Texas Life and Health Insurance Exam – Questions With
Solutions
At what point must a life insurance applicant be informed of their rights that
fall under the Fair Credit Reporting Act? Correct Ans - Upon
completion of the application
Who elects the governing body of a mutual insurance company? Correct
Ans - policyholders
An insurance applicant MUST be informed of an investigation regarding
his/her reputation and character according to the Correct Ans - Fair
Credit Reporting Act
What type of reinsurance contract involves two companies automatically
sharing their risk exposure? Correct Ans - 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 Ans - reserves
Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated Correct Ans - 1970 -
Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a
life policy? Correct Ans - 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 Ans -
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 Ans -
representations
The part of a life insurance policy guaranteed to be true is called a(n)
Correct Ans - warranty
,Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent Correct Ans - Principal
The Consideration clause of an insurance contract includes Correct Ans -
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 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 Ans - 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 Ans - Unilateral
When must insurable interest exist for a life insurance contract to be valid?
Correct Ans - Inception of the contract
Insurance contracts are known as ____ because certain future conditions or
acts must occur before any claims can be paid. Correct Ans -
conditional
Which of these require an offer, acceptance, and consideration? Correct
Ans - Contract
Which of these arrangements allows one to bypass insurable interest laws?
Correct Ans - 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 Ans - negotiating
An agent is an individual that represents whom? Correct Ans - Insurer
Insurable interest must exist at what time? Correct Ans - at the time of
application
Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? Correct Ans - Variable Life
Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? Correct Ans - 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 Ans -
Conversion provision
What type of life insurance are credit policies issued as? Correct Ans -
Term
How long does the coverage normally remain on a limited-pay life policy?
Correct Ans - age 100
All of these statements about Equity Indexed Life Insurance are correct
EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the
cash value will mirror that of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 Correct Ans - The
premiums can be lowered or raised, based on investment performance
Solutions
At what point must a life insurance applicant be informed of their rights that
fall under the Fair Credit Reporting Act? Correct Ans - Upon
completion of the application
Who elects the governing body of a mutual insurance company? Correct
Ans - policyholders
An insurance applicant MUST be informed of an investigation regarding
his/her reputation and character according to the Correct Ans - Fair
Credit Reporting Act
What type of reinsurance contract involves two companies automatically
sharing their risk exposure? Correct Ans - 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 Ans - reserves
Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated Correct Ans - 1970 -
Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a
life policy? Correct Ans - 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 Ans -
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 Ans -
representations
The part of a life insurance policy guaranteed to be true is called a(n)
Correct Ans - warranty
,Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent Correct Ans - Principal
The Consideration clause of an insurance contract includes Correct Ans -
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 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 Ans - 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 Ans - Unilateral
When must insurable interest exist for a life insurance contract to be valid?
Correct Ans - Inception of the contract
Insurance contracts are known as ____ because certain future conditions or
acts must occur before any claims can be paid. Correct Ans -
conditional
Which of these require an offer, acceptance, and consideration? Correct
Ans - Contract
Which of these arrangements allows one to bypass insurable interest laws?
Correct Ans - 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 Ans - negotiating
An agent is an individual that represents whom? Correct Ans - Insurer
Insurable interest must exist at what time? Correct Ans - at the time of
application
Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? Correct Ans - Variable Life
Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? Correct Ans - 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 Ans -
Conversion provision
What type of life insurance are credit policies issued as? Correct Ans -
Term
How long does the coverage normally remain on a limited-pay life policy?
Correct Ans - age 100
All of these statements about Equity Indexed Life Insurance are correct
EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the
cash value will mirror that of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 Correct Ans - The
premiums can be lowered or raised, based on investment performance
