Insurance for the APFC Exam 2026: Principles, PYQs & MCQs
- The six principles are utmost good faith, insurable interest, indemnity, subrogation, contribution and proximate cause — almost the whole topic.
- Subrogation: after paying a claim, the insurer recovers from the party responsible. Indemnity does not apply to life insurance.
- Insurable interest: life at inception, marine at loss, fire at both.
- The regulator is IRDAI; an insurance claim for a fixed asset destroyed by fire is a capital receipt.
- Reinsurance, coinsurance, double insurance and bancassurance are the type-distinctions the paper tests.
Insurance is a compact, high-return topic in the EPFO Assistant Provident Fund Commissioner (APFC) exam — the six principles of insurance are almost the whole of it, tested alongside the basic vocabulary of risk, the types of cover, and the overlap with social security. This guide covers the foundations, the six principles, the types of insurance and IRDAI’s role, with solved previous-year questions and 35 practice MCQs.
Why insurance is a compact, high-return topic in the APFC exam
Insurance is tested through its core principles and its overlap with the social-security schemes. Master the six principles cold — especially subrogation, tested in 2023 — and you cover most of what the paper can ask.
Foundations of insurance
- Risk, peril, hazard: a peril is the event that causes loss; a hazard is a condition that increases the chance or severity of loss. Moral hazard flows from the insured’s conduct; physical hazard from the subject’s condition.
- Insurable risk must be a pure risk (loss or no loss), not a speculative one.
- The contract: the proposal form is the offer; the policy is the document of terms; the premium is the consideration; underwriting is the assessment and pricing of the risk.
- Social vs private insurance: social insurance (ESI, EPF) is statutory and welfare-driven; private insurance is contractual.
The six principles of insurance
- Utmost good faith (uberrimae fidei): both parties must disclose all material facts.
- Insurable interest: the insured must stand to lose from the event — life at inception, marine at loss, fire at both.
- Indemnity: restore the insured to the pre-loss position, no more; it does not apply to life insurance.
- Subrogation: after indemnifying the insured, the insurer recovers from the third party responsible.
- Contribution: where several policies cover the same risk, insurers share the loss proportionately (indemnity policies only).
- Proximate cause: the nearest effective cause of loss decides liability.
A seventh idea often listed is mitigation of loss — the insured must act to minimise the loss.
Types of insurance and regulation
- Life vs general (non-life): general insurance covers fire, marine (hull, cargo, freight), motor and health.
- Reinsurance — an insurer insures part of its own risk with another insurer; double insurance — the same risk with more than one insurer; coinsurance — several insurers jointly cover one large risk; bancassurance — selling insurance through banks.
- Regulator: the Insurance Regulatory and Development Authority of India (IRDAI).
- Social-security overlap: the micro-insurance schemes PMJJBY (life) and PMSBY (accident) sit at the insurance / social-security boundary.
Quick-reference: key distinctions
| Point | In one line |
|---|---|
| Peril vs hazard | the cause of loss vs a condition that raises the chance/severity of loss |
| Insurable interest timing | life → inception; marine → loss; fire → both |
| Indemnity applies to | fire, marine, motor — not life |
| Subrogation vs contribution | recover from the wrongdoer vs share the loss among insurers |
| Reinsurance / coinsurance / double insurance | insurer’s own reinsurance / joint cover of one risk / same risk with many insurers |
The principle of subrogation in insurance allows the insurer to…
Subrogation follows indemnity: once the insurer has paid the claim, it acquires the insured’s rights and can recover the loss from the third party responsible.
Answer — recover the loss from the party responsible, after indemnifying the insured
The insurance claim received on account of machinery damaged completely by fire is:
The machinery was a fixed (capital) asset; a claim for its complete loss replaces that capital asset, so the receipt is capital, not revenue.
Answer — a capital receipt
Practice MCQs on insurance for the APFC exam
Thirty-five practice questions covering the foundations, the six principles, and the types of insurance. Answers follow the set.
1-b 2-b 3-b 4-b 5-b 6-b 7-b 8-b 9-b 10-c 11-b 12-b 13-a 14-b 15-a 16-b 17-b 18-c
19-b 20-b 21-b 22-b 23-b 24-b 25-b 26-b 27-b 28-b 29-b 30-b 31-b 32-b 33-b 34-b 35-b
Frequently asked questions
What are the six principles of insurance?
The six principles of insurance are utmost good faith, insurable interest, indemnity, subrogation, contribution and proximate cause. Mitigation of loss is often added as a seventh.
What is the principle of subrogation?
Subrogation means that once the insurer has indemnified the insured, it steps into the insured’s shoes and can recover the loss from the third party responsible for it.
Does the principle of indemnity apply to life insurance?
No. Life insurance is an assurance of a fixed sum, not a contract of indemnity. Indemnity applies to fire, marine and motor insurance.
When must insurable interest exist in life, marine and fire insurance?
Insurable interest must exist at the inception of a life policy, at the time of loss in a marine policy, and at both times in a fire policy.
Who regulates insurance in India?
Insurance in India is regulated by the Insurance Regulatory and Development Authority of India (IRDAI).
What is the difference between reinsurance and coinsurance?
Reinsurance is when an insurer insures part of its own risk with another insurer to spread large risks. Coinsurance is when several insurers jointly cover one large risk.
Is an insurance claim for a fixed asset a capital or revenue receipt?
An insurance claim received for a fixed asset destroyed by fire is a capital receipt, because it replaces a capital asset.
What does uberrimae fidei mean in insurance?
Uberrimae fidei means utmost good faith: both parties to an insurance contract must disclose all material facts fully and honestly.
