PEARSON VUE TEXAS LIFE AND HEALTH INSURANCE| COMPLETE
REAL EXAM 2026/2027 | QUESTIONS AND 100% VERIFIED ANSWERS
| SUCCESS GUARANTEED
1. What is the definition of risk? A) The certainty of loss B) The uncertainty of
loss C) The cause of loss D) The amount of loss ANSWER : B) The uncertainty
of loss
2. What is the difference between a peril and a hazard? A) A peril is a
condition that increases the chance of loss; a hazard is the cause of loss B) A
peril is the cause of loss; a hazard is a condition that increases the chance of
loss C) They are the same thing D) A peril is a type of insurance policy ANSWER
: B) A peril is the cause of loss; a hazard is a condition that increases the
chance of loss
3. Which of the following is an example of a moral hazard? A) A slippery
sidewalk B) An insured who intentionally sets fire to their own home C) Living
in a flood zone D) Wearing a seatbelt ANSWER : B) An insured who
intentionally sets fire to their own home
4. What is insurable interest? A) The interest an insurer has in making a profit
B) The financial interest a person has in the property or life being insured C)
The interest rate charged on policy loans D) The commission an agent earns
ANSWER : B) The financial interest a person has in the property or life being
insured
5. When must insurable interest exist for a life insurance policy to be valid?
A) At the time of claim B) At the time of application C) Throughout the entire
policy period D) Only at the time of death ANSWER : B) At the time of
application
6. What is the principle of indemnity? A) The insurer must pay the full face
amount regardless of loss B) The insured should be restored to the same
financial position after loss as before C) The agent must be paid a commission
,D) The policy must be renewed automatically ANSWER : B) The insured
should be restored to the same financial position after loss as before
7. Which of the following is NOT an essential element of a valid contract? A)
Offer and acceptance B) Consideration C) Competent parties D) Written
documentation ANSWER : D) Written documentation
8. What makes an insurance contract a contract of adhesion? A) Both parties
negotiate the terms B) The insurer drafts the policy and the insured takes it or
leaves it C) It is always written in simple language D) It requires a court order to
enforce ANSWER : B) The insurer drafts the policy and the insured takes it or
leaves it
9. Why is an insurance contract considered aleatory? A) Both parties
exchange equal values B) One party may receive much more than they give C)
It is always written in Latin D) It requires three witnesses ANSWER : B) One
party may receive much more than they give
10. What is the difference between a representation and a warranty? A) A
representation is guaranteed to be true; a warranty is believed to be true B) A
representation is believed to be true; a warranty is guaranteed to be true C)
They are the same thing D) A representation is oral; a warranty is written
ANSWER : B) A representation is believed to be true; a warranty is
guaranteed to be true
11. What is the purpose of the Fair Credit Reporting Act? A) To regulate
insurance premiums B) To protect consumers regarding credit reporting and
investigations C) To establish insurance company reserves D) To license
insurance agents ANSWER : B) To protect consumers regarding credit
reporting and investigations
12. When must a life insurance applicant be informed of their rights under
the Fair Credit Reporting Act? A) When the policy is delivered B) Upon
completion of the application C) At the time of claim D) Within 30 days of
policy issuance ANSWER : B) Upon completion of the application
13. What is the Law of Large Numbers? A) The more policies an insurer writes,
the more predictable losses become B) Large insurance companies always
make more profit C) Large policies have higher premiums D) The larger the
deductible, the lower the premium ANSWER : A) The more policies an insurer
writes, the more predictable losses become
,14. What is the difference between a stock company and a mutual company?
A) Stock companies are owned by policyholders; mutual companies are owned
by stockholders B) Stock companies are owned by stockholders; mutual
companies are owned by policyholders C) There is no difference D) Stock
companies only sell stock insurance ANSWER : B) Stock companies are owned
by stockholders; mutual companies are owned by policyholders
15. Who elects the governing body of a mutual insurance company? A) The
board of directors B) The policyholders C) The stockholders D) The state
insurance commissioner ANSWER : B) The policyholders
16. What is a domestic insurance company in Texas? A) A company
incorporated in another country B) A company incorporated and formed in
Texas C) Any company licensed to do business in Texas D) A company that only
sells domestic policies ANSWER : B) A company incorporated and formed in
Texas
17. What is a foreign insurance company? A) A company from another country
B) A company incorporated under the laws of another state C) A company that
sells international policies D) A company not licensed in Texas ANSWER : B) A
company incorporated under the laws of another state
18. What is an alien insurance company? A) A company from outer space B) A
company incorporated under the laws of another country C) A company that
only insures non-citizens D) A company not approved by the state ANSWER :
B) A company incorporated under the laws of another country
19. What does a certificate of authority do? A) It licenses an individual agent
B) It permits an insurance company to transact business in a state C) It certifies
an insurance policy D) It authorizes the sale of securities ANSWER : B) It
permits an insurance company to transact business in a state
20. What is the difference between express, implied, and apparent
authority? A) Express is written, implied is assumed from position, apparent is
what the agent appears to have B) They are all the same thing C) Express is
oral, implied is written, apparent is assumed D) Express is for life insurance
only ANSWER : A) Express is written, implied is assumed from position,
apparent is what the agent appears to have
21. What is a fiduciary responsibility? A) The duty to maximize profits B) The
duty to act in the best interest of another party C) The duty to sell as many
, policies as possible D) The duty to avoid all risks ANSWER : B) The duty to act
in the best interest of another party
22. What is the purpose of reinsurance? A) To increase premiums B) To
transfer risk from one insurer to another C) To eliminate the need for reserves
D) To avoid state regulation ANSWER : B) To transfer risk from one insurer to
another
23. What is a treaty reinsurance contract? A) A one-time agreement for a
specific risk B) An automatic agreement to share all risks of a certain type C) A
contract between an agent and an insurer D) A contract for international
insurance only ANSWER : B) An automatic agreement to share all risks of a
certain type
24. What are reserves in insurance? A) Profits earned by the company B)
Liquid assets set aside to pay future claims C) Commissions paid to agents D)
Premiums collected but not yet earned ANSWER : B) Liquid assets set aside to
pay future claims
25. What is the difference between a participating and non-participating
policy? A) Participating policies pay dividends; non-participating do not B)
Participating policies have higher premiums; non-participating have lower C)
Participating policies are only for groups D) There is no difference ANSWER :
A) Participating policies pay dividends; non-participating do not
26. What is a binder? A) A permanent insurance policy B) A temporary
insurance contract C) A type of reinsurance D) A claim form ANSWER : B) A
temporary insurance contract
27. What is subrogation? A) The right of the insurer to pursue a third party
that caused an insurance loss B) The right of the insured to cancel a policy C)
The process of underwriting D) The payment of dividends ANSWER : A) The
right of the insurer to pursue a third party that caused an insurance loss
28. What is the purpose of underwriting? A) To sell policies B) To evaluate and
classify risk C) To pay claims D) To invest premiums ANSWER : B) To evaluate
and classify risk
29. What is a rated policy? A) A policy with a higher premium due to increased
risk B) A policy with a lower premium C) A policy that has been cancelled D) A
policy that pays dividends ANSWER : A) A policy with a higher premium due
to increased risk
REAL EXAM 2026/2027 | QUESTIONS AND 100% VERIFIED ANSWERS
| SUCCESS GUARANTEED
1. What is the definition of risk? A) The certainty of loss B) The uncertainty of
loss C) The cause of loss D) The amount of loss ANSWER : B) The uncertainty
of loss
2. What is the difference between a peril and a hazard? A) A peril is a
condition that increases the chance of loss; a hazard is the cause of loss B) A
peril is the cause of loss; a hazard is a condition that increases the chance of
loss C) They are the same thing D) A peril is a type of insurance policy ANSWER
: B) A peril is the cause of loss; a hazard is a condition that increases the
chance of loss
3. Which of the following is an example of a moral hazard? A) A slippery
sidewalk B) An insured who intentionally sets fire to their own home C) Living
in a flood zone D) Wearing a seatbelt ANSWER : B) An insured who
intentionally sets fire to their own home
4. What is insurable interest? A) The interest an insurer has in making a profit
B) The financial interest a person has in the property or life being insured C)
The interest rate charged on policy loans D) The commission an agent earns
ANSWER : B) The financial interest a person has in the property or life being
insured
5. When must insurable interest exist for a life insurance policy to be valid?
A) At the time of claim B) At the time of application C) Throughout the entire
policy period D) Only at the time of death ANSWER : B) At the time of
application
6. What is the principle of indemnity? A) The insurer must pay the full face
amount regardless of loss B) The insured should be restored to the same
financial position after loss as before C) The agent must be paid a commission
,D) The policy must be renewed automatically ANSWER : B) The insured
should be restored to the same financial position after loss as before
7. Which of the following is NOT an essential element of a valid contract? A)
Offer and acceptance B) Consideration C) Competent parties D) Written
documentation ANSWER : D) Written documentation
8. What makes an insurance contract a contract of adhesion? A) Both parties
negotiate the terms B) The insurer drafts the policy and the insured takes it or
leaves it C) It is always written in simple language D) It requires a court order to
enforce ANSWER : B) The insurer drafts the policy and the insured takes it or
leaves it
9. Why is an insurance contract considered aleatory? A) Both parties
exchange equal values B) One party may receive much more than they give C)
It is always written in Latin D) It requires three witnesses ANSWER : B) One
party may receive much more than they give
10. What is the difference between a representation and a warranty? A) A
representation is guaranteed to be true; a warranty is believed to be true B) A
representation is believed to be true; a warranty is guaranteed to be true C)
They are the same thing D) A representation is oral; a warranty is written
ANSWER : B) A representation is believed to be true; a warranty is
guaranteed to be true
11. What is the purpose of the Fair Credit Reporting Act? A) To regulate
insurance premiums B) To protect consumers regarding credit reporting and
investigations C) To establish insurance company reserves D) To license
insurance agents ANSWER : B) To protect consumers regarding credit
reporting and investigations
12. When must a life insurance applicant be informed of their rights under
the Fair Credit Reporting Act? A) When the policy is delivered B) Upon
completion of the application C) At the time of claim D) Within 30 days of
policy issuance ANSWER : B) Upon completion of the application
13. What is the Law of Large Numbers? A) The more policies an insurer writes,
the more predictable losses become B) Large insurance companies always
make more profit C) Large policies have higher premiums D) The larger the
deductible, the lower the premium ANSWER : A) The more policies an insurer
writes, the more predictable losses become
,14. What is the difference between a stock company and a mutual company?
A) Stock companies are owned by policyholders; mutual companies are owned
by stockholders B) Stock companies are owned by stockholders; mutual
companies are owned by policyholders C) There is no difference D) Stock
companies only sell stock insurance ANSWER : B) Stock companies are owned
by stockholders; mutual companies are owned by policyholders
15. Who elects the governing body of a mutual insurance company? A) The
board of directors B) The policyholders C) The stockholders D) The state
insurance commissioner ANSWER : B) The policyholders
16. What is a domestic insurance company in Texas? A) A company
incorporated in another country B) A company incorporated and formed in
Texas C) Any company licensed to do business in Texas D) A company that only
sells domestic policies ANSWER : B) A company incorporated and formed in
Texas
17. What is a foreign insurance company? A) A company from another country
B) A company incorporated under the laws of another state C) A company that
sells international policies D) A company not licensed in Texas ANSWER : B) A
company incorporated under the laws of another state
18. What is an alien insurance company? A) A company from outer space B) A
company incorporated under the laws of another country C) A company that
only insures non-citizens D) A company not approved by the state ANSWER :
B) A company incorporated under the laws of another country
19. What does a certificate of authority do? A) It licenses an individual agent
B) It permits an insurance company to transact business in a state C) It certifies
an insurance policy D) It authorizes the sale of securities ANSWER : B) It
permits an insurance company to transact business in a state
20. What is the difference between express, implied, and apparent
authority? A) Express is written, implied is assumed from position, apparent is
what the agent appears to have B) They are all the same thing C) Express is
oral, implied is written, apparent is assumed D) Express is for life insurance
only ANSWER : A) Express is written, implied is assumed from position,
apparent is what the agent appears to have
21. What is a fiduciary responsibility? A) The duty to maximize profits B) The
duty to act in the best interest of another party C) The duty to sell as many
, policies as possible D) The duty to avoid all risks ANSWER : B) The duty to act
in the best interest of another party
22. What is the purpose of reinsurance? A) To increase premiums B) To
transfer risk from one insurer to another C) To eliminate the need for reserves
D) To avoid state regulation ANSWER : B) To transfer risk from one insurer to
another
23. What is a treaty reinsurance contract? A) A one-time agreement for a
specific risk B) An automatic agreement to share all risks of a certain type C) A
contract between an agent and an insurer D) A contract for international
insurance only ANSWER : B) An automatic agreement to share all risks of a
certain type
24. What are reserves in insurance? A) Profits earned by the company B)
Liquid assets set aside to pay future claims C) Commissions paid to agents D)
Premiums collected but not yet earned ANSWER : B) Liquid assets set aside to
pay future claims
25. What is the difference between a participating and non-participating
policy? A) Participating policies pay dividends; non-participating do not B)
Participating policies have higher premiums; non-participating have lower C)
Participating policies are only for groups D) There is no difference ANSWER :
A) Participating policies pay dividends; non-participating do not
26. What is a binder? A) A permanent insurance policy B) A temporary
insurance contract C) A type of reinsurance D) A claim form ANSWER : B) A
temporary insurance contract
27. What is subrogation? A) The right of the insurer to pursue a third party
that caused an insurance loss B) The right of the insured to cancel a policy C)
The process of underwriting D) The payment of dividends ANSWER : A) The
right of the insurer to pursue a third party that caused an insurance loss
28. What is the purpose of underwriting? A) To sell policies B) To evaluate and
classify risk C) To pay claims D) To invest premiums ANSWER : B) To evaluate
and classify risk
29. What is a rated policy? A) A policy with a higher premium due to increased
risk B) A policy with a lower premium C) A policy that has been cancelled D) A
policy that pays dividends ANSWER : A) A policy with a higher premium due
to increased risk
