | 7 to 9 | Easy to Medium |
IC 02 Policy Revival Schemes – High-Frequency Exam Topic
Policy revival questions appear in nearly every IC 02 licentiate exam. The III workbook describes 5 revival schemes, and candidates who skip this topic consistently lose 3 to 4 marks. Know each scheme precisely:
1. Ordinary Revival
The policyholder pays all overdue premiums with interest in a single payment. Health evidence is required if the lapse period exceeds a specified threshold set by the insurer.
2. Special Revival Scheme
Used when the policyholder cannot pay all arrears at once. The date of commencement of the policy is advanced to a new date so that the policy becomes in-force again with fewer years of coverage remaining.
3. Instalment Revival Scheme
The policyholder pays overdue premiums in monthly instalments spread over a period, rather than as a lump sum.
4. Loan-cum-Revival Scheme
A loan is taken against the policy’s surrender value and applied toward payment of overdue premiums. The balance loan amount, if any, is paid to the policyholder.
5. Survival Benefit-cum-Revival Scheme
Available only in money back plans. The survival benefit due is applied directly against the overdue premium amount to revive the policy.
IC 02 Premium Calculation – The 4 Key Factors Exam Questions Test
At least 4 to 5 questions in the actual IC 02 exam involve premium calculation or numerical problems. Practice these 4 core factors:
- Age of the life assured – determined by Age Next Birthday (ANB) or Age Last Birthday (ALB); ANB is the method used by LIC and most Indian insurers; premium increases with age due to higher mortality probability
- Policy term – longer terms spread the mortality cost over more years, affecting the net premium rate per thousand of sum assured
- Sum assured – higher sum assured attracts a sum assured rebate that reduces the per-unit premium; lower premium per 1000 rupees of cover
- Mode of premium payment – annual mode receives the maximum mode rebate; semi-annual, quarterly, and monthly modes receive progressively smaller or no rebates
Paid-Up Value vs Surrender Value in IC 02 Exam
Candidates most commonly lose marks by confusing paid-up value and surrender value. Here is the exact distinction the III workbook teaches:
- Paid-up value – the policy stays in force but for a reduced sum assured; calculated as: (number of premiums paid divided by total premiums payable) multiplied by the original sum assured; no further premium payment is required
- Surrender value – the policyholder exits the policy entirely and receives a cash amount; the policy terminates; calculated as the surrender value factor multiplied by the premiums paid
- Guaranteed surrender value (GSV) – the minimum amount the insurer must pay on surrender; equal to 30% of all premiums paid excluding the first year premium and any extra premium
- Special surrender value (SSV) – the higher amount the insurer may offer based on the paid-up value; the policyholder receives whichever is higher between GSV and SSV
IC 02 Mock Test vs IC 02 Previous Year Questions – What Is the Difference?
Many candidates search for IC02 previous year question papers or IC02 model question papers. The truth is that the Insurance Institute of India does not release official previous year question papers for public use. What competitors and test platforms offer as model question papers are question banks built on the III workbook’s learning outcomes and test objectives. This IC 02 mock test on SarkariExam.Center follows the same approach: 100 questions per full-length test, mapped to all 11 chapters, built on test objectives published by III.
III Licentiate Papers – IC 01, IC 02, and IC 14 Compared
The III Licentiate in Life Insurance requires passing 3 papers. Each paper is 100 MCQs and carries 20 credit points. You need 60 credit points total to earn the Licentiate certificate.
| Paper Code | Paper Name | Applicable For | Credit Points | Key Topics |
|---|---|---|---|---|
| IC 01 | Principles of Insurance | Life and Non-Life both | 20 | Insurable interest, utmost good faith, indemnity, subrogation, contribution, proximate cause |
| IC 02 | Practice of Life Insurance | Life Insurance only | 20 | Life plans, premium, ULIPs, nomination, assignment, claims, group insurance, annuity |
| IC 14 | Regulation of Insurance Business | Life and Non-Life both | 20 | IRDAI Act 1999, Insurance Act 1938, LIC Act 1956, IGMS, insurance ombudsman, consumer protection |
Note: Credit points earned in the Licentiate exam are valid for 5 years from the date of passing. You must pass all 3 papers within that validity window to earn the full Licentiate certificate.
How to Clear IC 02 in the First Attempt – 7 Tested Strategies
Candidates who pass the IC 02 licentiate exam in a single attempt consistently follow these 7 habits:
- Take 1 full mock test before you start studying. Your baseline score tells you which chapters need the most attention. Score below 40? Start with Chapters 2, 3, and 7. Score 40 to 55? Focus on ULIP charges, revival schemes, and premium calculation numericals.
- Master the 5 revival schemes by name and mechanism. Ordinary, Special, Instalment, Loan-cum-Revival, and Survival Benefit-cum-Revival appear in scenario-based questions where you must identify which scheme applies.
- Solve all premium calculation numerical problems by hand at least once. The IC 02 exam includes 4 to 5 calculation problems on age next birthday method, gross premium with rebates, and surrender value using the GSV factor. Practice builds speed.
- Write down Section 38 and Section 39 distinctions on one sheet. Nomination (Section 39) does not transfer policy ownership. Assignment (Section 38) does. This single distinction eliminates 3 to 4 mistakes per test.
- Attempt the ULIP chapter mock test separately 3 times. ULIP questions in IC 02 cover lock-in periods, fund types, death benefit calculation, and surrender value rules. These are consistently the trickiest questions.
- Read every wrong answer explanation in every mock test. Candidates who only check correct answers score 5 to 8 marks lower on average than those who read explanations for wrong answers too.
- Simulate the 2-hour exam under real conditions at least twice. Sit without a phone, complete all 100 questions, and time yourself. The real III exam is computer-based and timed strictly.
IC 02 High-Frequency Keywords and Concepts That Appear Repeatedly in the Exam
Based on reported exam questions from IC 02 licentiate candidates, these 15 terms appear in nearly every sitting:
- Annuitising – instructing the insurer to begin periodic pension payments at vesting
- Vesting – the date when a pension policy matures and payouts begin
- Commutation – taking up to one-third of the pension corpus as a tax-free lump sum
- Foreclosure – when the outstanding policy loan exceeds the policy’s surrender value, the insurer terminates the policy and recovers the loan
- IGMS – Integrated Grievance Management System; the IRDAI-mandated online portal for registering insurance complaints
- Insurable interest – the policyholder must have a financial stake in the life of the insured at the time of taking the policy
- Deferment period – the accumulation phase in a deferred annuity plan before pension payments start
- Proposal form – the primary document through which the proposer discloses material facts to the insurer; forms the basis of the insurance contract
- Bid-offer spread – an older ULIP charge now eliminated by IRDAI; questions may ask whether it still applies (answer: no)
- Bancassurance – the distribution of insurance products through bank branches as a tie-up channel between banks and insurance companies
- Keyman insurance – the beneficiary is the employer, not the family of the insured employee; the employer pays the premium and claims the benefit
- Free cover limit – the group insurance benefit level per employee up to which no medical evidence is needed; above this, individual health proof is required
- Adverse selection – people with higher health risks buy more insurance; insurers manage this through underwriting
- Moral hazard – the risk that insured people may take more risks knowing the insurer will pay for losses
- Non-forfeiture options – the 3 rights a policyholder has when unable to pay premium: paid-up value, surrender value, or extended term insurance
What This Free IC 02 Mock Test Gives You on SarkariExam.Center
This IC 02 Practice of Life Insurance mock test platform gives you the following without any payment or sign-up:
- 100 MCQs per full-length test, aligned with the III Licentiate IC 02 workbook
- Chapter-wise practice sets covering all 11 chapters with 50 targeted questions each
- Separate sets for high-difficulty topics such as premium calculation, ULIP numericals, and surrender value problems
- Instant scoring with correct answer shown immediately after each question or on final submission
- Detailed answer explanations referencing the specific III learning outcome being tested
- A timed interface replicating the actual III computer-based test environment
- Percentage-based performance score per chapter to identify weak areas before the real exam
IC 02 Mock Test FAQs
The passing mark for IC 02 is 60 out of 100. You must score at least 60% in every paper individually. Passing IC 02 alone earns you 20 credit points toward the 60 credits needed for the full III Licentiate certificate.
No. There is zero negative marking in the IC 02 exam. Attempt all 100 questions without any concern about penalty for wrong answers. Leaving a question blank wastes a scoring opportunity.
Chapters 2, 3, 6, 7, and 11 are the highest-weightage chapters. Life insurance plans, premium calculation, ULIPs, nomination and assignment, and claims together account for approximately 55 to 60 questions in the IC 02 exam. Mastering these 5 chapters alone can take you above the 60-mark pass threshold.
Nomination under Section 39 does not transfer policy ownership while assignment under Section 38 does. A nominee receives the money as a trustee for legal heirs. An assignee becomes the new owner of the policy with full rights. Assignment automatically cancels any existing nomination on the policy.
Take at least 5 full-length IC 02 mock tests before your exam date. Score above 70 consistently across 3 separate attempts on different days. This means you have mastered the syllabus well beyond the 60-mark minimum and can handle unfamiliar question phrasing on exam day.
