LIC Agency as Free Pension

How to pass IC 38 Exam

It is a First step to be LIC agent to pass LIC exam which is conducted by IRDA. It is online objective exam. Basic question is how to pass this exam ? without putting much time on it. We are discussing here few tips to pass this exam with 1 hr preparation. Original IC 38 book consists almost 400 pages along with 20 chapters. A normal study will take a month to read and understand the whole part. As we know its a only certification to get LIC code. So we will try to cover only important topic to understand  concept and insurance terminology. Follow our strategy ,we are assuring you for 100% successful results .
Total  No. Of questions =50
Total Time = 1 hr (60 mint)
Total Marks =50 (For each Ans one Mark)
Passing 35% =18 (even you score 17 marks ,One mark will be given  as grace )
Strategy To Pass this IC 38 LIC agent Exam 
                                                                                                                      Obtain Minimum Marks
                   First Solve 10 question minimum——————10
                                                                                                                                                                                          Now just
       Tick    Ans “C” option remaining 40 Question———–10 (Probability)
                                             Total Obtain Marks=======20(Passed)
Note : Don’t Leave any question unanswered ,there is no (-ve) marks.

 Type Of Insurance

  •  LIFE Insurance (for human life only)
  •  NON LIFE Insurance/General Insurance(Except human life)
 (The contract made between an insurance company and a third party to protect the insurance company from losses.  The contract provides for the third party to pay for the loss sustained by theinsurance company when the company makes a payment on the original contract.)

Elements of LIFE Insurance        

How Insurance paper flows in Office
  Indisputable clause
Sec 45(with in 2 yrs )
A positive duty voluntarily to disclose, accurately and fully, all facts material to the risk being proposed whether requested or not the principle applies equally to both the proposer and the insurer throughout the contract.
Breaches of the duty of utmost good faith can be categorised as
Non-disclosure, Concealment of a material fact.
Fraudulent misrepresentation or statements made with the intention of deceiving the insurer.
Innocent misrepresentation or inaccurate statements which are believed to be true.
Insurable interestis said to exist when an individual stands to gain or benefit from the continued existence or well-being of another individual(s) or property, and at the same time the individual would suffer a financial loss or inconvenience if there is damage to the other individual(s) or property.


Micro insurance products provide insurance protection to people in lower income group ,such as self help group ( SHG) members , farmers, rickshaw pullers etc.
 Min premium Rs.15 ( collected on a weekly basis ).
The Minimum life insurance cover is Rs. 5000 & Maximum cover is Rs. 50,000 .
  • Term insurance  
  • Pure endowment
  • Endowment plan
  •  Money back 
  • ULIP (Unit linked Insurance  Plan                                         
  • Pension/Annuity  Plan
  • ETF (Extended traded fund ) -One UNIT= 1 grm or ½ grm (You have 50 UNIT ETF = you have 50-100grms GOLD)
  • RIDERS– Max 30% of premium.
  • EMI—40% of MONTHLY INCOME will be Your EMI.
Underwriter feels that risk associated with a person might decrease over a time , in such cases ,underwriter accepts this proposal with LIEN.
                     1st yr—100% no claim
2nd —80%
3rd —60%
                   6th—100% claim paid
3rd year LIEN is higher than 4 yrs
If  Claim settled ,however Full S.A not paid —Due to LIEN.


LOCK IN period 

 3 year for traditional plan
 5 years for ULIP


Adjustment amount taken into account for expenses and profit of the insurer is known as loading.


  1. No limit of nominee in POLICY
  2. Nomination can be changed any time.




  1. Differed (MAXIMUM 2/3 of your fund can be withdrawn)
  2. b) Immediate

MWP (Married Woman Act) (1874)

Married Women’s Property (MWP) Act 1874 provides that a life insurance policy that has been taken out by a married man on his own life, for the benefit of his wife and children, shall be deemed to be a trust and will be outside the control of the life insured, his creditors, court attachments etc.
  • Nominee –trustee
  • No assignment
  • As per IRDA rule –Illustration as on Return on maturity should be shown 4% to 8%.


  • The Insurance Institute of India (III)
  • Insurance Institute of Risk Management (IIRM) and
  • The National Insurance Academy (NIA)

Pooling of risks :-

Separate pools will be maintained by insurance companies for:

  • Life Insurance
  • Car insurance
  • Home Insurance and
  • Travel insurance
    Pooling of risks is one of the fundamental principles of insurance.With pooling of risks an insurance company pools the premium collected from several individuals to insure them against similar risks. The insurance company maintains different sets of pools for different risks.



School or college records
Municipal records made at the time of birth
Permanent Account Number ( PAN) Card
The service registers of the employer
 Baptism Certificate
 A certified extract from a family Bible, if it contains the date of birth
Identity card of defense personnel, issued by the defense department 
A horoscope prepared at the time of birth
 A ration card
Self decleration, Elder’s declaration
A certificate from the village panchayat



The FPR is important as it is the evidence that the insurance contract has begun. The policy document, which is the evidence of the contract, may be issued some time later. The first premium receipt contains the following information:
  • Name and address of the life insure
  • Policy Number
  • Premium amount paid
  • Method and frequency of premium payment
  • Next date that premium payment is due
  • Date of commencement of the risk (i.e.when the cover begins)
  • Date the policy matures
  • Date the last premium will be paid: and
  • Sum insured


After the issue of the FPR the insurance company will issue subsequent premium receipts when it receives further premiums from the proposer. These receipts are known as renewal premium receipts (RPRs). The RPRs act as proof of payment in the event of any disputes related to premium payment, and so is important. The RPRs should be kept in a safe place along with the FPR and the policy document so that they can be produced easily when required.
  • It is the evidence of the contract between the insured and the insurance company. It is not the contract itself: if the policy document is lost by the policyholder, it does not affect the insurance contract. The insurance company will simply issue a duplicate policy without making any changes to the contract. The policy document has to be signed by a competent authority and should be stamped according to the Indian Stamp Act.
  • The heading of the policy document contains the name and address of the company and its logo.
  • The preamble of the policy states that the proposal and declaration signed by the proposer form the basis of the contract.
  • The operative clause lays down the mutual obligations of the parties regarding: .
  • The proviso of the policy states the general provisions relating to guaranteed surrender value, nomination, assignment and loans on security of the policy etc.
  • The schedule gives all the essential particulars of the policy, such as:
    • The date of commencement of policy
    • The date the policy matures
    • The sum insured ( when and how much the policy will pay)
    • The premium to be paid and their due dates
    • The nominee ( if stated in the proposal from)
  • The attestation confirms that the insurers have authenticated the policy document by signature. The attestation can be done by authorised officials of the insurance company.
Grace period: The grace period would normally be one month, but not less than 30 days for yearly, half-yearly or quarterly premium payments, and 15 days for monthly premium payments. However, some insurers allow 30 days even for monthly premium payments.
If a policyholder fails to pay a premium on a policy that is capable of having a value (e.g. an endowment or savings plan) and the policy lapses, then the insurance company is not liable to pay the full sum insured. Such a lapsed policy can be made a paid up policy. In a paid up policy the sum insured is reduced to an amount based on the amount of premiums already paid.
Paid up Value =  [(Number of premiums paid ÷ Total number of premiums payable) X Sum insured]  + Bonus

Adverse selection:

The underwriter must also protect the company from adverse selection. This is a term used to describe the situation where an insurance company accepts too many proposers who bring a higher than average risk to the pool. The concept of adverse selection is based on the view that people who fear that they are prone to risk are more likely to want to take out life insurance as opposed to people who feel that they are prone to low risk. If a company does find itself exposed to adverse selection it may find that it pays out more claims than anticipated. This obviously has a bad effect on the success of the company.
The process of calculating the premium is as follows
  1. Calculate the risk premium
  2. Based on the risk premium, calculate the level premium
  3. Deduct the expected interest on investments to calculate the net premium
  4. Add the loadings
  5. Arrive at the gross premium to be charged .
[Risk premium = Mortality rate X Sum insured]
{Net Premium=Premium – Interest earnings}


These profits are distributed to the policyholders in the form of bonuses. There are four types of bonus given by insurance companies.
Simple revisionary bonus: This is paid out at the time of the claim or the maturity of the policy, or at any other time as specified by the insurance company
Compound revisionary bonus: Under this method the insurance company computes the annual bonus on a compound interest basis, i.e. the bonus is added to the sum insured and the next year’s bonus is calculated on the enhanced amount.
Terminal bonus: This bonus is given by the insurance company as an incentive to the insured to continue with the company long-term until the end of the policy.
Interim bonus:Policies on which death claims are made or which mature between the two valuation dates also contribute to the surpluses, although this is disclosed only in the valuation made after their closure. As these policies have left the insurance company’s books before the valuation date, they will not participate in the process of valuation.

Churning and product switching

Repeatedly encouraging clients to switch policies or investments from one to another is known as
Churning: It is unethical practice and should be avoided.
When Product switching is suitable. Where the switch is clearly in the client’s best interest

Fact finding and financial planning

Fact Finding: It is first step of Financial planning.It is a process to identify a client’s need,quqntify them and priorities them based on the resources available .
Objective of Fact finding
 (1) Identify the need (2)Gathering client data (3)Analyzing Cash flow (4)Provide anticipated changes

Types Of CLAIMS:

  • DEATH Claim
  • Maturity Claim
  • Survival Benefit Claim or (Money Back policy)
  • Missing Person Claim
  • Suicide Person claim

 DEATH Claim

Early death claim: Death occur with in 2 yrs of Policy taken.
Non-Early claim: Death occur After 2 yrs
–Must complete investigation settle within 30 days
 — If delay more than 180 days in Payment   then Insurer has to pay extra (2% ) from bank

Suicide   Case :

.Case 1: if Death With 1yr 90% of Premium PaidCase 2 : After1 yr Full SA paid as Normal Policy
  • Case 1: If suicide with in 1 yr then 90% of Premium will be Paid
  • Case 2 : After 1 yr Full SA paid as Normal Policy

Missing Person

  • Presumption of death :From 7yrs
  • Days will be consider from the date of FIR of missing person

OMBUDSMAN  :Its is a dispute solving authority

  • Case limit up to 20 lac in district level
  • Result in 3 months or 180 days
  • Insurer will get reward if decision comes within 15 days
  • Customer can put complain after 30 days of receiving decision latter

Taxation part :

SECTION 80C Under section 80C a deduction from taxable income is allowed for investments made in the following products:

  • Life insurance premium paid for traditional products
  •  Unit-linked insurance plans (ULIPs).
  • Pension plans.
  • Repayment of the principal component of home loan.
  • Employee provident funds (EPFs)
  • Equity linked saving schemes (ELSs).
  • Tuition fees paid for children
  • Five-year tax saving bank deposits.
  • Public provident funds (PPFs).  
  • National savings certificates (NSCs)   
  • Stamp duty and registration charges. • Infrastructure bonds.
  • Pension funds. • Senior citizen savings schemes (SCSs).
  • Post office time deposit – five years
SEC 80(d)-Mediclaim upto Rs 15000 and additional for senior citizen


Financial planning is a process to identify his goals; assess net worth; estimating future financial needs; and working towards meeting those needs.
Role of Financial Planning :– It is a process in which clients current and future needs are considered and evaluated along with his risk profile and income assessment. Financial planning includes – Investing, Risk management, Estate planning, Retirement planning, Tax planning and financing daily and regular requirements.
Note – the right time to start financial planning is when one starts receiving his 1st salary.
Need for Financial Planning :– Disintegration of joint family; multiple investment choices; changing lifestyles; inflation; other contingency needs.
HEALTH INSURANCE (Points to know)
a) A health insurance policy provides financial protection to the insured person in the event of an unforeseen and sudden accident/illness leading to hospitalization.
b) Health insurance products can be classified on the basis of number of people covered under the policy:
         individual policy, family floater policy, group policy.
c) A hospitalization expenses policy or Mediclaim reimburses the cost of hospitalization expenses incurred on account of illness / accident.
d) Pre hospitalization expenses would be relevant medical expenses incurred during period up to the defined number of days (generally 30 days) prior to hospitalization and will be considered as part of claim.
e) Post hospitalization expenses would be relevant medical expenses incurred during period up to the defined number of days (generally 60 days) after hospitalization and will be considered as part of claim.
f) In a family floater policy, the family consisting of spouse, dependent children and dependent parents are offered a single sum insured which floats over the entire family.
g) A hospital daily cash policy provides a fixed sum to the insured person for each day of hospitalization
h) Critical illness policy is a benefit policy with a provision to pay a lump sum amount on diagnosis of certain named critical illness.
i) High Deductible or Top -up Covers offer cover for higher sum insured over and above specified chosen amount (called threshold or deductible).
j) The fixed benefits cover provides adequate cover to the insured person and also helps the insurer to effectively price his policy
k) A Personal Accident (PA) Cover provides compensation in the form of death and disability benefits due to unforeseen accidents.
l) Out-patient covers provide for medical expenses like dental treatments, vision care expenses, routine medical examinations and tests etc. that do not require hospitalization.
m) A group policy is taken by a group owner who could be an employer, an association, bank’s credit card division, where a single policy covers the entire group of individuals.
n) Corporate Floater or Buffer Cover amount helps meet excess expenses over and above the family sum insured.
o) Overseas Mediclaim / Travel Policies provide cover to an individual against exposure to the risk of accident, injury and sickness during his stay overseas.
p) Corporate Frequent Travelers‟Plan is an annual policy whereby a corporate takes individual policies for its executives who frequently make trips outside India.
q) Many terms used in health insurance have been standardized by IRDA by regulation to avoid confusion especially for the insured.
CLAIM PROCESS in health Policy
Intimation  Registration  → Verification of Documents
 Capturing Billing InformationCoding the claim
Processing/Adjudication of ClaimArriving the final claim payable
Free Look-In Period (or) Cooling off period – if any proposer after entering into a contract ie. After taking a policy if he wants to cancel or reject the policy then he or she take this decision within 15 days from receiving of policy.
Level Premium – it is a premium fixed in such a manner that it does not increase with age but remains constant throughout the contact period.
Principle of Risk Pooling – it works on the principle of mutuality. Here premium collected from various people is collected in same pool for same risk and used for same kind of risk-claim. Under no circumstances money collected under one risk pool is used for another pool. It also makes use of diversification, where funds flowing from one source is invested / kept at many destinations.
Key man insurance – it is used for business purpose. Keyman insurance does not indemnify the actual loss incurred but compensates with affixed monetary sum as specified in insurance policy. Thus keyman insurance can be described as an insurance policy taken out by a business to compensate that business for financial loss that would arise from death of an important member. Keyman insurance is a term insurance policy where the sum assured is linked profitability of company and not the key person’s income. In case the keyman dies the benefit is received by the company.
Mortgage Redemption Insurance – it is an insurance policy that provides financial protection for home loan borrower. It is basically decreasing term life insurance policy taken by mortgagor to repay the balance mortgage in case of his/her premature death. It is also known as loan protector policy. The insurance cover decreases each year.
Hospitalization Indemnity product:- It protects one from the expenditure incur in the event of hospitalization. In most of the cases they cover only a specific no. of days before and after hospitalization, but exclude other expenses done. In short the cover is provided on “Indemnity” basis. A regular HIP covers expenses only if the duration is more than 24hrs.
a) Inpatient Hospitalization expenses:- A hospitalization expenses policy or Mediclaim reimburses the cost of hospitalization expenses incurred on account of illness / accident.
b) Pre hospitalization expenses:- would be relevant medical expenses incurred during period up to the defined number of days (generally 30 days) prior to hospitalization and will be considered as part of claim.
c) Post hospitalization expenses:- would be relevant medical expenses incurred during period up to the defined number of days (generally 60 days) after hospitalization and will be considered as part of claim.
d) Domiciliary hospitalization:- the condition in which the patient cannot be taken to hospital and needs to be given cover at his place itself. This cover has an excess clause of 3-5 days wherein the initial treatment cost of given days is to be borne by the insured.
e) Common exclusions:- some of the exclusions in HIP policies are Pre-existing diseases, all non-medical items expenses, waiting period of 30days from start of policy.
f) Family floater:- In a family floater policy, the family consisting of spouse, dependent children and dependent parents are offered a single sum insured which floats over the entire family.
Married Women’s Property Act (MWP) – section 6 of MWP act 1874 provides for security of benefits under a life insurance policy to the wife and children. Under MWP act the life insurance policy forms for a creation of trust. Features of policy under MWP act –
  • Each policy will be a separate trust.
  • Either the wife or child can be trustee.
  • Policy will be beyond control of court attachments, creditors or even life assured.
The claim money will be paid to trustees

Lapse and Reinstatement / Revival :

The policy is considered to be lapse if the premium is not paid even after the grace period is over. Lapse policies can be revived. Revival / reinstatement of policy means to put back into force which have been stopped / terminated due to non payment of premiums or non-forfeiture. Revival of policies however is not unconditional right of insured. Insurer will do it if they think –there is no increase in risk for insurer, creation of reserve, payment of overdue premium with interest, satisfactory evidence of continued insurability, revival application within specific time period, payment of outstanding loan. Policy revival measures –
Ordinary revival – one which involves payment of arrears of premium with interest. It is affected when surrender value is acquired.
Special revival – one which policy has not completed 3yrs and has not acquired surrender value and time from first unpaid premium (fup) is more.
Loan cum revival – one in which simultaneous granting of loan and revival of policy is done. Arrears of premium and interest are calculated as pre ordinary revival.
Installment revival – sometimes policy holder is not in a position to pay arrears in lump sum. The arrears of premium are calculated and depending on mode of payment are asked to pay in future premiums as distributed.
NOW watch below Videos ,we have tried to cover in parts ↓ 

 DOWNLOAD IC 38 Notes    IC 38 My Notes   

LIC Agency as Free Pension
How to pass IC 38 Exam as per NEW syllabus

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