TEXAS LIFE AND HEALTH INSURANCE
EXAM QUESTIONS WITH COMPLETE
SOLUTIONS
At what point must a life insurance applicant be informed of their rights that fall under
the Fair Credit Reporting Act? - Answer-Upon completion of the application
Who elects the governing body of a mutual insurance company? - Answer-policyholders
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the - Answer-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their
risk exposure? - 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 - Answer-reserves
Which of the following requires insurers to disclose when an applicant's consumer or
credit history is being investigated - Answer-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life
policy? - 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 - 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 - Answer-representations
The part of a life insurance policy guaranteed to be true is called a(n) - Answer-warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - Answer-Principal
The Consideration clause of an insurance contract includes - 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 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? -
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? - Answer-Unilateral
When must insurable interest exist for a life insurance contract to be valid? - Answer-
Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must
occur before any claims can be paid. - Answer-conditional
Which of these require an offer, acceptance, and consideration? - Answer-Contract
Which of these arrangements allows one to bypass insurable interest laws? - 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 - Answer-negotiating
An agent is an individual that represents whom? - Answer-Insurer
Insurable interest must exist at what time? - Answer-at the time of application
Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling? - Answer-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in
an Adjustable Life policy? - 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? - Answer-Conversion provision
What type of life insurance are credit policies issued as? - Answer-Term
, How long does the coverage normally remain on a limited-pay life policy? - Answer-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 - Answer-The premiums can be lowered
or raised, based on investment performance
Which of these is an element of a Variable Life policy? - Answer-A fixed, level premium
What type of life insurance incorporates flexible premiums and an adjustable death
benefit? - Answer-Universal Life
T would like to be assured $10,000 is available in 10 years to replace a roof on his
house. What kind of $10,000 policy should T purchase? - Answer-Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies?
- Answer-Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited
time is called - Answer-Limited-Pay Life
What kind of life insurance product covers children under their parent's policy? -
Answer-Term rider
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the
premium payment
Policyowner has no say where the investment will go but can choose the premium
mode
The investment vehicle for this type of policy is held in the insurer's general portfolio
The death benefit can vary but the policyowner has no say in the premium amount paid
- Answer-Policyowner controls where the investment will go and selects the amount of
the premium payment
P is looking to purchase a life insurance policy that will pay a stated monthly income to
his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that
20 year period. What type of policy should P purchase? - Answer-Family Maintenance
policy
Which of the following statements about a Variable Whole Life policy is CORRECT?
It provides a minimum guaranteed Death benefit
EXAM QUESTIONS WITH COMPLETE
SOLUTIONS
At what point must a life insurance applicant be informed of their rights that fall under
the Fair Credit Reporting Act? - Answer-Upon completion of the application
Who elects the governing body of a mutual insurance company? - Answer-policyholders
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the - Answer-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their
risk exposure? - 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 - Answer-reserves
Which of the following requires insurers to disclose when an applicant's consumer or
credit history is being investigated - Answer-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life
policy? - 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 - 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 - Answer-representations
The part of a life insurance policy guaranteed to be true is called a(n) - Answer-warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - Answer-Principal
The Consideration clause of an insurance contract includes - 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 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? -
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? - Answer-Unilateral
When must insurable interest exist for a life insurance contract to be valid? - Answer-
Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must
occur before any claims can be paid. - Answer-conditional
Which of these require an offer, acceptance, and consideration? - Answer-Contract
Which of these arrangements allows one to bypass insurable interest laws? - 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 - Answer-negotiating
An agent is an individual that represents whom? - Answer-Insurer
Insurable interest must exist at what time? - Answer-at the time of application
Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling? - Answer-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in
an Adjustable Life policy? - 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? - Answer-Conversion provision
What type of life insurance are credit policies issued as? - Answer-Term
, How long does the coverage normally remain on a limited-pay life policy? - Answer-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 - Answer-The premiums can be lowered
or raised, based on investment performance
Which of these is an element of a Variable Life policy? - Answer-A fixed, level premium
What type of life insurance incorporates flexible premiums and an adjustable death
benefit? - Answer-Universal Life
T would like to be assured $10,000 is available in 10 years to replace a roof on his
house. What kind of $10,000 policy should T purchase? - Answer-Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies?
- Answer-Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited
time is called - Answer-Limited-Pay Life
What kind of life insurance product covers children under their parent's policy? -
Answer-Term rider
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the
premium payment
Policyowner has no say where the investment will go but can choose the premium
mode
The investment vehicle for this type of policy is held in the insurer's general portfolio
The death benefit can vary but the policyowner has no say in the premium amount paid
- Answer-Policyowner controls where the investment will go and selects the amount of
the premium payment
P is looking to purchase a life insurance policy that will pay a stated monthly income to
his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that
20 year period. What type of policy should P purchase? - Answer-Family Maintenance
policy
Which of the following statements about a Variable Whole Life policy is CORRECT?
It provides a minimum guaranteed Death benefit
