Texas State Insurance License Exam
Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is the incontestability clause in life insurance?
✔✔A provision that prevents the insurer from voiding a policy after it has been in force for a
specified period, usually two years.
What is a grace period?
✔✔A specified period after the premium due date during which the policy remains in force.
What is an exclusion in an insurance policy?
✔✔A situation or condition specifically not covered by the policy.
What is a binder?
✔✔A temporary contract providing proof of insurance until a formal policy is issued.
What does the principle of utmost good faith require?
✔✔Both parties in an insurance contract must act honestly and disclose all relevant information.
What is a risk in insurance terms?
✔✔The uncertainty regarding financial loss.
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,What is the purpose of underwriting?
✔✔To evaluate risk and determine the terms and premium of the policy.
What is policy lapse?
✔✔Termination of coverage due to nonpayment of premiums.
What is the difference between term and whole life insurance?
✔✔Term life provides coverage for a specific period without cash value, while whole life
provides permanent coverage with cash value accumulation.
What is a waiver of premium rider?
✔✔A provision that allows premiums to be waived if the insured becomes disabled.
What is a contingent beneficiary?
✔✔A person or entity who receives benefits if the primary beneficiary is deceased or cannot
claim them.
What is the purpose of a substandard risk classification?
✔✔To assign higher premiums to applicants with greater risk due to health or lifestyle factors.
What is coinsurance in health insurance?
✔✔The percentage of costs the insured must pay after the deductible is met.
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, What is a copayment?
✔✔A fixed amount the insured pays for a covered service at the time of care.
What is a stop-loss provision?
✔✔A limit on the insured’s total out-of-pocket expenses.
What is a policyholder’s consideration in an insurance contract?
✔✔Payment of premiums.
What is insurable interest?
✔✔A financial or emotional stake in the continued existence of the insured person or property.
What is the principle of indemnity?
✔✔To restore the insured to their financial position prior to a loss without allowing profit.
What is the difference between a revocable and irrevocable beneficiary?
✔✔A revocable beneficiary can be changed by the policyowner, while an irrevocable beneficiary
cannot without consent.
What is a deductible in an insurance policy?
✔✔The portion of a loss the insured must pay before the insurer will pay.
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Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is the incontestability clause in life insurance?
✔✔A provision that prevents the insurer from voiding a policy after it has been in force for a
specified period, usually two years.
What is a grace period?
✔✔A specified period after the premium due date during which the policy remains in force.
What is an exclusion in an insurance policy?
✔✔A situation or condition specifically not covered by the policy.
What is a binder?
✔✔A temporary contract providing proof of insurance until a formal policy is issued.
What does the principle of utmost good faith require?
✔✔Both parties in an insurance contract must act honestly and disclose all relevant information.
What is a risk in insurance terms?
✔✔The uncertainty regarding financial loss.
1
,What is the purpose of underwriting?
✔✔To evaluate risk and determine the terms and premium of the policy.
What is policy lapse?
✔✔Termination of coverage due to nonpayment of premiums.
What is the difference between term and whole life insurance?
✔✔Term life provides coverage for a specific period without cash value, while whole life
provides permanent coverage with cash value accumulation.
What is a waiver of premium rider?
✔✔A provision that allows premiums to be waived if the insured becomes disabled.
What is a contingent beneficiary?
✔✔A person or entity who receives benefits if the primary beneficiary is deceased or cannot
claim them.
What is the purpose of a substandard risk classification?
✔✔To assign higher premiums to applicants with greater risk due to health or lifestyle factors.
What is coinsurance in health insurance?
✔✔The percentage of costs the insured must pay after the deductible is met.
2
, What is a copayment?
✔✔A fixed amount the insured pays for a covered service at the time of care.
What is a stop-loss provision?
✔✔A limit on the insured’s total out-of-pocket expenses.
What is a policyholder’s consideration in an insurance contract?
✔✔Payment of premiums.
What is insurable interest?
✔✔A financial or emotional stake in the continued existence of the insured person or property.
What is the principle of indemnity?
✔✔To restore the insured to their financial position prior to a loss without allowing profit.
What is the difference between a revocable and irrevocable beneficiary?
✔✔A revocable beneficiary can be changed by the policyowner, while an irrevocable beneficiary
cannot without consent.
What is a deductible in an insurance policy?
✔✔The portion of a loss the insured must pay before the insurer will pay.
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