Texas insurance test

Which type of life insurance provides coverage for a specified period of time?

C. Term Life - Term insurance provides protection for a set number of years (10, 20, 30 years) and does not build cash value.

Which type of policy accumulates guaranteed cash value?

B. Whole Life - Whole Life is permanent insurance with level premiums and guaranteed cash value.

Which policy allows the policyowner to adjust premiums and death benefits?

B. Universal Life - Universal Life offers flexible premiums and adjustable death benefits.

An applicant intentionally lies about a serious medical condition. This is considered:

B. Misrepresentation - A false statement on the application is a misrepresentation and may affect coverage.

An insurable interest must exist:

B. When the policy is issued - Insurable interest is required at policy inception to prevent wagering on lives.

Which rider waives premiums if the insured becomes totally disabled?

B. Waiver of Premium Rider - The insurer pays the premiums while the insured remains totally disabled.

Which beneficiary can be changed without the beneficiary’s consent?

C. Revocable - A revocable beneficiary can be changed by the policyowner at any time.

The grace period allows:

A. The policyowner extra time to pay a premium while coverage remains active.

Which settlement option guarantees payments for the beneficiary’s lifetime?

D. Life Income - Payments continue for as long as the beneficiary lives.

Twisting is:

B. Replacing an existing policy through misleading statements - Twisting is an illegal unfair trade practice.

Which of the following is NOT an element of a legal contract?

D. Cash Value - A legal contract requires offer, acceptance, consideration, and competent parties—not cash value.

Which clause prevents the insurer from contesting the policy after two years (except in limited circumstances allowed by law)?

C. Incontestability - After the contestable period, the insurer generally cannot void the policy because of misstatements.

Which of the following is considered an unfair trade practice?

B. Twisting - Twisting involves misleading a client into replacing existing insurance.

In Texas, insurance producers are regulated by:

B. Texas Department of Insurance.

Which policy does NOT build cash value?

D. Term Life - Term insurance provides only a death benefit and does not accumulate cash value.

Which nonforfeiture option provides the policyowner with the policy’s cash value in one payment?

C. Cash Surrender - The insurer pays the accumulated cash value (minus any loans or fees), and the policy terminates.

Which nonforfeiture option uses the cash value to purchase a smaller amount of permanent insurance?

B. Reduced Paid-Up Insurance - Coverage continues for life but with a reduced death benefit.

Extended Term Insurance:

B. Uses cash value to buy term insurance for the original face amount.

Policy dividends are:

C. Generally considered a return of excess premium.

Which dividend option purchases additional fully paid-up insurance?

C. Paid-Up Additions - This increases both the death benefit and cash value.

Which dividend option leaves the money with the insurer to earn interest?

D. Accumulate at Interest.

A life insurance loan is:

B. Based on the policy’s cash value.

If a policy loan is not repaid before the insured dies:

B. The loan plus interest is deducted from the death benefit.

Which policy provision states that the policy and application make up the entire contract?

B. Entire Contract.

The consideration given by the policyowner is:

B. Premium payments and statements in the application.

Which statement about beneficiaries is TRUE?

A. A contingent beneficiary receives proceeds only if the primary beneficiary cannot.

Which rider allows the insured to buy additional coverage without proving insurability?

B. Guaranteed Insurability Rider.

Which rider pays an additional benefit if death results from an accident?

C. Accidental Death Rider.

Underwriting is the process of:

B. Determining an applicant’s level of risk.

Which of the following factors is NOT typically considered in life insurance underwriting?

D. Favorite color.

An annuity is primarily designed to:

C. Provide income during retirement.

During the accumulation period of an annuity:

B. The owner contributes money that grows on a tax-deferred basis.

The period during which annuity payments are made is called the:

C. Annuitization Period.

Which annuity guarantees a fixed rate of return?

C. Fixed Annuity.

Who assumes the investment risk in a variable annuity?

C. Policyowner/Annuitant.

Life insurance death benefits are generally:

B. Income tax-free to beneficiaries.

Cash value growth inside a life insurance policy is generally:

B. Tax-deferred.

Which retirement plan is commonly offered by employers?

B. 401(k).

An Individual Retirement Account (IRA) is:

B. A personal retirement savings account with potential tax advantages.

Controlled business refers to:

B. Writing insurance primarily on yourself, your family, or your business to earn commissions.

Rebating is:

A. Returning part of the premium or offering something of value not stated in the policy as an inducement to buy insurance.

Defamation in the insurance business involves:

A. Making false statements that harm another insurer or producer.

If a producer collects a premium from an applicant, the producer must:

C. Promptly remit it to the insurer according to company procedures.

A producer who intentionally misappropriates client premiums may have their license:

B. Suspended or revoked and may face additional penalties.

Which statement about ethics is MOST accurate?

A. Producers should recommend the policy that best fits the client’s needs.

Which type of life insurance is designed to insure two or more people under one policy?

B. Group Life.

Which of the following is a characteristic of Term Life insurance?

C. Temporary coverage with no cash value.

A policyowner wants to transfer ownership rights to another person. This is called:

B. Assignment.

An absolute assignment transfers:

C. All ownership rights.

Which clause gives the policyowner the right to reinstate a lapsed policy if certain requirements are met?

B. Reinstatement.

The suicide clause generally states that if the insured dies by suicide within the first:

C. 2 years.

Which policy provision protects the insured if the insurer becomes insolvent?

B. Guaranty Association (subject to state law and limits).

Which of the following is considered a representation?

A. A statement made by the applicant believed to be true.

Which of the following is NOT a common life insurance settlement option?

D. Deductible Payment.

The owner of a life insurance policy has the right to:

D. All of the above.

Which type of insurer is owned by its policyholders?

B. Mutual Company.

Which type of insurer is owned by shareholders?

C. Stock Company.

Which of the following best describes a stock insurance company?

B. Shareholders own the company.

A fraternal benefit society must:

C. Operate on a lodge system and provide benefits to members.

Which unfair trade practice involves making false statements about another insurance company?

C. Defamation.

Which type of authority is specifically stated in the agency contract?

C. Express Authority.

Which type of authority arises from actions necessary to carry out express authority?

A. Implied Authority.

Which of the following is a producer’s fiduciary responsibility?

C. Properly handling premiums collected from clients.

A producer who intentionally misrepresents policy benefits may be subject to:

B. License suspension, revocation, fines, or other disciplinary action.

Which of the following is considered an unfair trade practice?

B. Twisting.

Which rider allows the insured to purchase additional insurance at specified times without proving insurability?

C. Guaranteed Insurability Rider.

Which rider provides an additional benefit if death is caused by an accident?

C. Accidental Death Rider (often called AD&D when it also includes dismemberment benefits).

Which policy provision gives the insured additional time to pay an overdue premium before the policy lapses?

B. Grace Period.

Which clause states that the insurer generally cannot contest the policy after it has been in force for two years?

C. Incontestability Clause.

Which policy provision allows a lapsed policy to be restored if policy requirements are met?

B. Reinstatement.

A revocable beneficiary:

B. May be changed by the policyowner without the beneficiary’s consent.

Which type of life insurance generally has the lowest initial premium?

D. Term Life.

The primary purpose of underwriting is to:

B. Determine the applicant’s level of risk and appropriate premium classification.

Which Texas agency regulates insurance companies and insurance producers?

C. Texas Department of Insurance (TDI).

The primary purpose of life insurance is to:

B. Provide financial protection to beneficiaries upon the insured’s death.