Texas Life & Health Insurance License
Exam Official License Exam Actual Exam
2026/2027 with Detailed Rationales |
Complete Exam-Style Questions | Pass
Guaranteed – A+ Graded
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SECTION 1: TYPES OF LIFE INSURANCE POLICIES Q1 – Q10
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Question 1 of 50
A 34-year-old single father in Austin earns $72,000 annually as a software engineer. He wants
life insurance that provides permanent protection with a guaranteed level premium and a
cash value component that grows at a fixed rate set by the insurer. He does not want to
manage investment choices or assume market risk.
A. Variable universal life insurance
B. Adjustable life insurance
C. Whole life insurance ✓ CORRECT
D. Term life insurance with a return of premium rider
Correct Answer: C
Rationale: Whole life insurance provides permanent coverage with a guaranteed level
premium and fixed cash value growth determined by the insurer's general account, with no
investment risk transferred to the policyholder. Variable universal life requires the
policyholder to select investment subaccounts and assumes market risk, which this
applicant specifically wants to avoid. In Texas, whole life policies must clearly disclose the
guaranteed cash value schedule in the policy summary provided at delivery.
Question 2 of 50
A 45-year-old business owner in Dallas needs $2 million in life insurance coverage for the
next 15 years to secure a small business loan. Her budget is tight during the startup phase,
but she wants the option to convert to permanent coverage without evidence of insurability if
the business succeeds.
,A. Decreasing term life insurance
B. Level premium convertible term life insurance ✓ CORRECT
C. Whole life insurance with a term rider
D. Joint life insurance with her business partner
Correct Answer: B
Rationale: Level premium convertible term provides fixed premiums for a specified period
with a conversion privilege that guarantees the right to switch to permanent coverage without
a medical exam or proof of insurability. Decreasing term would reduce the death benefit over
time, which does not match her need for consistent $2 million coverage to secure the loan.
Texas regulations require insurers to offer conversion privileges for a minimum period,
typically before the term policy expires or the insured reaches age 70.
Question 3 of 50
A 28-year-old teacher in Houston purchases a universal life policy with a flexible premium
structure. After five years, she receives a significant inheritance and wants to use the policy's
cash value to temporarily cover premiums while she takes a sabbatical. She asks her agent
whether this will cause the policy to lapse.
A. The policy will lapse immediately if she stops paying premiums
B. She can use the cash value to cover premiums if the net amount at risk remains sufficient
✓ CORRECT
C. Only the interest portion of the cash value may be used for premium payments
D. She must convert to whole life before using cash value for premiums
Correct Answer: B
Rationale: Universal life insurance allows policyholders to use accumulated cash value to
pay premiums as long as the cash value is adequate to cover the monthly deductions for
mortality charges and expenses, keeping the net amount at risk viable. The policy does not
automatically lapse when premium payments stop if sufficient cash value exists to cover
ongoing costs. Texas agents must explain this flexibility during the sales presentation, as it is
a key distinguishing feature of universal life compared to whole life.
Question 4 of 50
A 52-year-old executive in San Antonio wants a permanent life insurance policy that offers a
death benefit and the potential for higher cash value accumulation through separate
investment accounts. He is comfortable with market fluctuations and wants to allocate
premiums among equity, bond, and money market subaccounts.
A. Current assumption whole life insurance
B. Variable life insurance ✓ CORRECT
C. Indexed universal life insurance
, D. Modified endowment contract
Correct Answer: B
Rationale: Variable life insurance features separate accounts that invest in underlying
subaccounts such as equities, bonds, and money market funds, allowing the policyholder to
assume investment risk in exchange for potential higher returns. Indexed universal life ties
cash value growth to a stock market index with participation rates and caps, but does not
offer direct allocation to separate subaccounts. In Texas, variable life policies are considered
securities and require the agent to hold both a life insurance license and appropriate
securities registrations.
Question 5 of 50
A married couple in Fort Worth, both age 60, wants a single life insurance policy that pays the
death benefit upon the second spouse's death. Their primary goal is to provide liquidity for
estate taxes and ensure their children inherit the family ranch without forced sale.
A. Joint life insurance with first-to-die payout
B. Survivorship life insurance ✓ CORRECT
C. Individual term policies on each spouse
D. Split-dollar life insurance arrangement
Correct Answer: B
Rationale: Survivorship life insurance, also called second-to-die or last survivor insurance,
pays the death benefit only after both insureds have died, making it ideal for estate liquidity
needs where no immediate death benefit is required at the first death. Joint life with
first-to-die pays upon the first death, which would not address their estate tax planning goal.
Texas estate planning attorneys frequently recommend survivorship policies for ranch and
farmland owners seeking to preserve generational assets.
Question 6 of 50
A 38-year-old physician in Plano buys a $500,000 20-year level term policy. At age 48, with ten
years remaining on the term, she is diagnosed with a chronic condition that makes obtaining
new coverage difficult. She wants to maintain her current death benefit without requalifying
medically.
A. She must apply for a new term policy and accept higher rates
B. She can exercise the guaranteed renewable provision to continue coverage
C. She can convert the term policy to a permanent policy with the same face amount ✓
CORRECT
D. She can only reduce the face amount and extend the term period
Correct Answer: C
Exam Official License Exam Actual Exam
2026/2027 with Detailed Rationales |
Complete Exam-Style Questions | Pass
Guaranteed – A+ Graded
══════════════════════════════════════
SECTION 1: TYPES OF LIFE INSURANCE POLICIES Q1 – Q10
══════════════════════════════════════
Question 1 of 50
A 34-year-old single father in Austin earns $72,000 annually as a software engineer. He wants
life insurance that provides permanent protection with a guaranteed level premium and a
cash value component that grows at a fixed rate set by the insurer. He does not want to
manage investment choices or assume market risk.
A. Variable universal life insurance
B. Adjustable life insurance
C. Whole life insurance ✓ CORRECT
D. Term life insurance with a return of premium rider
Correct Answer: C
Rationale: Whole life insurance provides permanent coverage with a guaranteed level
premium and fixed cash value growth determined by the insurer's general account, with no
investment risk transferred to the policyholder. Variable universal life requires the
policyholder to select investment subaccounts and assumes market risk, which this
applicant specifically wants to avoid. In Texas, whole life policies must clearly disclose the
guaranteed cash value schedule in the policy summary provided at delivery.
Question 2 of 50
A 45-year-old business owner in Dallas needs $2 million in life insurance coverage for the
next 15 years to secure a small business loan. Her budget is tight during the startup phase,
but she wants the option to convert to permanent coverage without evidence of insurability if
the business succeeds.
,A. Decreasing term life insurance
B. Level premium convertible term life insurance ✓ CORRECT
C. Whole life insurance with a term rider
D. Joint life insurance with her business partner
Correct Answer: B
Rationale: Level premium convertible term provides fixed premiums for a specified period
with a conversion privilege that guarantees the right to switch to permanent coverage without
a medical exam or proof of insurability. Decreasing term would reduce the death benefit over
time, which does not match her need for consistent $2 million coverage to secure the loan.
Texas regulations require insurers to offer conversion privileges for a minimum period,
typically before the term policy expires or the insured reaches age 70.
Question 3 of 50
A 28-year-old teacher in Houston purchases a universal life policy with a flexible premium
structure. After five years, she receives a significant inheritance and wants to use the policy's
cash value to temporarily cover premiums while she takes a sabbatical. She asks her agent
whether this will cause the policy to lapse.
A. The policy will lapse immediately if she stops paying premiums
B. She can use the cash value to cover premiums if the net amount at risk remains sufficient
✓ CORRECT
C. Only the interest portion of the cash value may be used for premium payments
D. She must convert to whole life before using cash value for premiums
Correct Answer: B
Rationale: Universal life insurance allows policyholders to use accumulated cash value to
pay premiums as long as the cash value is adequate to cover the monthly deductions for
mortality charges and expenses, keeping the net amount at risk viable. The policy does not
automatically lapse when premium payments stop if sufficient cash value exists to cover
ongoing costs. Texas agents must explain this flexibility during the sales presentation, as it is
a key distinguishing feature of universal life compared to whole life.
Question 4 of 50
A 52-year-old executive in San Antonio wants a permanent life insurance policy that offers a
death benefit and the potential for higher cash value accumulation through separate
investment accounts. He is comfortable with market fluctuations and wants to allocate
premiums among equity, bond, and money market subaccounts.
A. Current assumption whole life insurance
B. Variable life insurance ✓ CORRECT
C. Indexed universal life insurance
, D. Modified endowment contract
Correct Answer: B
Rationale: Variable life insurance features separate accounts that invest in underlying
subaccounts such as equities, bonds, and money market funds, allowing the policyholder to
assume investment risk in exchange for potential higher returns. Indexed universal life ties
cash value growth to a stock market index with participation rates and caps, but does not
offer direct allocation to separate subaccounts. In Texas, variable life policies are considered
securities and require the agent to hold both a life insurance license and appropriate
securities registrations.
Question 5 of 50
A married couple in Fort Worth, both age 60, wants a single life insurance policy that pays the
death benefit upon the second spouse's death. Their primary goal is to provide liquidity for
estate taxes and ensure their children inherit the family ranch without forced sale.
A. Joint life insurance with first-to-die payout
B. Survivorship life insurance ✓ CORRECT
C. Individual term policies on each spouse
D. Split-dollar life insurance arrangement
Correct Answer: B
Rationale: Survivorship life insurance, also called second-to-die or last survivor insurance,
pays the death benefit only after both insureds have died, making it ideal for estate liquidity
needs where no immediate death benefit is required at the first death. Joint life with
first-to-die pays upon the first death, which would not address their estate tax planning goal.
Texas estate planning attorneys frequently recommend survivorship policies for ranch and
farmland owners seeking to preserve generational assets.
Question 6 of 50
A 38-year-old physician in Plano buys a $500,000 20-year level term policy. At age 48, with ten
years remaining on the term, she is diagnosed with a chronic condition that makes obtaining
new coverage difficult. She wants to maintain her current death benefit without requalifying
medically.
A. She must apply for a new term policy and accept higher rates
B. She can exercise the guaranteed renewable provision to continue coverage
C. She can convert the term policy to a permanent policy with the same face amount ✓
CORRECT
D. She can only reduce the face amount and extend the term period
Correct Answer: C
