Texas Life & Health Insurance Exam
At what point must a life insurance applicant be informed of their rights that fall under the
Fair Credit Reporting Act? -correct answer-Upon completion of the application
Who elects the governing body of a mutual insurance company? -correct answer-
policyholders
An insurance applicant MUST be informed of an investigation regarding his/her reputation
and character according to the -correct answer-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk
exposure? -correct answer-Treaty
The stated amount or percent of liquid assets that an insurer must have on hand that will
satisfy future obligations to its policyholders is called -correct answer-reserves
Which of the following requires insurers to disclose when an applicant's consumer or credit
history is being investigated -correct answer-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy? -
correct answer-Promise to pay a death benefit
When third-party ownership is involved, applicants who also happen to be the stated
primary beneficiary are required to have -correct answer-insurable interest in the proposed
insured
Statements made on an insurance application that are believed to be true to the best of the
applicant's knowledge are called -correct answer-representations
The part of a life insurance policy guaranteed to be true is called a(n) -correct answer-
warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent -correct answer-Principal
The Consideration clause of an insurance contract includes -correct answer-the schedule and
amount of premium payments
E and F are business partners. Each takes out a $500,000 life insurance policy on the other,
naming himself as primary beneficiary. E and F eventually terminate their business, and four
,months later E dies. Although E was married with three children at the time of death, the
primary beneficiary is still F. However, an insurable interest no longer exists. Where will the
proceeds from E's life insurance policy be directed to? -correct answer-In this situation, the
proceeds from E's life insurance policy will go to F.
Which of the following terms defines the legally enforceable promise in an insurance
contract by the insurer? -correct answer-Unilateral
When must insurable interest exist for a life insurance contract to be valid? -correct answer-
Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must occur
before any claims can be paid. -correct answer-conditional
Which of these require an offer, acceptance, and consideration? -correct answer-Contract
Which of these arrangements allows one to bypass insurable interest laws? -correct answer-
Investor-Originated Life Insurance
Investor-originated life insurance (or IOLI), sometimes called stranger-originated life
insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done
when an investor (or stranger) persuades an individual to take out life insurance specifically
for the purpose of selling the policy to the investor. The investor compensates the insured
and makes the premiums, then collects the death benefit when the insured dies.
Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration -correct answer-negotiating
An agent is an individual that represents whom? -correct answer-Insurer
Insurable interest must exist at what time? -correct answer-at the time of application
Which policy requires an agent to register with the National Association of Securities Dealers
(NASD) before selling? -correct answer-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an
Adjustable Life policy? -correct answer-increase face amount
When a policy owner exchanges a term policy for a whole life policy without providing proof
of good health, which of these apply? -correct answer-Conversion provision
,What type of life insurance are credit policies issued as? -correct answer-Term
How long does the coverage normally remain on a limited-pay life policy? -correct answer-
age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the cash value will
mirror that of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 -correct answer-The premiums can be lowered
or raised, based on investment performance
Which of these is an element of a Variable Life policy? -correct answer-A fixed, level
premium
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
-correct answer-Universal Life
T would like to be assured $10,000 is available in 10 years to replace a roof on his house.
What kind of $10,000 policy should T purchase? -correct answer-Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies? -
correct answer-Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited
time is called -correct answer-Limited-Pay Life
What kind of life insurance product covers children under their parent's policy? -correct
answer-Term rider
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium
payment
Policyowner has no say where the investment will go but can choose the premium mode
The investment vehicle for this type of policy is held in the insurer's general portfolio
The death benefit can vary but the policyowner has no say in the premium amount paid -
correct answer-Policyowner controls where the investment will go and selects the amount of
the premium payment
, P is looking to purchase a life insurance policy that will pay a stated monthly income to his
beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year
period. What type of policy should P purchase? -correct answer-Family Maintenance policy
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 -correct answer-It provides a minimum guaranteed Death
benefit
Credit Life insurance is -correct answer-issued in an amount not to exceed the amount of the
loan
The amount of coverage on a group credit life policy is limited to -correct answer-the
insured's total loan value
Term insurance has which of the following characteristics? -correct answer-Expires at the
end of the policy period
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death? -
correct answer-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 -correct answer-Variable Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then
increases in year 6 and stays level thereafter, all the while the death benefit remains the
same. What kind of policy is this? -correct answer-Modified Whole Life
Which of these life products is NOT considered interest-sensitive? -correct answer-Modified
Whole Life
What type of life policy covers two people and pays upon the death of the last insured? -
correct answer-Survivorship
Which is true concerning a Variable Universal Life policy? -correct answer-Policyowner
controls where the investment will go and selects the amount of the premium payment
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? -correct answer-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? -
correct answer-Decreasing term policy
At what point must a life insurance applicant be informed of their rights that fall under the
Fair Credit Reporting Act? -correct answer-Upon completion of the application
Who elects the governing body of a mutual insurance company? -correct answer-
policyholders
An insurance applicant MUST be informed of an investigation regarding his/her reputation
and character according to the -correct answer-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk
exposure? -correct answer-Treaty
The stated amount or percent of liquid assets that an insurer must have on hand that will
satisfy future obligations to its policyholders is called -correct answer-reserves
Which of the following requires insurers to disclose when an applicant's consumer or credit
history is being investigated -correct answer-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy? -
correct answer-Promise to pay a death benefit
When third-party ownership is involved, applicants who also happen to be the stated
primary beneficiary are required to have -correct answer-insurable interest in the proposed
insured
Statements made on an insurance application that are believed to be true to the best of the
applicant's knowledge are called -correct answer-representations
The part of a life insurance policy guaranteed to be true is called a(n) -correct answer-
warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent -correct answer-Principal
The Consideration clause of an insurance contract includes -correct answer-the schedule and
amount of premium payments
E and F are business partners. Each takes out a $500,000 life insurance policy on the other,
naming himself as primary beneficiary. E and F eventually terminate their business, and four
,months later E dies. Although E was married with three children at the time of death, the
primary beneficiary is still F. However, an insurable interest no longer exists. Where will the
proceeds from E's life insurance policy be directed to? -correct answer-In this situation, the
proceeds from E's life insurance policy will go to F.
Which of the following terms defines the legally enforceable promise in an insurance
contract by the insurer? -correct answer-Unilateral
When must insurable interest exist for a life insurance contract to be valid? -correct answer-
Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must occur
before any claims can be paid. -correct answer-conditional
Which of these require an offer, acceptance, and consideration? -correct answer-Contract
Which of these arrangements allows one to bypass insurable interest laws? -correct answer-
Investor-Originated Life Insurance
Investor-originated life insurance (or IOLI), sometimes called stranger-originated life
insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done
when an investor (or stranger) persuades an individual to take out life insurance specifically
for the purpose of selling the policy to the investor. The investor compensates the insured
and makes the premiums, then collects the death benefit when the insured dies.
Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration -correct answer-negotiating
An agent is an individual that represents whom? -correct answer-Insurer
Insurable interest must exist at what time? -correct answer-at the time of application
Which policy requires an agent to register with the National Association of Securities Dealers
(NASD) before selling? -correct answer-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an
Adjustable Life policy? -correct answer-increase face amount
When a policy owner exchanges a term policy for a whole life policy without providing proof
of good health, which of these apply? -correct answer-Conversion provision
,What type of life insurance are credit policies issued as? -correct answer-Term
How long does the coverage normally remain on a limited-pay life policy? -correct answer-
age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the cash value will
mirror that of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 -correct answer-The premiums can be lowered
or raised, based on investment performance
Which of these is an element of a Variable Life policy? -correct answer-A fixed, level
premium
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
-correct answer-Universal Life
T would like to be assured $10,000 is available in 10 years to replace a roof on his house.
What kind of $10,000 policy should T purchase? -correct answer-Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies? -
correct answer-Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited
time is called -correct answer-Limited-Pay Life
What kind of life insurance product covers children under their parent's policy? -correct
answer-Term rider
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium
payment
Policyowner has no say where the investment will go but can choose the premium mode
The investment vehicle for this type of policy is held in the insurer's general portfolio
The death benefit can vary but the policyowner has no say in the premium amount paid -
correct answer-Policyowner controls where the investment will go and selects the amount of
the premium payment
, P is looking to purchase a life insurance policy that will pay a stated monthly income to his
beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year
period. What type of policy should P purchase? -correct answer-Family Maintenance policy
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 -correct answer-It provides a minimum guaranteed Death
benefit
Credit Life insurance is -correct answer-issued in an amount not to exceed the amount of the
loan
The amount of coverage on a group credit life policy is limited to -correct answer-the
insured's total loan value
Term insurance has which of the following characteristics? -correct answer-Expires at the
end of the policy period
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death? -
correct answer-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 -correct answer-Variable Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then
increases in year 6 and stays level thereafter, all the while the death benefit remains the
same. What kind of policy is this? -correct answer-Modified Whole Life
Which of these life products is NOT considered interest-sensitive? -correct answer-Modified
Whole Life
What type of life policy covers two people and pays upon the death of the last insured? -
correct answer-Survivorship
Which is true concerning a Variable Universal Life policy? -correct answer-Policyowner
controls where the investment will go and selects the amount of the premium payment
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? -correct answer-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? -
correct answer-Decreasing term policy
