Texas Life & Health Insurance Exam Review

A set of 200 question-and-answer flashcards covering key concepts from Texas Life and Health Insurance licensing material.

In a Texas group life plan, what is the maximum death benefit a spouse may be insured for relative to the employee’s coverage?

No more than 50 % of the employee’s insurance amount.

What does the Misstatement of Age provision require an insurer to do if the insured’s age is misstated?

Adjust the benefit to the amount the paid premiums would have purchased at the insured’s correct age.

How long is the minimum grace period for premium payment on an individual life policy issued in Texas?

31 days.

What percentage of a producer’s total continuing-education hours must be completed in a classroom or classroom-equivalent setting in Texas?

50 %.

What document grants an insurer the legal right to transact insurance in Texas?

A Certificate of Authority.

After how many years may an insurer no longer use suicide as a defense against paying a life claim in Texas?

After two years.

If an insured’s age is discovered to be incorrect after death, what will most life companies do?

Pay the amount the premiums would have bought at the correct age.

Which type of group may NOT be insured by a group life policy?

A group consisting exclusively of individuals related by blood, marriage, or adoption.

What is the maximum value a producer may give as a promotional advertising item without it being considered a rebate in Texas?

$25 or less.

Which provision is NOT required in a Texas group life policy?

Right to Loan (policy loan) provision.

What item is NOT required to appear in a life-insurance illustration?

The company’s mortality table.

Exaggerating dividends in an advertisement is an example of what unfair practice?

False advertising.

An agent’s fiduciary responsibility extends to which parties?

Insureds, applicants, and insurers—but not other agents.

A company domiciled in another U.S. state but doing business in Texas is classified as what kind of insurer?

A foreign insurer.

Who is NOT entitled to insurer information during a fraud investigation?

The insured involved in the claim.

Requiring a borrower to purchase insurance from a specific insurer is an illegal practice known as what?

Coercion.

How often must a Texas insurance agent license normally be renewed?

Every two years.

What must an insurer do when it terminates an agent’s appointment?

Send a termination notice to the Texas Department of Insurance.

After revocation, how long must an individual wait before re-applying for an agent’s license in Texas?

At least five years.

After notice of hearing for an unfair-practice charge, the Commissioner must hold the hearing no sooner than how many days?

No sooner than 6 days after notice.

Which power does the Texas Commissioner of Insurance NOT have?

Activating insurers’ financial reserves.

Which personal trait is explicitly required of Texas insurance-license applicants?

They must be honest, trustworthy, and reliable.

Selling shares of stock is NOT considered what activity in insurance law?

Doing the business of insurance.

If an agent places coverage with an unauthorized insurer, who may be personally liable for unpaid claims?

The agent.

Who owns a stock insurance company?

Its stockholders.

Why does the Commissioner examine an insurer’s records?

To determine the solvency of the company.

To whom may a licensed agent legally share commissions?

Another agent licensed for the same line of insurance.

A Medicare Supplement policy may be cancelled for what reason?

Non-payment of premium.

When must an Outline of Coverage be provided for a Medicare Supplement application?

At the time of application.

Who must approve an HMO’s Evidence of Coverage form before use?

The Commissioner of Insurance.

How long must fully insured groups and HMOs offer an annual open-enrollment period?

At least 31 days each 12-month period.

What is the minimum benefit period that a Long-Term-Care policy must offer?

12 months.

Which benefit is NOT required under a group health plan for drug or alcohol treatment?

Transportation to and from the treatment facility.

Non-payment of coverage may allow an HMO to do what to an enrollee?

Cancel or non-renew the enrollee’s coverage.

Health coverage for newborns must begin when?

At the moment of birth.

Under a Key-Employee Life policy, who selects the beneficiary?

The company (policyowner).

Who cannot be the third-party owner in a Key-Employee policy?

The insured employee.

Early IRA distributions before age 59½ are subject to what taxes?

Ordinary income tax plus a 10 % penalty.

Cash surrender of a new Universal Life policy may signal what compliance concern?

Potential anti-money-laundering violation.

“Usual, customary, and reasonable expenses” refers to what in health insurance?

Fees typically charged by healthcare providers.

The provision requiring insurer and insured to share a covered loss is called what?

Coinsurance.

Which benefit is NOT provided by Social Security?

Dismemberment benefits.

Cancer insurance typically excludes coverage for which condition?

Arthritis treatment.

Social Security disability benefits are reduced based on what factor?

Amount of benefits available from other sources.

A life policy that fails the 7-pay test becomes classified as what?

A Modified Endowment Contract (MEC).

Who is normally the owner of a 403(b) tax-sheltered annuity?

The participating employee.

To sell Variable Life insurance, a producer must register with which organization?

FINRA (Financial Industry Regulatory Authority).

In the phrase “Straight Life,” the word “straight” refers to what?

Premiums are paid for the insured’s entire lifetime.

Credit life insurance commonly uses which type of coverage?

Decreasing Term Life.

Requesting a surrender of a new life policy’s cash value payable to an unrelated person may trigger scrutiny under which rules?

Anti-money-laundering rules (USA Patriot Act).

A long-term-care rider in a life policy pays benefits upon what trigger?

Inability to perform at least two Activities of Daily Living (ADLs).

A Hospital Indemnity policy pays benefits on what basis?

A fixed amount per day of covered hospitalization.

Which statement about Waiver-of-Premium riders is FALSE?

The insured must first qualify for Social Security disability before benefits apply.

Qualified Roth IRA distributions are generally taxed how?

They are income-tax free.

Are rollover contributions to an IRA limited by dollar amount?

No, rollovers are not dollar-limited.

Which is NOT a valid reason to purchase life insurance on a minor?

Providing death benefits to the child if both parents die.

Which life policy offers flexible premiums, adjustable death benefit, and owner-directed investments?

Variable Universal Life.

Which is NOT an underwriting information source?

Rating services such as A.M. Best.

What is the initial source of underwriting information for an insurer?

The application signed by the proposed insured.

Which feature of a whole life policy allows the owner to borrow money?

Accumulated cash value.

A telephone interview report on an applicant appears in what document?

The inspection report.

If an aviation applicant refuses higher premiums, the insurer will typically issue the policy with what?

An Aviation Exclusion rider.

Which employee-benefit plans are exempt from ERISA regulation?

Church plans.

How are lump-sum life-insurance death benefits taxed to a beneficiary?

They are received income-tax free.

Which life policy combines term insurance with an investment element?

Universal Life.

A Family Income Policy combines Whole Life with which type of term insurance?

Decreasing Term.

How long does an individual have to complete a tax-free rollover from a qualified plan?

60 days.

Statements guaranteed to be absolutely true in an insurance contract are called what?

Warranties.

A qualified retirement plan is considered top-heavy when what percentage of plan assets belong to key employees?

More than 60 %.

A 15-year mortgage is best protected by what life policy?

A 15-year Decreasing Term policy.

Dental indemnity coverage reimburses the insured when?

After the insurer receives the dentist’s invoice.

Which policy provision allows a lapsed life policy to be put back in force?

The Reinstatement provision.

Who is NOT required to sign a life-insurance application?

The beneficiary.

Which insurance product is most suitable for a retiree investing a lump sum for income?

An annuity.

A life policy with monthly mortality charges and owner-controlled investments is called what?

Variable Universal Life.

Which health plan best covers catastrophic illness expenses?

Major Medical insurance.

The Accelerated Death Benefit is commonly referred to as what?

A Living Benefit.

Under the Misstatement of Age clause, how are benefits adjusted?

The death benefit is reduced to the amount premiums would have purchased at the correct age.

A Graded Premium Whole Life policy features what premium pattern?

Premiums increase annually for several early years, then level off.

If an insured dies during a life policy’s grace period, what will the insurer do?

Pay the face amount minus the past-due premium.

Dividends from a participating life policy are generally taxed how?

They are not taxable, but any interest earned on them is taxable.

Offer, acceptance, and consideration are elements of what?

A valid contract.

Before a life policy is issued, whose signature is always required on the application?

The applicant’s.

If a life policy has an outstanding loan at death, what happens to the loan balance?

It is deducted from the death proceeds.

If eligible rollover funds are disbursed to a participant, what federal tax withholding applies?

20 % must be withheld.

Which policy would guarantee $10,000 available in exactly 10 years?

A Ten-Year Endowment policy.

A contingent beneficiary is defined as what?

The person who receives proceeds if the primary beneficiary dies first.

The Guaranteed Insurability option in LTC insurance allows the insured to do what?

Buy additional coverage later without evidence of insurability.

Insurable interest for life insurance must exist at what time?

Only at policy inception.

Which type of life insurance gives the most coverage for the lowest cost over a set period?

Term life insurance.

Basic Hospital and Surgical policies usually pay how in relation to actual costs?

Benefits are lower than actual expenses.

If an insurance application is incomplete, what will the insurer do?

Return it to the producer for completion.

A Keogh (HR-10) plan can only be used by a sole proprietor under what condition?

Employees must be included in the plan.

Major Medical policies typically have a benefit period of what length?

One year.

Underlying equity investment is a defining element of which life product?

Variable Life.

If an individual DI application is declined, what notice is NOT sent?

No notice is sent to the MIB about the declination.

An insurer may void a policy for misrepresentation only under what condition?

If discovered within the contestable period and material to the risk.

The concept of level premiums means what about early-year charges?

Early premiums are higher than the cost of pure protection, building cash value.

A Term Life rider added to a whole life policy provides what extra benefit?

Additional life insurance coverage.

Variable Whole Life policies feature what kind of premium structure?

A fixed, level premium.