Texas Life Health Insurance
Exam Questions and Answers
100% PASS
At what point must a life insurance applicant be informed of their rights
that fall under the Fair Credit Reporting Act? - CORRECT ANSWER-Upon
completion of the application
Who elects the governing body of a mutual insurance company? - CORRECT
ANSWER-policyholders
An insurance applicant MUST be informed of an investigation regarding
his/her reputation and character according to the - CORRECT ANSWER-
Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically
sharing their risk exposure? - CORRECT ANSWER-Treaty
The stated amount or percent of liquid assets that an insurer must have on
hand that will satisfy future obligations to its policyholders is called -
CORRECT ANSWER-reserves
,Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated - CORRECT ANSWER-1970
- Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of
a life policy? - CORRECT ANSWER-Promise to pay a death benefit
When third-party ownership is involved, applicants who also happen to be
the stated primary beneficiary are required to have - CORRECT ANSWER-
insurable interest in the proposed insured
Statements made on an insurance application that are believed to be true to
the best of the applicant's knowledge are called - CORRECT ANSWER-
representations
The part of a life insurance policy guaranteed to be true is called a(n) -
CORRECT ANSWER-warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - CORRECT ANSWER-Principal
The Consideration clause of an insurance contract includes - CORRECT
ANSWER-the schedule and amount of premium payments
E and F are business partners. Each takes out a $500,000 life insurance
policy on the other, naming himself as primary beneficiary. E and F
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,eventually terminate their business, and four months later E dies. Although
E was married with three children at the time of death, the primary
beneficiary is still F. However, an insurable interest no longer exists. Where
will the proceeds from E's life insurance policy be directed to? - CORRECT
ANSWER-In this situation, the proceeds from E's life insurance policy will go
to F.
Which of the following terms defines the legally enforceable promise in an
insurance contract by the insurer? - CORRECT ANSWER-Unilateral
When must insurable interest exist for a life insurance contract to be valid?
- CORRECT ANSWER-Inception of the contract
Insurance contracts are known as ____ because certain future conditions or
acts must occur before any claims can be paid. - CORRECT ANSWER-
conditional
Which of these require an offer, acceptance, and consideration? - CORRECT
ANSWER-Contract
Which of these arrangements allows one to bypass insurable interest laws? -
CORRECT ANSWER-Investor-Originated Life Insurance
Investor-originated life insurance (or IOLI), sometimes called stranger-
originated life insurance (or STOLI) is used to circumvent state insurable
interest statutes. This is done when an investor (or stranger) persuades an
individual to take out life insurance specifically for the purpose of selling the
, policy to the investor. The investor compensates the insured and makes the
premiums, then collects the death benefit when the insured dies.
Which of these is NOT considered to be an element of an insurance
contract?
the offer
acceptance
negotiating
consideration - CORRECT ANSWER-negotiating
An agent is an individual that represents whom? - CORRECT ANSWER-
Insurer
Insurable interest must exist at what time? - CORRECT ANSWER-at the
time of application
Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? - CORRECT ANSWER-Variable Life
Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? - CORRECT ANSWER-increase face
amount
When a policy owner exchanges a term policy for a whole life policy without
providing proof of good health, which of these apply? - CORRECT ANSWER-
Conversion provision
What type of life insurance are credit policies issued as? - CORRECT
ANSWER-Term
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
Exam Questions and Answers
100% PASS
At what point must a life insurance applicant be informed of their rights
that fall under the Fair Credit Reporting Act? - CORRECT ANSWER-Upon
completion of the application
Who elects the governing body of a mutual insurance company? - CORRECT
ANSWER-policyholders
An insurance applicant MUST be informed of an investigation regarding
his/her reputation and character according to the - CORRECT ANSWER-
Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically
sharing their risk exposure? - CORRECT ANSWER-Treaty
The stated amount or percent of liquid assets that an insurer must have on
hand that will satisfy future obligations to its policyholders is called -
CORRECT ANSWER-reserves
,Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated - CORRECT ANSWER-1970
- Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of
a life policy? - CORRECT ANSWER-Promise to pay a death benefit
When third-party ownership is involved, applicants who also happen to be
the stated primary beneficiary are required to have - CORRECT ANSWER-
insurable interest in the proposed insured
Statements made on an insurance application that are believed to be true to
the best of the applicant's knowledge are called - CORRECT ANSWER-
representations
The part of a life insurance policy guaranteed to be true is called a(n) -
CORRECT ANSWER-warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - CORRECT ANSWER-Principal
The Consideration clause of an insurance contract includes - CORRECT
ANSWER-the schedule and amount of premium payments
E and F are business partners. Each takes out a $500,000 life insurance
policy on the other, naming himself as primary beneficiary. E and F
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
,eventually terminate their business, and four months later E dies. Although
E was married with three children at the time of death, the primary
beneficiary is still F. However, an insurable interest no longer exists. Where
will the proceeds from E's life insurance policy be directed to? - CORRECT
ANSWER-In this situation, the proceeds from E's life insurance policy will go
to F.
Which of the following terms defines the legally enforceable promise in an
insurance contract by the insurer? - CORRECT ANSWER-Unilateral
When must insurable interest exist for a life insurance contract to be valid?
- CORRECT ANSWER-Inception of the contract
Insurance contracts are known as ____ because certain future conditions or
acts must occur before any claims can be paid. - CORRECT ANSWER-
conditional
Which of these require an offer, acceptance, and consideration? - CORRECT
ANSWER-Contract
Which of these arrangements allows one to bypass insurable interest laws? -
CORRECT ANSWER-Investor-Originated Life Insurance
Investor-originated life insurance (or IOLI), sometimes called stranger-
originated life insurance (or STOLI) is used to circumvent state insurable
interest statutes. This is done when an investor (or stranger) persuades an
individual to take out life insurance specifically for the purpose of selling the
, policy to the investor. The investor compensates the insured and makes the
premiums, then collects the death benefit when the insured dies.
Which of these is NOT considered to be an element of an insurance
contract?
the offer
acceptance
negotiating
consideration - CORRECT ANSWER-negotiating
An agent is an individual that represents whom? - CORRECT ANSWER-
Insurer
Insurable interest must exist at what time? - CORRECT ANSWER-at the
time of application
Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? - CORRECT ANSWER-Variable Life
Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? - CORRECT ANSWER-increase face
amount
When a policy owner exchanges a term policy for a whole life policy without
providing proof of good health, which of these apply? - CORRECT ANSWER-
Conversion provision
What type of life insurance are credit policies issued as? - CORRECT
ANSWER-Term
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
