Texas State Insurance License Exam Questions and Answers | Latest Version | 2025/2026 | Correct & Verified

Texas State Insurance License Exam Questions and Answers | Latest Version | 2025/2026 | Correct & Verified What is the incontestability clause in life insurance? A provision that prevents the insurer from voiding a policy after it has been in force for a specified period, usually two years. What is a grace period? A specified period after the premium due date during which the policy remains in force. What is an exclusion in an insurance policy? A situation or condition specifically not covered by the policy. What is a binder? A temporary contract providing proof of insurance until a formal policy is issued. What does the principle of utmost good faith require? Both parties in an insurance contract must act honestly and disclose all relevant information. What is a risk in insurance terms? The uncertainty regarding financial loss. 2 What is the purpose of underwriting? To evaluate risk and determine the terms and premium of the policy. What is policy lapse? Termination of coverage due to nonpayment of premiums. What is the difference between term and whole life insurance? Term life provides coverage for a specific period without cash value, while whole life provides permanent coverage with cash value accumulation. What is a waiver of premium rider? A provision that allows premiums to be waived if the insured becomes disabled. What is a contingent beneficiary? A person or entity who receives benefits if the primary beneficiary is deceased or cannot claim them. What is the purpose of a substandard risk classification? To assign higher premiums to applicants with greater risk due to health or lifestyle factors. What is coinsurance in health insurance? The percentage of costs the insured must pay after the deductible is met. 3 What is a copayment? A fixed amount the insured pays for a covered service at the time of care. What is a stop-loss provision? A limit on the insured’s total out-of-pocket expenses. What is a policyholder’s consideration in an insurance contract? Payment of premiums. What is insurable interest? A financial or emotional stake in the continued existence of the insured person or property. What is the principle of indemnity? To restore the insured to their financial position prior to a loss without allowing profit. What is the difference between a revocable and irrevocable beneficiary? A revocable beneficiary can be changed by the policyowner, while an irrevocable beneficiary cannot without consent. What is a deductible in an insurance policy? The portion of a loss the insured must pay before the insurer will pay. 4 What is subrogation? The insurer’s legal right to recover losses from a third party after paying a claim. What is a probationary period in health insurance? A period at the beginning of coverage during which benefits for certain conditions are not payable. What is an assignment in life insurance? The transfer of ownership or benefits of a policy to another party. What is the difference between express and implied authority of an insurance agent? Express authority is specifically granted by contract; implied authority is assumed as necessary to perform duties. What is a subrogation clause used for? To allow the insurer to pursue recovery from a responsible third party after paying a claim. What is a policy declaration page?