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)

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