Pearson VUE Texas Life and Health Insurance Actual Exam – Texas Department of Insurance (TDI) General Lines Agent – 2026/2027 Edition – 200 Questions with Evidence-Based Verified Answers (100% correct solutions)

Pearson VUE Texas Life and Health Insurance Actual Exam – Texas Department of Insurance (TDI) General Lines Agent – 2026/2027 Edition – 200 Questions with Evidence-Based Verified Answers (100% correct solutions) An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called An installment Refund annuity A Straight Life annuity A Cash Refund annuity A Joint Life annuity An installment Refund annuity One becomes eligible for Social Security disability benefits after having been disabled for 3 months 5 months 6 months 12 months 5 months A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? Straight life accumulates faster than Limited-pay Life 20-Pay Life accumulates cash value faster than Straight Life Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating 20-Pay Life and Straight Life accumulate cash value at the same rate 20-Pay Life accumulates cash value faster than Straight Life Who makes the legally enforceable promises in a unilateral insurance policy? Beneficiary Insurance company Insured Applicant Insurance company The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and the initial premium agreeing to a physical examination delivery of policy disclosure of any medical conditions the initial premium Which parts of a life insurance policy are guaranteed to be true? Rating Representation Statement Warranty Warranty A comprehensive major medical health insurance policy contains an Eligible Expenses provision which identifies the types of health care services that are covered. All of the following health care services are typically covered EXCEPT for hospital charges physician fees experimental and investigative services nursing services experimental and investigative services If a retiree on Medicare required five hospital stays in one year, which policy would provide the best insurance for excess hospital expenses? Long-term care Indemnity Medicare Supplement Medicaid Medicare Supplement S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits? No benefits are payable under the Master contract Full benefits are payable under the Master contract Full benefits are payable under the converted policy Benefits less required premium are payable under the converted policy Full benefits are payable under the Master contract All of the following are limited benefit plans EXCEPT cancer policies life insurance policies dental policies critical illness policies life insurance policies A physician opens up a new practice and qualifies for a $7,000/month Disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow? Extended Term rider Cost of Living Adjustment rider Guaranteed Insurability Option rider Waiver of Premium rider Guaranteed Insurability Option rider An agent whose license has been revoked is required to wait at least five years before applying for a new license submit all previously written policies to the Commissioner of Insurance's office for servicing of the accounts cancel all policies currently in effect and advise the insureds to place them elsewhere continue to service the existing accounts but not solicit new business wait at least five years before applying for a new license The benefits under a Disability Buy-Out policy are normally paid in installments taxable to the beneficiary payable to the company or another shareholder normally paid after a short elimination period payable to the company or another shareholder he Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for insolvency health information financial information overinsurance health information How are surrender charges deducted in a life policy with a rear-end loaded provision? Deducted from the death benefit Deducted when the policy is discontinued Deducted from policy's cash value Deducted when assigned to another policyowner Deducted when the policy is discontinued What MUST an insurance company use in its advertising? Its trade name Its true corporate name Its service mark Its corporate logo Its true corporate name An accident policy will most likely pay a benefit for a(n) self-inflicted injury critical illness on-the-job accident off-the-job accident off-the-job accident M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT policy is delivered free-look period has expired insurance company issues policy initial premium is collected free-look period has expired When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n) Federal Fair Credit Act Violation Title 18 Fraud violation Anti-Money Laundering violation Unfair Trade Practice violation Anti-Money Laundering violation Which of these do NOT constitute policy delivery? Policy mailed to applicant Policy mailed to agent Policy delivered to the applicant by the agent Policy issued with a rating Policy issued with a rating What is the MINIMUM number of Activities of Daily Living (ADL) an insured must be unable to perform to qualify for Long Term Care benefits? 1 2 3 4 2 An agent who tells a client that dividends are guaranteed may be guilty of fraud rebating misrepresentation slander misrepresentation Which statement regarding a Key Employee Life policy is NOT true? The application must be signed by the key employee Its purpose is to prevent the financial loss that may ensue if a key employee dies The beneficiary is named by the key employee The company purchases, owns, pays the premiums and is the beneficiary The beneficiary is named by the key employee A policyowner's rights are limited under which beneficiary designation? Revocable Tertiary Contingent Irrevocable Irrevocable Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take? Deposit the applicant's check into his account and make a personal check out to the insurance company from his personal account Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company Cross off his name on the "pay to" portion of the check, write the name of the insurance company, and send the check back to the insurance company Deposit the check in to his personal account, use the funds to purchase a cashiers check, and send the new cashiers check back to the insurance company Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company Variable Whole Life Insurance can be described as both an insurance and securities product an insurance product only a securities product only the insurance company assumes the investment risk both an insurance and securities product A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary? Medicaid Long-term care Medicare Her group health plan Her group health plan Medicare is a disability program is a hospital and medical expense insurance program offers assistance in making health insurance premiums Part D provides payment for surgeon expenses is a hospital and medical expense insurance program T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take? Allow her to take a tax deduction on unearned premiums Increase her policy's coverage amount Decrease her policy's coverage amount Nothing Increase her policy's coverage amount All of the following statements about health coverage for newborns are correct EXCEPT coverage begins and benefits are payable from the moment of birth coverage includes necessary care and treatment of congenital defects coverage during the first year is limited to congenital defects continued coverage after the first 31 days is dependent on notification coverage during the first year is limited to congenital defects Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself? Policy Exclusion Incontestable Entire Contract Provision Assignment Entire Contract Provision An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a $125,000 individual whole life policy $25,000 modified whole life policy $25,000 individual term life policy $25,000 individual whole life policy $25,000 individual whole life policy M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is Adjustable Life Indeterminate Premium Life Grader Premium Life Modified Premium Life Modified Premium Life S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT type of life insurance S's attained age dividend amount used toward purchase beneficiary's age beneficiary's age Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy? Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company Which of the following statements is CORRECT about the period in which a Term Policy can be converted? It is the same in all contracts It is set by state regulation It can be changed by the insured It varies according to the contracts It varies according to the contracts If, at the time of an insured's death, the insurance company discovers that the insured's age was misstated on the application for life insurance, the company will most likely deny the claim for policy proceeds on the basis of fraud collect the correct premiums and pay the claim pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age pay the policy proceeds less a penalty not to exceed 12% of those proceeds pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective? The date the sales appointment was made The date the application was submitted to the insurance company The date of application The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured An assignment of benefits of a Health Policy transfers payments to someone other than the policyowner is prohibited by state law is allowed only on policies dates after 1992 transfers rights from the company to the policyholder transfers payments to someone other than the policyowner What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)? MEWA Blanket insurance Dread disease insurance Disability insurance Dread disease insurance K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy would cover her loss of income? Indemnity Major Medical Travel Disability Income Disability Income M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son? Tertiary Irrevocable Revocable Contingent Revocable The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured dies of natural causes becomes critically ill becomes chronically ill is blinded in an accident is blinded in an accident Which of the following policy features allows an insured to defer current health charges to the following year's deductible instead of the current year's deducitble? Deferral provision Carryover provision Stop Loss provision Corridor provision Carryover provision T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this? Fixed Certain Joint and Full Survivor Life Annuity with Period Certain Installment Refund Life Annuity with Period Certain On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take? Collect initial premium Collect initial premium along with a signed health statement Explain to the applicant the policy is no longer in effect due to change in health condition Collect initial premium and leave a binding receipt Collect initial premium along with a signed health statement Which of the following costs would a Basic Hospital/Surgical policy likely cover? Surgically removing a facial birthmark Care given at a nursing home Treating a wound from a soldier injured at war Lost income caused by a hospital stay Surgically removing a facial birthmark Which of these statements concerning an Individual Straight Life annuity is accurate? Life expectancy of the annuitant is not a factor The payments are received tax-free Only available to employees of nonprofit charitable, educational, and religious organizations Payments are made to an annuitant for life Payments are made to an annuitant for life J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? Payor clause Automatic Premium Loan provision Reinstatement provision Waiver of Premium Reinstatement provision P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA laws, which of the following statements is TRUE? She DOES need to provide evidence of insurability She does NOT need to provide evidence of insurability She will have up to 6 months to convert to an individual policy She will be paying exactly the same premium for the individual plan as she did the group plan She does NOT need to provide evidence of insurability A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value? Cash surrender Life settlement contract Buy-sell arrangement 1031 Exchange Life settlement contract Who can purchase a plan through the Marketplace? Anyone Any legal resident except those incarcerated Only those who do not have access to employer-sponsored coverage Only those who might be eligible for tax credits Any legal resident except those incarcerated What is Old Age and Survivors Health Insurance (OASDHI) also known as? Medicare Social Security Medicaid FICA Social Security Which of these require an offer, acceptance, and consideration? Warranty Estoppel Contract Representation Contract How does a typical Variable Life Policy investment account grow? Tied to price of gold Through mutual funds, stocks, bonds Based on returns from insurer's general account Tied to Treasury Bills Through mutual funds, stocks, bonds An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the agent applicant's spouse National Association of Insurance Commissioners (NAIC) applicant's physician applicant's physician After the initial enrollment period, an HMO must hold an open enrollment period of how many days at LEAST once in every 12-month period? 15 31 45 90 31 Which of the following is NOT included in the policy face? Free Look provision Name of the insured Name of the insurer Exclusions Exclusions A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following? Guaranteed Insurability rider Aviation exclusion Impairment rider Accidental Death Benefit rider Aviation exclusion In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy? Nonforfeiture Entire Contract Insuring Clause Owner's Rights Owner's Rights A Renewable Term Policy is renewable at the option of the Owner Company Insured Assignee insured Which of these is considered a true statement regarding Medicaid? Funded by both state and federal governments Intended to be used by individuals age 65 and older Provides disability income benefits Automatically covers those receiving Social Security disability benefits Funded by both state and federal governments 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 Policyowner controls where the investment will go and selects the amount of the premium payment In life insurance, the needs approach is used mostly to establish which type of life insurance a client should apply for how much life insurance a client should apply for which company a client should use when applying for life insurance what the maximum amount the client can spend on life insurance how much life insurance a client should apply for A life insurance illustration is NOT required to include the name of the insurer underwriting or rating classification upon which the illustration is based initial death benefit company's mortality table company's mortality table Which of these characteristics is consistent with a Straight Life policy? Owner can adjust both premium and death benefit Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract Owner has the option of converting to term insurance Premiums are payable for as long as there is insurance coverage in force Premiums are payable for as long as there is insurance coverage in force Under the Texas insurance code, which of the following statements about the Suicide clause is CORRECT? The Commissioner of Insurance must review insurance companies' Suicide clauses every five years for discrimination A Suicide clause must apply equally to Life and Accidental Death and Dismemberment (AD&D) policies An insurance company must actuarially justify any suicide limitation Suicide may not be a defense against payment after the second year Suicide may not be a defense against payment after the second year Which of the following best describes a contingent beneficiary? Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured Person designated by the primary beneficiary's executor to receive policy proceeds Person designated by the state to receive policy proceeds in the event that the primary beneficiary dies Person designated by the insurance comapany to receive policy proceeds in the event that the primary beneficiary dies Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured A Business Disability Buyout plan policy is designed as an incurred expense plan with a very short Elimination period to pay benefits to the Corporation or other shareholders to pay benefits to the insured's spouse to pay benefits to the Corporation or other shareholders Term insurance has which of the following characteristics? Expires at the end of the policy period Builds cash value Has nonforfeiture options Endows at the end of the policy period Expires at the end of the policy period An agent MUST do which of the following during a sales presentation for a participating life insurance policy? Include a statement that dividends are NOT guaranteed Include a statement that dividends ARE guaranteed Explain the applicable Nonforfeiture values Explain the surrender cost indexes for 5 and 10 years Include a statement that dividends are NOT guaranteed In regards to representations or warranties, which of these statements is TRUE? Warranties are statements considered to be true to the best of the applicant's belief If material to the risk, false representations will void a policy Representations are statements guaranteed to be true in every respect If material to the risk, false representations will NOT void a policy If material to the risk, false representations will void a policy The Commissioner of Insurance may issue a temporary agent's license for a maximum of how many days? 180 90 60 30 90 A stock insurance company is owned by it's directors stockholders agents insureds stockholders J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct? The gross premium is higher on a monthly payment mode as compared to being paid annually The gross premium is lower on a monthly payment mode as compared to being paid annually The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis The gross premium is higher on a monthly payment mode as compared to being paid annually What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies? Family Maintenance Policy Family Income Policy Survivor Policy Family Survivor Policy Family Maintenance Policy Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan? Revocable assignment Beneficiary change Irrevocable assignment Collateral assignment Collateral assignment Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured? HMO PPO EPO PLHSO PPO Basic Hospital and Surgical policy benefits are lower than the actual expenses incurred higher than the actual expenses incurred normally subject to deductibles normally subject to coinsurance lower than the actual expenses incurred An employer that offers a qualified retirement plan to its employees is eligible to avoid ERISA regulations make tax-deductible contributions to the plan make tax deductible contributions to key employees only make partial tax-deductible contributions to the plan make tax-deductible contributions to the plan What action can a policyowner take if an application for a bank loan requires collateral? Utilize accelerated benefits provision Borrow against policy cash value and use as a down payment Assign policy ownership to the bank Name bank as beneficiary Assign policy ownership to the bank Which of the following provisions specifies how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due? Grace Period Consideration Waiver of Premium Reinstatement Grace Period The Consideration clause in a life insurance contract contains what pertinent information? Summary of benefits Offer and acceptance Entire Contract Amount of premium payments and when they are due Amount of premium payments and when they are due T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay? The total premiums paid minus any policy loans Nothing $50,000 $100,000 $50,000 T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? $1,000,000 $500,000 $250,000 $0 $0 The clause identifying which losses resulting from an accident or sickness are insured by the policy is called the Entire Contract provision Consideration clause Benefit clause Insuring clause Insuring clause What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100? Term Life Whole Life Credit Life Universal Life Whole Life What is the purpose of the Time of Payment of Claims provision? Requires the insured to wait 60 days after submitting Proof of Loss before filing a lawsuit Prevents delayed claim payments made by the insurer Requires a probation period for each claim filed by the insured Protects the insurer from frivolous lawsuits Prevents delayed claim payments made by the insurer A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following? Critical illness Terminal illness Inability of the insured to perform more than 2 Activities of Daily Living (ADL's) Inability of the insured to maintain insurance premiums due to unemployment Inability of the insured to perform more than 2 Activities of Daily Living (ADL's) Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability? Owner's Rights clause Incontestable Period Insuring Agreement Conversion privilege Conversion privilege The Insurance Commissioner may examine the records of an insurance company in order to determine the solvency of the company determine the trust deposits of the company approve the claims records of the company for tax purposes assess the company's value on behalf of a prospective client determine the solvency of the company What does Medicare Parts A and B cover? Part A covers hospitalization; Part B covers long-term care Part A covers doctor's services; Part B covers hospitalization Part A covers hospitalization; Part B covers doctor's services Part A covers prescription drugs; Part B covers disability Part A covers hospitalization; Part B covers doctor's services What is issued to each employee of an employer health plan? Provision Receipt Policy Certificate Certificate A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need? Endowment at Age 75 Universal Life Graded Benefit Whole Life Modified Whole Life Universal Life When a life insurance policy exceeds certain IRS table values, the result would create which of the following? 1035 Exchange An investment Modified Endowment Contract (MEC) Endowment Modified Endowment Contract (MEC) Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges? The maximum premium an insurer can charge for their health insurance based on geography The maximum amount an employer can contribute to a contributory health plan The maximum deductible an insured can be charged The maximum amount considered eligible for reimbursement by an insurance company under a health plan The maximum amount considered eligible for reimbursement by an insurance company under a health plan K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary? Return of premiums paid Cash value plus interest $20,000 death benefit Face amount plus interest $20,000 death benefit Which of the following are NOT managed care organizations? Point-of-Service plan (POS) Preferred Provider Organization (PPO) Medical Information Bureau (MIB) Health Maintenance Organization (HMO) Medical Information Bureau (MIB) K has a health policy that must be renewed by the insurer and the premiums can only be increased if applied to the entire class of insureds. This type of policy is considered optionally renewable conditionally renewable guaranteed renewable noncancellable guaranteed renewable What type of life insurance incorporates flexible premiums and an adjustable death benefit? Endowment Policy Modified Whole Life Decreasing Term Universal Life Universal Life P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy? A straight life deffered annuity A straight life annuity An immediate annuity A deferred annuity An immediate annuity Quarterly premium payments increase the annual cost of insurance because insurer risk exposure is greater interest to the insurer is increased while administrative costs are decreased mortality costs are greater interest to the insurer is decreased while the administrative costs are increased interest to the insurer is decreased while the administrative costs are increased N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities? Installment Immediate Fixed Installment Deferred Flexible Installment Deferred Flexible Premium Immediate Flexible Installment Deferred If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? Insurer Beneficiary Reinsurer Insured Insured What kind of life insurance product covers children under their parent's policy? Family Maintenance rider Term rider Family Income rider Payor benefit Term rider When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n) elimination exclusion limitation exception exclusion What is the purpose of the U.S.A. Patriot Act? detect and deter fraud detect and deter alien insurance companies detect and deter terrorism detect and deter misrepresentations detect and deter terrorism The health insurance program which is administered by each state and funded by both the federal and state governments is called Long-term care Medicaid Medicare Supplemental Program Medicare Medicaid R had received full disability income benefits for 6 months. When he returns to work, he is only able to resume half his normal daily workload. Which provision pays reduced benefits to R while he is not working at full capacity? Residual Disability Recurrent Disability Presumptive Disability Occupational Disability Residual Disability A group life insurance policy may NOT insure groups consisting exclusively of persons who are salaried, clerical, or administrative employees hourly paid laborers or their supervisors administrative, managerial, or sales personnel related by marriage, blood or legal adoption related by marriage, blood or legal adoption Credit Life insurance is issued in any amount at the discretion of the applicant used in the event of loss of income issued in an amount not to exceed the amount of the loan coverage that waives the premiums on a loan payment in the event of total disability issued in an amount not to exceed the amount of the loan If an insurance company issues a Disability Income policy that it cannot cancel or for which it cannot increase premiums, the type of renewability that best desribes this policy is called noncancellable conditionally renewable cancellable guaranteed renewable noncancellable All of the following may charge fees for insurance advice EXCEPT Legal reserve agents Financial planners Life and Health insurance counselors Managing general agents Legal reserve agents An agent MUST give a prospective insured an Outline of Coverage when taking an application for a Whole life policy Variable Annuity Medicare Supplement policy Term Life policy Medicare Supplement policy A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion fraud rebating boycotting coercion Which of the following circumstances would cause a Medicare Supplement policy to be cancelled? A claim greatly exceeds the benefits payable The insured fails to pay the premium The attending physician dies before the claim is settled The insured is no longer in good health The insured fails to pay the premium Benefits for drug and alcohol treatment under a group health policy must include all of the following services EXCEPT treatment in a certified facility transportation to and from an outpatient facility outpatient treatment through a public hospital or clinic group therapy prescribed by a physician transportation to and from an outpatient facility V is insured under an individual Disability Income policy with a 30-day Elimination period. On July 1, he is involved in an accident and temporarily disabled. He returns to work on December 1. How many months of benefit are payable? 6 months 5 months 4 1/2 months 4 months 4 months A foreign insurance company is one that is incorporated under Texas law under the laws of another state is a territory of the United States outside the United States under the laws of another state A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a treaty insurer risk retention group risk assumption group captive insurer risk retention group What should an insured do if the insurer does not send claims forms within the time period set forth in a health policy's Claims Forms provision? File a lawsuit Submit the claim in any form Wait for the claim form to arrive Resubmit the request for a claim form Submit the claim in any form Which of these is considered a mandatory provision? Payment of Claims Insurance with Other Insurers Misstatement of Age Change of Occupation Payment of Claims N has a Major Medical policy that only pays a portion of N's medical expenses. N is responsible for paying the remaining balance. This provision is known as Assignment of Benefits Coinsurance Indemnity Co-deductible Coinsurance A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision? Payor provision Accelerated Benefits provision Assignment provision Waiver of Premium provision Payor provision The sections of an insurance contract which limit coverage are called waivers riders exclusions limitations exclusions Which of the following is NOT a limited benefit plan? cancer policies life insurance policies dental policies critical illness policies life insurance policies All of the following provisions must be included in life insurance policies EXCEPT Incontestability Entire Contract Extended Term Misstatement of Age Extended Term In a life insurance policy, which feature states that the policy will not cover certain risks? Exception Exclusion Ejection Expulsion Exclusion What type of life policy covers two people and pays upon the death of the last insured? Shared Survivorship Adjustable Joint Survivorship J is a subscriber to a plan which contracts with doctors and hospitals to provide medical benefits at a predetermined price. What type of plan does J belong to? Multiple Employer Welfare Arrangement Multiple Employer Trust Health Maintenance Organization Co-op Arrangement Health Maintenance Organization Which of the following actions is NOT possible with a Universal Life policy? Policy's cash value may be used to pay premiums Premium payments may be made at unscheduled times Premiums may be applied as a credit against income tax Face amount may be adjusted Premiums may be applied as a credit against income tax If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act? Primary beneficiary's estate Primary beneficiary's next of kin Insured's estate Insured's contingent beneficiary Insured's contingent beneficiary Which of these is NOT considered to be a cost connected with an individual's death? Funeral expense Tax liability Business expenses Probate costs Business expenses Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated 1970 - Fair Credit Reporting Act 1959 - Intervention by (SEC) The Securities and Exchange Commission 1999 - Financial Services Modernization Act 1945 - The McCarran-Ferguson Act 1970 - Fair Credit Reporting Act What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years? Family Lump Sum Policy Family Maintenance Policy Family Survivor Policy Family Income Policy Family Maintenance Policy Which of the following statements about the classification of applicants is INCORRECT? Substandard applicants are never declined by underwriters Substandard applicants are occasionally declined by underwriters Preferred risk applicants typically have better premium rates than standard risk applicants An applicant can be classified as substandard risk because of a hazardous job Substandard applicants are never declined by underwriters A Health Reimbursement Arrangement MUST be established with employee funding with other employer-sponsored benefit plans by the employer only during specific open enrollment periods by the employer Variable annuities may invest premiums in each of the following EXCEPT Common Stock Money Market securities Insurer's corporate business account Junk bonds Insurer's corporate business account Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of $10,000 $7,500 $5,000 $2,500 $10,000 What percentage of continuing education instruction MUST be completed in the classroom or classroom equivalent? 25% 50% 75% 100% 50% A certificate of authority does which of the following? Gives an agent authority to represent a specific insurance company Permits an agent to solicit insurance in Texas Permits a decreased agent's relative to act as an agent for a limited period of time Permits an insurance company to transact business in Texas Permits an insurance company to transact business in Texas An insurer receives proof of loss for an acceptable medical expense claim under an Individual Health Insurance Policy. Under the Time of Payment of Claims provision, the insurer MUST pay the benefits immediately within a maximum of three months within a reasonable amount of time at least monthly immediately The Notice of Claims provision requires a policyowner to provide proof of loss to an insurer within a specified time notify an insurer of a claim within a specified time wait 60 days after filing a claim to initiate a lawsuit against an insurer notify their physician of a claim within a specified time notify an insurer of a claim within a specified time P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary? Premiums paid plus interest Nothing. Claim will be denied $50,000 minus any outstanding policy loans $100,000 because the cause of death was accidental $50,000 minus any outstanding policy loans The Misstatement of Age provision requires that if the age of the insured is misstated, then any amount payable is forfeited an amount that the premiums paid would have purchased at the current age or ages an amount consists of the premiums paid for the policy if the policy was issued for over three years reduced by a specified percentage of the face amount an amount that the premiums paid would have purchased at the current age or ages T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary? Request will be accepted only if in writing by the insured Change will be made only if premiums are paid current Change will be made immediately Request of the change will be refused Request of the change will be refused Which of the following health insurance coverages is BEST suited for meeting the expenses of catastrophic illness? Major Medical Hospital Expense Surgical Expense Hospital Income Major Medical An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n) delayed effective date exclusion for the medical condition extended Contestable period Concealment clause exclusion for the medical condition What provision in a life insurance policy states that the application is considered part of the contract? Application provision Policy Exclusions provision Entire Contract provision Incontestability provision Entire Contract provision When an employee is required to pay a portion of the premium for an employer/employee group health plan, the employee is covered under which of the following plans? Joint Noncontributory Contributory Participating Contributory In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and a Medical Information Report the initial premium forward it immediately to the insurer Attending Physician Statement the initial premium A newly licensed General Lines agent must complete a MINIMUM of how many hours of continuing education within 24 months after initial license? 10 15 20 24 24 A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as a fraternal benefit society a stock insurer a mutual insurer the Life and Health Insurance Guaranty Association a fraternal benefit society An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for which of the following reasons? Failure to pay for coverage Marriage to a person with a pre-existing condition Excessive use of health care benefits Refusing HMO advice to quit smoking Failure to pay for coverage Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements? Consideration Competent Parties Offer/Acceptance Legal Purpose (Insurable Interest) Legal Purpose (Insurable Interest) Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the marital deduction death benefits Section 1035 exchange capital gains tax rate marital deduction An organization that solicits insurance only among its members is known as a specific order specialized company limited insurance company fraternal benefit society fraternal benefit society K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies? Limited-Pay Life Term to Age 65 Whole Life Paid-Up at Age 65 Endowment at Age 65 Endowment at Age 65 T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition? Insurer will require a higher deductible for any claims resulting from this condition Insurer is required to initially cover this pre-existing condition Insurer will permanently exclude the condition from the policy Insurer will likely treat as a pre-existing condition which may not be covered for one year Insurer will likely treat as a pre-existing condition which may not be covered for one year What would the Medical Information Bureau (MIB) identify? Testing positive for marijuana use from a previous screening Existing life insurance coverage with other carriers Credit scores Primary physician Testing positive for marijuana use from a previous screening In a Life insurance contract, an insurance company's promise to pay stated benefits is called the Insuring clause Consideration clause Entire Contract Owner's rights Insuring clause Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? Interest Only Fixed Period Fixed Amount Life Income Life Income When must insurable interest exist for a life insurance contract to be valid? Inception of the contract Throughout the entire length of the contract When the insured dies During the contestable period Inception of the contract An insurance agent does NOT have fiduciary responsibilities to insurance companies insureds applicants other agents other agents If an insured sustains a loss on a policy sold by an agent through an insurance company that is not authorized to do business in Texas, which of the following would be liable? The agent only The company only The agent and the company The Life, Accident, Health and Hospital Insurance Guaranty Association The agent and the company An applicant for an agent's license must meet which of the following requirements? Be honest, trustworthy, and reliable Be at least 17 years of age Have been a resident of Texas for at least 6 months Post a $100,000 Performance Bond Be honest, trustworthy, and reliable Who is normally considered to be the owner of a 403(b) tax-sheltered annuity? The 403(b) custodian The financial institution The employer The employee The employee Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this? Guaranteed insurability rider Additional coverage rider Paid-up option rider Extended insurability rider Guaranteed insurability rider Which of these statements concerning an individual Disability Income policy is TRUE? Premiums are normally tax-deductible Age of the insured determines the amount of the benefits Normally includes an Elimination period Benefits are normally taxable Normally includes an Elimination period N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot? Misrepresentation Exclusion Collateral assignment Concealment Exclusion N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase? 30 Pay Life Term to Age 70 Universal Life Adjustable Life 30 Pay Life Which statement is TRUE in regards to a policy loan? Past-due interest payments not paid after 3 months will void the policy Past-due interest on a policy loan is added to the total debt Insurance companies can send delinquent interest accounts to a collection agency Insurance companies can charge an interest rate based on the policyowner's credit report Past-due interest on a policy loan is added to the total debt P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax? $20,000 $14,000 $6,000 $0 $0 What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? Entire contract Owner's rights Nonforfeiture options Conversion Conversion Which of the following statements BEST describes the intent of a Coinsurance clause in a Major Medical policy? Discourages overutilization of the insurance coverage Minimizes the need for deductibles Discourages adverse selection Minimizes the waiting period Discourages overutilization of the insurance coverage At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in Only income tax on the amount withdrawn Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan Continued tax-free accumulations in the bank savings account Only a 10% penalty on the withdrawal of funds Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan Before holding a hearing regarding an agent's unfair or deceptive practice, the Insurance Commissioner MUST give how many days notice? 3 5 10 30 30 Which of the following is an important underwriting principle of group life insurance? Physical examinations are required Everyone must be covered in the group Employer must pay for the entire premium The group must be formed for the purpose of getting affordable insurance Everyone must be covered in the group The Consideration clause of an insurance contract includes the buyer's guide a summary of the coverage provided the named beneficiaries the schedule and amount of premium payments the schedule and amount of premium payments K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? Daughter Husband's estate K's estate Trust fund Daughter The Commissioner of insurance may suspend, revoke, or refuse to renew the license of an agent who is convicted of a misdemeanor is found guilty of misrepresentation or fraud in obtaining the license files for bankruptcy fails to write any business for six consecutive months M is insured under a basic Hospital/Surgical Expense policy. A physician performs surgery on M. What determines the claim M is eligible for? Claim payment is equal to physician's actual charges Claim payment is negotiated between physician and patient Determined by the schedule of benefits from the hospital Determined by the terms of the policy Determined by the terms of the policy If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase An Estate Builder Policy A Whole Life Policy with Extended Term A Whole Life Policy with an Other Insured Rider A Whole Life Policy with a Payor benefit A Whole Life Policy with an Other Insured Rider The insuring clause Specifies the additional time given to pay past due premiums States the scope and limits of the coverage States the amount of premium to be collected Prohibits the insured from suing the insurer for at least 60 days after filing a written proof of loss States the scope and limits of the coverage How does group insurance differ from individual insurance? Evidence of insurability is required Premiums are higher Premiums are lower Pre-existing conditions not covered Premiums are lower A Long-Term Care policy must offer a MINIMUM benefit period of how many months? 12 18 24 30 12 What percent of personal life insurance premiums is usually deductible for federal income tax purposes? 100% 75% 50% 0% 0% Why is an applicant's signature required on a life insurance application? To attest that the statements on the application are warranties To attest that the statements on the application are accurate to the best of the applicant's knowledge To give Power of Attorney to the producer if needed To attest that all statements on the application are guaranteed to be true To attest that the statements on the application are accurate to the best of the applicant's knowledge When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply? Extended term option Conversion provision 1035 Exchange Incontestable period Conversion provision The premiums paid by an employer for his employee's group life insurance are usually considered to be tax-deductible to the employer partially deductible to the employee tax-deductible to the employee taxable income to the employee tax-deductible to the employee An individual who purchases a Life annuity is given protection against inflation the risk of dying prematurely the risk of living longer than expected the risk of not having enough retirement income the risk of living longer than expected How are Roth IRA distributions normally taxed? 10% penalty tax is applied Taxed as ordinary income Capital gains tax is applied Distributions are received tax-free Distributions are received tax-free An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be converted to an individual permanent policy at an individual rate converted to an individual permanent policy at a group rate continued at an individual rate continued at a group rate converted to an individual permanent policy at an individual rate A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies? 3 6 9 12 6 Group life policies MUST include all of the following provisions EXCEPT Ownership Beneficiary Designation Conversion Privilege Right to Loan Proceeds Right to Loan Proceeds When can a policyowner change a revocable beneficiary? Anytime After the consent of the current beneficiary Never Only if primary beneficiary dies Anytime The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n) Term rider Accidental Death and Dismemberment rider (AD&D) Family rider Annuity Accidental Death and Dismemberment rider (AD&D) Upon delivery of a rated life insurance policy, the Producer must obtain each of the following EXCEPT Signed HIPAA disclosure Signed amendment Signed statement of Good Health The required premium Signed HIPAA disclosure An insurance company must provide information on fraudulent claims at the request of all of the following entities EXCEPT local law enforcement agencies the Commissioner of Insurance the Attorney General an insured an insured At what point does an informal contract become binding? When one party makes an invitation and the other makes an offer When an offer is made by one party and the other party rejects the offer and makes a counteroffer When one party makes an offer and the other party accepts that offer When one party makes the required payment When one party makes an offer and the other party accepts that offer