Pearson VUE Texas Life and Health Insurance
Actual Exam V2 – Texas Department of Insurance
(TDI) General Lines Agent – 2026/2027 Edition
400 Questions with Evidence-Based Verified
Answers (100% correct solutions)
Q: What type of reinsurance contract involves two companies automatically sharing their risk
exposure?
Answer
Treaty
Q: 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
Q: When third-party ownership is involved, applicants who also happen to be the stated
primary beneficiary are required to have
Answer
insurable interest
Q: Statements made on an insurance application that are believed to be true to the best of the
applicant's knowledge are called
Answer
representations
Q: The part of a life insurance policy guaranteed to be true is called a(n)
Answer
warranty
Q: Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent
Answer
Principal
Q: The Consideration clause of an insurance contract includes
Answer
the schedule and amount of premium payments
Q: 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.
Q: Which term defines the legally enforceable promise in an insurance contract by the insurer?
Answer
Unilateral
Q: Insurance contracts are known as ____ because certain future conditions or acts must occur
before any claims can be paid.
Answer
conditional
Q: Which of these require an offer, acceptance, and consideration?
Answer
Contract
Q: Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration
Answer
negotiating
Q: An agent is an individual that represents whom?
Answer
Insurer
Q: Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling?
Answer
Variable Life
Q: Which of the following actions require a policy owner to provide proof of insurability in an
Adjustable Life policy?
Answer
increase face amount
Q: 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
Q: What type of life insurance are credit policies issued as?
Answer
Term
Q: How long does the coverage normally remain on a limited-pay life policy?
Answer
age 100
Q: All of these statements about Equity Indexed Life Insurance are correct EXCEPT
Answer - 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
The premiums can be lowered or raised, based on investment performance
Q: What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Answer
Universal Life
Q: What type of life policy covers 2 lives and pays the face amount after the first one dies?
Answer
Joint Life Policy
Q: Life insurance that covers an insured's whole life with level premiums paid over a limited
time is called
Answer
Limited-Pay Life
Q: What kind of life insurance product covers children under their parent's policy?
Answer
Term rider
Q: 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
Q: Which of the following statements about a Variable Whole Life policy is CORRECT? -It provides a minimum guaranteed Death benefit - It is a combination of a Limited Period Endowment and a Decreasing Term policy - Its premiums and benefits are variable - It has a guaranteed rate of return
Answer
It provides a minimum guaranteed Death benefit
Q: Credit Life insurance is
Answer
issued in an amount not to exceed the amount of the loan
When does Term Life expire?
Answer
At the end of the policy period
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
A life policy with a death benefit that can fluctuate according to the performance of its
underlying investment portfolio is referred to as
Variable Life
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
T has a term policy that allows him to continue the coverage after expiration of the initial policy
period. What type of term coverage is this?
Renewable
F needs life insurance that provides coverage for only a limited amount of time with a death
benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were
to die at age 50, how long would G's family receive an income?
10 years
The most important factor to consider when determining whether to convert term insurance at the
insured's attained age or the insured's original age is
the cost
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
exclusions
Which statement regarding the Misstatement of Age provision is considered to be true? -Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered -Requires that a new policy must be applied for if a misstatement of age is found on the current
policy -Misstatement of Age provision is valid only during the contestable period -Insurer may void the policy if a misstatement of age is discovered
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish
coverage under which of the following provisions?
Reinstatement provision
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?
50,000
D was actively serving in the Marines when he was killed in an automobile accident while on
leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's
beneficiary's receive?
$100,000
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? -Coverage can be added at specific events such as marriage or having a child -Evidence of insurability is not required when the option is exercised -Evidence of insurability is required when the option is exercised -Coverage can be added at specific ages
Evidence of insurability is required when the option is exercised
An insured is past due on his life insurance premium, but is still within the Grace Period. What
will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
Which of these are NOT an example of a Nonforfeiture option? -Extended Term -Reduced Paid-up -Cash Surrender -Life Income
life income
When can a policyowner change a revocable beneficiary?
anytime
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
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?
revocable
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a
fatal accident where K dies before P. Under the Common Disaster provision, where will the
money go?
To P's estate
A policyowner's rights are limited under which beneficiary designation?
Irrevocable
A level premium indicates
the premium is fixed for the entire duration of the contract
On a life insurance policy, who is qualified to change the beneficiary designation?
Policyowner
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
Any changes made on an insurance application requires the initials of whom?
Applicant
In order for coverage on a non-medical insurance application to take effect the same day, the
producer must collect a signed application and
the initial premium
Which of these factors do NOT play a role in the underwriting of a life insurance policy? -Avocations
-Credit status -Marital status - Occupation
marital status
An insurance company may NOT reject a prospective insured's life application on the basis of
which of the following factors? -Height - Weight -Gender -Medical history
gender
What type of group plan involves employees sharing the cost?
contributory plan
A noncontributory group term life plan is characterized by
the entire cost of the plan is paid for by the employer
W is a 39-year old female who just purchased an annuity to provide income for life starting at
age 60. All of these would be acceptable annuity choices EXCEPT a(n) -Flexible Premium Deferred annuity -Variable annuity -Immediate annuity
-Straight Life annuity
Immediate annuity
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?
Life Annuity with Period Certain
The annuity that represents the largest possible monthly payment to an individual annuitant is
a(n)
Straight Life annuity
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which type of contract liquidates an estate through recurrent payments?
Annuity
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will
then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred
One becomes eligible for Social Security disability benefits after having been disabled for
5 months
What is Old Age and Survivors Health Insurance (OASDHI) also known as?
Social Security
Q is severely injured in an automobile accident and becomes totally disabled. How many months
must Q be disabled before being able to apply for Social Security disability benefits?
5
Which product would best serve a retired individual looking to invest a lump-sum of money
through an insurance company?
Annuity
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at
what age?
59 1/2
A Key Employee policy is taken out by Company X on its vice president. Ten years later, this
employee leaves Company X and begins working for Company Y. If this individual were to die
and the policy is still in force and unchanged, where would the death proceeds be directed?
Company X
All students attending a large university could be covered by
a blanket policy
The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for
health information
Which type of provider is known for stressing preventative medical care?
Health Maintenance Organizations (HMO's)
The individual who provides general medical care for a patient as well as the referral for
specialized care is known as a
Primary Care Physician
The health insurance program which is administered by each state and funded by both the federal
and state governments is called
Medicaid
Which of the following organizations would make reimbursement payments directly to the
insured individual for covered medical expenditures?
Commercial insurer
What does Medicare Parts A and B cover?
Part A covers hospitalization; Part B covers doctor's services
Medicare
is a hospital and medical expense insurance program
Medicaid was designed to assist individuals who are
below a specific income limit
Which of the following does Social Security NOT provide benefits for? -Survivorship -Dismemberment -Disability -Retirement
Dismemberment
In order to establish a Health Reimbursement Arrangement (HRA), it MUST
be established by the employer
All of the following are limited benefit plans EXCEPT -cancer policies - life insurance policies - dental policies
-critical illness policies
life insurance policies
K becomes ill after traveling overseas and is unable to work for 3 months. What kind of policy
would cover her loss of income?
Disability Income
If a retiree on Medicare required five hospital stays in one year, which policy would provide the
best insurance for excess hospital expenses?
Medicare Supplement
Which of the following will a Long Term Care plan typically provide benefits for?
home health care
How long is the typical free look period for Long Term care insurance policies?
30 days
A Disability Income policyowner recently submitted a claim for a chronic neck problem that has
now resulted in total disability. The original neck injury occurred before the application was
taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application.
How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
Which of the following health policy provisions states that the producer does NOT have the
authority to change the policy or waive any of its provisions?
Entire Contract
An insurer must provide an insured with claim forms within __ days after receiving notice of a
loss.
15
An insurance company normally has 2 years to contest information provided on an accident and
health application. This 2 year period begins on the date that the
insurer dates the policy
What type of rider would be added to an Accident and Health policy if the policyowner wants to
ensure the policy will continue if he/she ever becomes totally disabled?
Waiver of Premium rider
Which of the following are NOT managed care organizations?
Medical Information Bureau (MIB)
In general, what percent of personal health insurance premiums is deductible for federal income
tax purposes?
100%
A life insurance illustration is NOT required to include the
company's mortality table
An insurance company must do which of the following to terminate an agent's appointment?
Send notice of the termination to the Texas Department of Insurance
An organization that solicits insurance only among its members is known as a
fraternal benefit society
Before holding a hearing regarding an agent's unfair or deceptive practice, the Insurance
Commissioner MUST give how many days notice?
30 days
A newly licensed General Lines agent must complete a MINIMUM of how many hours of
continuing education within 24 months after initial license?
24 hours
Insurance agent licenses normally must be renewed every
2 years
An insurance agent does NOT have fiduciary responsibilities to
other agents
If an insurance company is organized under the laws of New Jersey and licensed to do business
here, it is considered which of the following in Texas?
a foreign company
In Texas, a domestic insurance company is defined as a company that
is incorporated and formed in Texas
Under the Texas insurance code, an insurance company must pay death benefits for suicide if the
policy has been in force for a MINIMUM of
2 years
A certificate of authority does which of the following?
Permits an insurance company to transact business in Texas
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?
31
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has
been approved by the
Commissioner of Insurance
A Long-Term Care policy must offer a MINIMUM benefit period of how many months?
12
A foreign insurance company is one that is incorporated
under the laws of another state
Under an individual life insurance policy, an insured may assign a MAXIMUM of what
percentage of policy ownership?
100%
Who can purchase a plan through the Marketplace?
Any legal resident except those incarcerated
An enrollee of a Health Maintenance Organization (HMO) may be cancelled or nonrenewed for
which of the following reasons?
Failure to pay for coverage
Under Texas insurance law, the term "transacting business" includes
collecting premiums
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
An agent who tells claimants that their rights may be impaired if they fail to complete a release
form within a given period of time could be guilty of
coercion
Which of the following is an example of rebating?
returning a portion of a premium as inducement to purchase insurance
A stock insurance company is owned by it's
stockholders
An agent who tells a client that dividends are guaranteed may be guilty of
misrepresentation
An individual life insurance policy issued in Texas MUST have a grace period for premium
payment of how many days?
31
An agent may legally share commissions only with
another agent who is licensed in the same line of insurance
An agent whose license has been revoked is required to
wait at least five years before applying for a new license
The Commissioner of Insurance may issue a temporary agent's license for a maximum of how
many days?
90
Insurance company agent appointments remain in force for which of the following maximum
periods of time, if any?
Until terminated or withdrawn
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 and the company
D is an architect receiving Disability Income benefits who is not able to return to work full time,
but can work on a part-time basis. Which of these features would allow D to continue receiving
benefits?
*Residual Benefit clause
*Waiver Benefit clause
*Concurrent Benefit clause
*Guaranteed Benefit clause
Residual Benefit clause
The individual who provides general medical care for a patient as well as the referral for
specialized care is known as a:
*Physician's assistant
*Primary Care Physician
*Secondary Care Physician
*Third Party Administrator
Primary Care Physician
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
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
Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are
prohibited under the Texas Insurance Code covering
*rebating
*false advertising
*discrimination
*unfair methods of competition
unfair methods of competition
An insurance agent does NOT have fiduciary responsibilities to
*insurance companies
*insureds
*applicants
*other agents
other agents
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a
contributory group Term Life plan to all its eligible employees?
*Portion of the premiums paid for by the employer may be a tax deduction
*Portion of the premiums paid for by the employee may be a tax deduction
*Portion of the death proceeds are taxable to the beneficiary
*Portion of the death proceeds are taxable to the estate
Portion of the premiums paid for by the employer may be a tax deduction
When applied to Whole Life insurance, the word "straight" denotes:
The absence of dividends
Options to reduce or withhold premium payments
The mode premium payments
The duration of premium payments
The duration of premium payments
If an individual has an Accidental Death and Dismemberment policy and dies, an autopsy can be
performed in all these situations, EXCEPT:
When the cause of death is unknown
When the state prohibits this by law
When consent for the autopsy is not obtained
When foul play was a contributing factor
When the state prohibits this by law
J would like to maintain the right to change beneficiaries. Which beneficiary designation should
be used?
Irrevocable
Contingent
Primary
Revocable
Revocable
What percent of personal life insurance premiums is usually deductible for federal income tax
purposes?
100%
75%
50%
0%
0%
F needs life insurance that provides coverage for only a limited amount of time with a death
benefit that changes regularly according to a schedule. What kind of policy is needed?
Level term policy
Whole life policy
Limited-pay policy
Decreasing term policy
Decreasing term policy
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
Which of these arrangements allows one to bypass insurable interest laws?
Concealment
Indemnity contract
Contract of adhesion
Investor-Originated Life Insurance
Investor-Originated Life Insurance
Under the Texas insurance code, an insurance company must pay death benefits for suicide if the
policy has been in force for a MINIMUM of
six months
one year
two years
three years
two years
Which of the following types of organizations are prepaid group health plans, where members
pay in advance for the services of participating physicians and hospitals that have agreements?
PPO
HMO
MEWA
POS
HMO
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
Which of the following statements is NOT CORRECT about the Commissioner of Insurance?
The Commissioner must be elected in a general election
The Commissioner is authorized to conduct the activities of the Texas Department of Insurance
(TDI)
The Commissioner may be a former employee of the Texas Department of Insurance (TDI)
The Commissioner must serve as chief executive and administrator officer of the Texas
Department of Insurance
The Commissioner must be elected in a general election
The guarantee of insurability option provides a long-term care policyowner the ability to:
buy additional coverage at a later date
add the insured's spouse at a later date
pay the same premium for life
cancel the policy at anytime
buy additional coverage at a later date
A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has
been approved by the
State Board of Health
HMO's Board of Directors
Commissioner of Insurance
State HMO Association
Commissioner of Insurance
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
An insured's inability to perform two or more activities of daily living may trigger which type of
policy rider?
Waiver of premium
Long term care
Accelerated death benefit
Accidental
Long term care
Which of these types of policies may NOT have the Automatic Premium Loan provision attached
to it?
Modified Whole Life
20-Pay Life
Decreasing Term
Endowment
Decreasing Term
A Medical Information Report (MIB) report may disclose which of the following:
Prior preferred rating
Prior use of marjuana
Prior lapsing of policy
Prior bankruptcy judgement
Prior use of marjuana
Which of these types of life insurance allows the policyowner to have level premiums and to also
choose from a selection of investment options?
Modified Whole Life
Variable Life
Universal Life
Adjustable Life
Variable Life
K applies for a life insurance policy on herself and submits the initial premium with the
application. She is given a receipt by the agent stating that coverage begins immediately if the
application is approved. What kind of receipt was used?
Binding
Initial Premium
Conditional
Contingent
Conditional
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
A Long-Term Care policy must offer a MINIMUM benefit period of how many months?
12
18
24
30
12
Which of these life insurance riders allows the applicant to have excess coverage?
Automatic Premium Loan rider
Waiver of Premium rider
Guarantee Insurability rider
Term rider
Term rider
Which of the following types of policies BEST identifies one in which the cash value may
fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
Universal Life
Endowment Life
Modified Whole Life
Graded Premium Whole Life
Universal Life
What type of renewability guarantees premium rates and renewability?
Optionally renewable
Conditionally renewable
Noncancellable
Guaranteed renewable
Noncancellable
When must insurable interest be present in order for a life insurance policy to be valid?
When the insured dies
Within the incontestability period
When the application is made
Before the insured dies
When the application is made
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
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
T has a term policy that allows him to continue the coverage after expiration of the initial policy
period. What type of term coverage is this?
Renewable
Increasing
Level
Decreasing
Renewable
An insurance company must do which of the following to terminate an agent's appointment?
Send notice of the termination to the Texas Department of Insurance
Request that the Texas Department of Insurance cancel the agent's license
Notify the agent of the termination at least 30 days before the effective date of termination
Request a hearing before the Commissioner of Insurance
Send notice of the termination to the Texas Department of Insurance
An agent who tells a client that dividends are guaranteed may be guilty of
fraud
rebating
misrepresentation
slander
misrepresentation
In Texas, a domestic insurance company is defined as a company that
employs Texas residents agents only
maintains a full service branch office in Texas
is incorporated and formed in Texas
is licensed to issue Homeowners policies only
is incorporated and formed in Texas
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child
Provides funds for final expenses if the child were to die
Provides living benefits for the child's college education
Provides child with insurance now, in case the child becomes uninsurable later
If both parents were to die, it would provide death benefits to the child
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
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
Insurance company agent appointments remain in force for which of the following maximum
periods of time, if any?
One year
Two years
Three years
Until terminated or withdrawn
Until terminated or withdrawn
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
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
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
Under the Nonforfeiture Law, a cash surrender value payment may be deferred by the insurance
company for NO LONGER than how many months?
1
3
6
12
6
J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained
in an accident. J's age as stated on the application five years ago was found to be understated by
ten years. Which of the following actions will the insurance company take?
The insurer will pay the original benefit stated in the policy
The insurer will adjust the benefit to what the premiums paid would have purchased at the
insured's actual age
The insurer will pay the original face amount minus any premium deficiencies owed
The insurer will deny the claim and refund premiums paid
The insurer will adjust the benefit to what the premiums paid would have purchased at the
insured's actual age
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 statements BEST describes how a policy that uses the "accidental bodily
injury" definition of an accident differs from one that uses the "accidental means" definition?
Double indemnity
Benefits are taxable
More restrictive
Less restrictive
Less restrictive
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What
will this transaction provide?
Income for a fixed period stated in the contract
Income that cannot be outlived by the owner
Inflation protection
Tax-free income
Income that cannot be outlived by the owner
D needs life insurance that provides coverage for only a limited amount of time while also
paying the lowest possible premium. What kind of policy is needed?
Limited-pay life
Graded Premium
Level term
Endowment
Level term
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a
fatal accident where K dies before P. Under the Common Disaster provision, which of these
statements is true?
Proceeds will be paid to P's estate
Proceeds will be divided equally between K's and P's estate
Proceeds will be payable to K's estate if P dies within a specified time
The courts will decide who will receive death benefits
Proceeds will be payable to K's estate if P dies within a specified time
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
In an individual retirement account (IRA), rollover contributions are:
subject to capital gains tax
subject to ordinary income tax
partially limited by dollar amount
not limited by dollar amount
not limited by dollar amount
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 types of policies pays a benefit if the insured goes blind?
Universal life
AD&D
Endowment
Adjustable life
AD&D
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
Group life policies MUST include all of the following provisions EXCEPT
Ownership
Beneficiary Designation
Conversion Privilege
Right to Loan Proceeds
Right to Loan Proceeds
With a Basic Medical Expense policy, what does the hospitalization expense cover?
hospital room and board
hospital administration expenses
surgeon's fees
physician fees
hospital room and board
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
P completes an application for a $10,000 life policy, but does not give the producer the initial
premium. P's coverage becomes effective when:
P receives the policy and pays the premium
P passes the medical examination
the producer receives the policy
the insurance company approves the policy
P receives the policy and pays the premium
ABC Insurance Company has accepted a life insurance application which contains unanswered
questions. The company then makes the application part of the life contract. In this situation, the
insurer has:
waived one of its legal rights
issued a voidable policy
committed an act of fraud
assigned the risk to a reinsurer
waived one of its legal rights
Which of the following does Social Security NOT provide benefits for?
Survivorship
Dismemberment
Disability
Retirement
Dismemberment
Equity indexed annuities are invested in which of the following:
Insurer's general account
Savings bonds
Insured's general account
S&P 500
S&P 500
The Commissioner of Insurance has the power and duty to take all of the following actions
EXCEPT
activate insurance companies' financial reserves
compute insurance companies' required financial reserves
issue insurance licenses
handle insurance-related consumer complaints
activate insurance companies' financial reserves
All of the following are limited benefit plans, EXCEPT:
cancer policies
life insurance policies
dental policies
critical illness policies
life insurance policies
What percentage of continuing education instruction MUST be completed in the classroom or
classroom equivalent?
25%
50%
75%
100%
50%
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
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Medical Information Bureau Act
Freedom of Information Act
Fair Credit Reporting Act
Medical Information Act
Fair Credit Reporting Act
A level premium indicates:
the premium is fixed for a period stated in the contract, then becomes variable
the premium can only be changed with the consent of the insurer
the premium stays level until the policy's renewal date
the premium is fixed for the entire duration of the contract
the premium is fixed for the entire duration of the contract
Which of the following claims are typically excluded from Medical expense policies?
Treatment for alcohol addiction
Intentionally self-inflicted injuries
Treatment for mental illness
Injuries sustained from an automobile accident
Intentionally self-inflicted injuries
Which of the following actions will an insurance company most likely NOT take if an applicant,
who has diabetes, applies for a Disability Income policy?
Issue the policy with a diabetes exclusion
Issue the policy with an altered Time of Payment of Claims provision
Issue the policy with a rating
Decline the applicant
Issue the policy with an altered Time of Payment of Claims provision
Which of the following BEST describes how pre-admission certifications are used?
Used to assist in underwriting
Used to prevent nonessential medical costs
Used to minimize hospital lawsuits
Used to help process claims
Used to prevent nonessential medical costs
In health insurance policies, a waiver of premium provision keeps the coverage in force without
premium payments:
Whenever an insured is unable to work
During the time an insured is confined in a hospital
Following an accidental injury, but not during sickness
After an insured has become totally disabled as defined in the policy
After an insured has become totally disabled as defined in the policy
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
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
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider.
S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$100,000
$50,000
Refund of premiums paid plus interest
No claim will be paid because cause of death was from natural causes
$50,000
Which statement regarding the Change of Beneficiary provision is true?
The beneficiary can only be changed with the consent of the insurer
The policyowner can change the beneficiary
The insured can change the beneficiary
A beneficiary change is subject to underwriting procedures
The policyowner can change the beneficiary
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
The provision that can be used to put an insurance policy back in force after it has lapsed due to
nonpayment is called:
Reinstatement
Grace period
Automatic premium loan
Waiver of premium
Reinstatement
How long is the typical free look period for Long Term care insurance policies?
20 days
30 days
40 days
50 days
30 days
The provision in a health insurance policy that suspends premiums being paid to the insurer
while the insured is disabled is called the:
Probation Period
Grace Period
Waiver of Premium
Elimination Period
Waiver of Premium
Insurance agent licenses normally must be renewed every
six months
one year
two years
three years
two years
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
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Requires that a new policy must be applied for if a misstatement of age is found on the current
policy
Misstatement of Age provision is valid only during the contestable period
Insurer may void the policy if a misstatement of age is discovered
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Which of the following statements describes what an Accident and Health policyowner may
NOT do?
File a covered claim
Assign ownership
Cancel the coverage
Adjust the premium payments
Adjust the premium payments
B has a $100,000 Accidental Death and Dismemberment policy that pays triple indemnity for
common carrier death. If B is killed from an accident on a commercial flight, what will the
policy pay B's beneficiary?
$100,000
$200,000
$300,000
$400,000
$300,000
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
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent
Principal
Which of the following policy provisions prohibits an insurance company from incorporating
external documents into an insurance policy?
Waiver
Exceptions and Reductions
Incontestable
Entire Contract
Entire Contract
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial
premium. When will the policy become effective?
When the policy is issued
The date of policy delivery
When the conditions of the receipt are met
The date the sales appointment was set
When the conditions of the receipt are met
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 deductible?
Deferral provision
Carryover provision
Stop Loss provision
Corridor provision
Carryover provision
Which of the following medical expenses does Cancer insurance NOT cover?
Chemotherapy
Radiation treatment
Physician visit
Arthritis
Arthritis
Which of the following types of health coverage frequently uses a deductible?
Major Medical policy
Basic Surgical policy
Basic Hospital policy
Worker's Compensation
Major Medical policy
Which of the following situations does a Critical Illness plan cover?
Asthma
Leukemia
Alcohol rehabilitation
Severe car accident
Leukemia
Who is NOT required to sign a life insurance application?
Adult insured
Policyowner
Agent
Beneficiary
Beneficiary
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
Which of these require an offer, acceptance, and consideration?
Warranty
Estoppel
Contract
Representation
Contract
Which of these circumstances is a Business Disability Buy-Sell policy designed to help in the
sale of a business?
Company becoming insolvent
Death of the business owner
Business owner becoming disabled
Key employee becoming disabled
Business owner becoming disabled
A stock insurance company is owned by it's
directors
stockholders
agents
insureds
stockholders
Additional coverage can be added to a Whole Life policy by adding a(n):
payor rider
accelerated benefit rider
decreasing term rider
automatic premium loan rider
decreasing term rider
Which of the following types of care is typically not covered in a Long-Term Care policy?
Acupuncture
Skilled care
Home Health care
Custodial care
Acupuncture
An incomplete life insurance application submitted to an insurer will result in which of these
actions?
Application will be returned to the writing agent
Application will be approved with restrictions
Application will be pending until a MIB report is sent to the insurer
Application will be automatically declined
Application will be returned to the writing agent
Which of the following is an example of rebating?
returning a portion of a premium as inducement to purchase insurance
cancellation of an insurance policy without cause
sale of mass-marketed insurance products
offer of temporary insurance coverage
returning a portion of a premium as inducement to purchase insurance
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
A policy of adhesion can only be modified by whom?
The agent
The applicant
The primary beneficiary
The insurance company
The insurance company
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
Which health policy clause specifies the amount of benefits to be paid?
Insuring
Consideration
Free-look
Payment mode
Insuring
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 is CORRECT about an agent who is taking an insurance
application?
The agent should avoid asking the applicant questions that may cause embarrassment
The agent should have the applicant initial any changes made on the application
The agent may allow a member of the applicant's immediate family to sign the application if the
applicant is not available
The applicant may answer routine questions on the application for the applicant
The agent should have the applicant initial any changes made on the application
C is trying to determine whether to convert her convertible term life policy to whole life
insurance using her original age or attained age. What factor would affect her decision the most?
The cost
The nonforfeiture options
The contestable period
The assignment of ownership
The cost
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
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
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
An insured pays premiums on an annual basis for an individual health insurance policy. What is
the MINIMUM number of days for the Grace Period provision?
7
10
20
31
31
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
What type of insurance offers permanent life coverage with premiums that are payable for life?
Credit Life
Renewable Term Life
Whole Life
Endowment
Whole Life
Which of these Nonforfeiture Options continue a build-up of cash value?
Waiver of Premium
Extended Term
Reduced Paid-Up
Cash Surrender
Reduced Paid-Up
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
Which of these are NOT an example of a Nonforfeiture option?
Extended Term
Reduced Paid-up
Cash Surrender
Life Income
Life Income
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to never cancel coverage
Promise to pay a death benefit to a named beneficiary
Promise to not raise premiums
Promise to accept an insured's assignment of benefits
Promise to pay a death benefit to a named beneficiary
Which of the following statements about Health Reimbursement Arrangements (HRA) is
CORRECT?
If the employee had a qualified medical leave from work, lost wages can be reimbursed
If the employee paid for qualified medical expenses, the reimbursements may be tax-free
Any unused amounts are added to employee's gross income
Health insurance premiums can be reimbursed to the employee
If the employee paid for qualified medical expenses, the reimbursements may be tax-free
T files a claim on his Accident and Health policy after being treated for an illness. The insurance
company believes that T misrepresented his actual health on the initial insurance application and
is, therefore, disputing the claim's validity. The provision that limits the time period during which
the company may dispute a claim's validity is called:
Insuring
Time Limit on Certain Defenses
Grace Period
Free-look
Time Limit on Certain Defenses
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
With Disability Income insurance, an insurance company may limit the monthly benefit amount
a prospective policy holder may obtain because of the insured's:
monthly expenditures at the time of disability
gross income at the time of purchase
gross income at the time of disability
occupation at the time of purchase
gross income at the time of purchase
Which health policy clause stipulates that an insurance company must attach a copy of the
application to the policy to ensure that it is part of the contract?
Consideration
Entire Contract
Free-look
Insuring
Entire Contract
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
If a contract of adhesion contains complicated language, to whom would the interpretation be in
favor of?
Insurer
Beneficiary
Reinsurer
Insured
Insured
What is the maximum Social Security Disability benefit amount an insured can receive?
50% of the insured's Primary Insurance Amount (PIA)
75% of the insured's Primary Insurance Amount (PIA)
100% of the insured's Primary Insurance Amount (PIA)
100% of the insured's Primary Insurance Amount (PIA) minus any monies received from a
retirement plan
100% of the insured's Primary Insurance Amount (PIA)
What is 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
A Disability Income policyowner recently submitted a claim for a chronic neck problem that has
now resulted in total disability. The original neck injury occurred before the application was
taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application.
How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
Claim will be denied and coverage will remain in force
Claim will be denied and coverage will be cancelled
Claim will be denied, the coverage cancelled, and all premiums paid will be refunded
Claim will be paid and coverage will remain in force
A policyowner would like to change the beneficiary on an Accidental Death and Dismemberment
(AD&D) insurance policy and make the change permanent. Which type of designation would
fulfill this need?
Revocable
Contingent
Irrevocable
Primary
Irrevocable
According to the Time Payment of Claims provision, the insurer must pay Disability Income
benefits no less frequently than which of the following options?
Annually
Semiannually
Quarterly
Monthly
Monthly
When an insured changes to a more hazardous occupation, which disability policy provision
allows an insurer to adjust policy benefits and rates?
Relation of earnings to insurance provision
Change of occupation provision
Conformity of state statutes provision
Entire contract provisions
Change of occupation provision
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
File a lawsuit
Contact the insurer again requesting forms
Nothing
File written proof of loss
File written proof of loss
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
S recently received a $500,000 lump sum retirement buyout from her employer. She would like
to buy an annuity that will immediately furnish her with a guaranteed income for life. What type
of annuity is best suited for her situation?
403(b) Plan
Deferred Premium
Single Premium
Period Certain
Single Premium
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
The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid
in which of the following programs?
Social Security Disability Income
Medicare Supplements
Medicaid
COBRA
Social Security Disability Income
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
beneficiary
insured
policyowner
insurer
policyowner
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
An insurance company would MOST likely pay benefits under an Accidental Death and
Dismemberment policy for which of the following losses?
Loss of life due to a heart attack
Loss of eyesight due to an accidental injury
Loss of the spleen due to an accidental injury
Partial paralysis due to a stroke
Loss of eyesight due to an accidental injury
Which contract permits the remaining partners to buy-out the interest of a disabled business
partner?
Group Disability
Business Continuation
Disability Buy-Sell
Key Person Disability
Disability Buy-Sell
An agent who tells claimants that their rights may be impaired if they fail to complete a release
form within a given period of time could be guilty of
defamation
rebating
coercion
discrimination
coercion
G is an accountant who has ten employees and is concerned about how the business would
survive financially if G became disabled. The type of policy which BEST addresses this concern
is:
Business Overhead Expense
Disability Income
Key Employee Life
Contributory
Business Overhead Expense
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
Which of the following health policy provisions states that the producer does NOT have the
authority to change the policy or waive any of its provisions?
Time Limit on Certain Defenses
Reinstatement
Entire Contract
Change of Beneficiary
Entire Contract
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
If an insurance company is organized under the laws of New Jersey and licensed to do business
here, it is considered which of the following in Texas?
a domestic company
a foreign company
an alien company
an imported company
a foreign company
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
Content preview
Pearson VUE Texas Life and Health Insurance
Actual Exam V2 – Texas Department of Insurance
(TDI) General Lines Agent – 2026/2027 Edition –
400 Questions with Evidence-Based Verified
Answers (100% correct solutions)
Q: What type of reinsurance contract involves two companies automatically sharing their risk
exposure?
Answer
Treaty
Q: 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
Q: When third-party ownership is involved, applicants who also happen to be the stated
primary beneficiary are required to have
Answer
insurable interest
,Q: Statements made on an insurance application that are believed to be true to the best of the
applicant's knowledge are called
Answer
representations
Q: The part of a life insurance policy guaranteed to be true is called a(n)
Answer
warranty
Q: Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent
Answer
Principal
Q: The Consideration clause of an insurance contract includes
Answer
the schedule and amount of premium payments
,Q: 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.
Q: Which term defines the legally enforceable promise in an insurance contract by the insurer?
Answer
Unilateral
Q: Insurance contracts are known as ____ because certain future conditions or acts must occur
before any claims can be paid.
Answer
conditional
Q: Which of these require an offer, acceptance, and consideration?
Answer
Contract
, Q: Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration
Answer
negotiating
Q: An agent is an individual that represents whom?
Answer
Insurer
Q: Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling?
Answer
Variable Life
Q: Which of the following actions require a policy owner to provide proof of insurability in an
Adjustable Life policy?
Answer