Texas Insurance Exam Practice Questions and Answers Updated
2026 | Complete Texas State Insurance Licensing Study Guide
with Verified Questions, Detailed Rationales, Life & Health
Insurance, Property & Casualty Coverage, Policy Provisions,
Underwriting Principles, Risk Management, Insurance Laws,
Ethics, Claims Handling & TDI Licensing Exam Prep
Question 1: Under Texas insurance law, what is the statutory grace period for life
insurance policies when premiums are paid on a monthly basis?
A. 10 days
B. 15 days
C. 31 days
D. 60 days
CORRECT ANSWER: C. 31 days
Rationale: Texas Insurance Code §1115.002 mandates a minimum 31-day grace period
for life insurance policies regardless of premium payment mode. This protects
policyholders from unintentional lapse due to minor payment delays and is a key Texas-
specific provision frequently tested on the state licensing exam.
Question 2: Which of the following best describes the purpose of the "free look"
provision in a Texas life insurance policy?
A. It allows the insurer to rescind the policy if fraud is discovered within 30 days
B. It permits the policyowner to return the policy for a full premium refund within a
specified period
C. It grants the beneficiary the right to contest the death benefit distribution
D. It enables the agent to modify policy terms after delivery without client consent
CORRECT ANSWER: B. It permits the policyowner to return the policy for a full
premium refund within a specified period
Rationale: The free look provision, required under Texas law, gives the policyowner a
statutory period (10 days standard, 30 days for replacements) to review the policy and
cancel for a full refund. This consumer protection ensures informed consent and aligns
with Texas Insurance Code regulations on policy delivery.
Question 3: In Texas, which entity is responsible for administering the licensing
examinations for insurance producers?
A. Texas Department of Insurance (TDI) directly
B. National Association of Insurance Commissioners (NAIC)
C. Pearson VUE under contract with TDI
D. Texas Insurance Licensing Board
CORRECT ANSWER: C. Pearson VUE under contract with TDI
,Rationale: The Texas Department of Insurance contracts with Pearson VUE to
administer all insurance licensing examinations. Candidates must schedule and take
their exams through Pearson VUE testing centers or remote proctoring, as specified in
the TDI Candidate Handbook and Pearson VUE Texas insurance pages.
Question 4: Which type of life insurance policy builds cash value that the
policyowner may borrow against during the insured's lifetime?
A. Annual renewable term
B. Decreasing term
C. Whole life
D. Group term
CORRECT ANSWER: C. Whole life
Rationale: Whole life insurance is a permanent policy that includes a savings
component (cash value) which grows tax-deferred and can be accessed via policy loans
or withdrawals. Term policies provide pure death benefit protection with no cash
accumulation feature, making whole life distinct for living benefits.
Question 5: Under Texas law, how many hours of continuing education must a
licensed insurance agent complete every two-year license period?
A. 12 hours
B. 16 hours
C. 24 hours
D. 40 hours
CORRECT ANSWER: C. 24 hours
Rationale: Texas Administrative Code §159.1 requires all licensed insurance agents to
complete 24 hours of approved continuing education every two years, including at least
3 hours of ethics training. This ensures agents maintain current knowledge of laws,
products, and ethical standards.
Question 6: Which rider allows a life insurance policyowner to purchase additional
coverage at specified future dates without evidence of insurability?
A. Waiver of premium rider
B. Accidental death benefit rider
C. Guaranteed insurability rider
D. Cost of living adjustment rider
CORRECT ANSWER: C. Guaranteed insurability rider
Rationale: The guaranteed insurability rider permits the policyowner to increase
coverage at predetermined ages or life events (e.g., marriage, birth of child) without
undergoing new medical underwriting. This provides flexibility for growing insurance
needs while protecting insurability if health declines.
,Question 7: In Texas, what is the minimum passing score required on the state
insurance licensing examination?
A. 60%
B. 65%
C. 70%
D. 75%
CORRECT ANSWER: C. 70%
Rationale: Pearson VUE and the Texas Department of Insurance require a scaled score
of at least 70% to pass any Texas insurance licensing examination. This standard
applies uniformly across Life, Health, Property, Casualty, and Adjuster exam lines as
stated in official candidate materials.
Question 8: Which of the following is NOT a standard exclusion in a Texas
homeowners insurance policy?
A. Flood damage
B. Earth movement
C. Fire caused by lightning
D. Intentional loss by the insured
CORRECT ANSWER: C. Fire caused by lightning
Rationale: Standard homeowners policies (HO-3) in Texas cover fire damage regardless
of cause, including lightning. Flood, earthquake, and intentional acts are universally
excluded and require separate policies or endorsements. Understanding covered perils
versus exclusions is fundamental to property insurance knowledge.
Question 9: What does the term "incontestability" mean in a Texas life insurance
policy?
A. The insurer cannot contest the policy's validity after two years from issue, except for
nonpayment
B. The beneficiary cannot contest the death benefit distribution after policy maturity
C. The agent cannot be held liable for misrepresentations after policy delivery
D. The policyowner cannot cancel the policy after the free look period expires
CORRECT ANSWER: A. The insurer cannot contest the policy's validity after two
years from issue, except for nonpayment
Rationale: Texas Insurance Code §1115.001 establishes a two-year incontestability
period, after which the insurer cannot void the policy based on misstatements in the
application (except for fraud or nonpayment). This protects policyowners from post-
claim underwriting and promotes policy stability.
Question 10: Which Texas-specific program provides property insurance for
residents in high-risk coastal areas where standard insurers may not offer
coverage?
, A. Texas FAIR Plan
B. Texas Windstorm Insurance Association (TWIA)
C. Texas Residential Insurance Pool
D. Coastal Property Reinsurance Fund
CORRECT ANSWER: B. Texas Windstorm Insurance Association (TWIA)
Rationale: TWIA is a state-created insurer of last resort for windstorm and hail coverage
in designated coastal counties of Texas. It addresses market gaps where private
insurers limit exposure to catastrophic wind risk, fulfilling a critical consumer protection
role under Texas Insurance Code Chapter 2210.
Question 11: In health insurance, what does "COBRA" primarily allow?
A. Conversion of group coverage to individual coverage without evidence of insurability
upon termination
B. Continuation of group health coverage for eligible individuals after qualifying events
C. Coordination of benefits between multiple health plans to prevent overpayment
D. Comprehensive outpatient benefit riders for major medical policies
CORRECT ANSWER: B. Continuation of group health coverage for eligible
individuals after qualifying events
Rationale: COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law
requiring employers with 20+ employees to offer continued group health coverage to
employees and dependents after qualifying events like job loss, reduction in hours, or
divorce. Texas agents must understand this federal mandate alongside state
continuation laws.
Question 12: Which provision in a life insurance policy specifies that if the insured
and primary beneficiary die in the same accident with no evidence of order of
death, the proceeds will be paid as if the beneficiary died first?
A. Spendthrift clause
B. Common disaster clause
C. Facility of payment clause
D. Uniform Simultaneous Death Act provision
CORRECT ANSWER: B. Common disaster clause
Rationale: The common disaster clause (often aligned with the Uniform Simultaneous
Death Act) establishes a default order of payment when insured and beneficiary die
simultaneously. This prevents proceeds from passing through the beneficiary's estate
unnecessarily and ensures distribution aligns with the policyowner's probable intent.
Question 13: Under Texas law, which of the following activities constitutes an
"unfair claims settlement practice"?
A. Requesting a proof of loss form within 30 days of claim notification
B. Denying a claim based on a policy exclusion clearly stated in the contract
2026 | Complete Texas State Insurance Licensing Study Guide
with Verified Questions, Detailed Rationales, Life & Health
Insurance, Property & Casualty Coverage, Policy Provisions,
Underwriting Principles, Risk Management, Insurance Laws,
Ethics, Claims Handling & TDI Licensing Exam Prep
Question 1: Under Texas insurance law, what is the statutory grace period for life
insurance policies when premiums are paid on a monthly basis?
A. 10 days
B. 15 days
C. 31 days
D. 60 days
CORRECT ANSWER: C. 31 days
Rationale: Texas Insurance Code §1115.002 mandates a minimum 31-day grace period
for life insurance policies regardless of premium payment mode. This protects
policyholders from unintentional lapse due to minor payment delays and is a key Texas-
specific provision frequently tested on the state licensing exam.
Question 2: Which of the following best describes the purpose of the "free look"
provision in a Texas life insurance policy?
A. It allows the insurer to rescind the policy if fraud is discovered within 30 days
B. It permits the policyowner to return the policy for a full premium refund within a
specified period
C. It grants the beneficiary the right to contest the death benefit distribution
D. It enables the agent to modify policy terms after delivery without client consent
CORRECT ANSWER: B. It permits the policyowner to return the policy for a full
premium refund within a specified period
Rationale: The free look provision, required under Texas law, gives the policyowner a
statutory period (10 days standard, 30 days for replacements) to review the policy and
cancel for a full refund. This consumer protection ensures informed consent and aligns
with Texas Insurance Code regulations on policy delivery.
Question 3: In Texas, which entity is responsible for administering the licensing
examinations for insurance producers?
A. Texas Department of Insurance (TDI) directly
B. National Association of Insurance Commissioners (NAIC)
C. Pearson VUE under contract with TDI
D. Texas Insurance Licensing Board
CORRECT ANSWER: C. Pearson VUE under contract with TDI
,Rationale: The Texas Department of Insurance contracts with Pearson VUE to
administer all insurance licensing examinations. Candidates must schedule and take
their exams through Pearson VUE testing centers or remote proctoring, as specified in
the TDI Candidate Handbook and Pearson VUE Texas insurance pages.
Question 4: Which type of life insurance policy builds cash value that the
policyowner may borrow against during the insured's lifetime?
A. Annual renewable term
B. Decreasing term
C. Whole life
D. Group term
CORRECT ANSWER: C. Whole life
Rationale: Whole life insurance is a permanent policy that includes a savings
component (cash value) which grows tax-deferred and can be accessed via policy loans
or withdrawals. Term policies provide pure death benefit protection with no cash
accumulation feature, making whole life distinct for living benefits.
Question 5: Under Texas law, how many hours of continuing education must a
licensed insurance agent complete every two-year license period?
A. 12 hours
B. 16 hours
C. 24 hours
D. 40 hours
CORRECT ANSWER: C. 24 hours
Rationale: Texas Administrative Code §159.1 requires all licensed insurance agents to
complete 24 hours of approved continuing education every two years, including at least
3 hours of ethics training. This ensures agents maintain current knowledge of laws,
products, and ethical standards.
Question 6: Which rider allows a life insurance policyowner to purchase additional
coverage at specified future dates without evidence of insurability?
A. Waiver of premium rider
B. Accidental death benefit rider
C. Guaranteed insurability rider
D. Cost of living adjustment rider
CORRECT ANSWER: C. Guaranteed insurability rider
Rationale: The guaranteed insurability rider permits the policyowner to increase
coverage at predetermined ages or life events (e.g., marriage, birth of child) without
undergoing new medical underwriting. This provides flexibility for growing insurance
needs while protecting insurability if health declines.
,Question 7: In Texas, what is the minimum passing score required on the state
insurance licensing examination?
A. 60%
B. 65%
C. 70%
D. 75%
CORRECT ANSWER: C. 70%
Rationale: Pearson VUE and the Texas Department of Insurance require a scaled score
of at least 70% to pass any Texas insurance licensing examination. This standard
applies uniformly across Life, Health, Property, Casualty, and Adjuster exam lines as
stated in official candidate materials.
Question 8: Which of the following is NOT a standard exclusion in a Texas
homeowners insurance policy?
A. Flood damage
B. Earth movement
C. Fire caused by lightning
D. Intentional loss by the insured
CORRECT ANSWER: C. Fire caused by lightning
Rationale: Standard homeowners policies (HO-3) in Texas cover fire damage regardless
of cause, including lightning. Flood, earthquake, and intentional acts are universally
excluded and require separate policies or endorsements. Understanding covered perils
versus exclusions is fundamental to property insurance knowledge.
Question 9: What does the term "incontestability" mean in a Texas life insurance
policy?
A. The insurer cannot contest the policy's validity after two years from issue, except for
nonpayment
B. The beneficiary cannot contest the death benefit distribution after policy maturity
C. The agent cannot be held liable for misrepresentations after policy delivery
D. The policyowner cannot cancel the policy after the free look period expires
CORRECT ANSWER: A. The insurer cannot contest the policy's validity after two
years from issue, except for nonpayment
Rationale: Texas Insurance Code §1115.001 establishes a two-year incontestability
period, after which the insurer cannot void the policy based on misstatements in the
application (except for fraud or nonpayment). This protects policyowners from post-
claim underwriting and promotes policy stability.
Question 10: Which Texas-specific program provides property insurance for
residents in high-risk coastal areas where standard insurers may not offer
coverage?
, A. Texas FAIR Plan
B. Texas Windstorm Insurance Association (TWIA)
C. Texas Residential Insurance Pool
D. Coastal Property Reinsurance Fund
CORRECT ANSWER: B. Texas Windstorm Insurance Association (TWIA)
Rationale: TWIA is a state-created insurer of last resort for windstorm and hail coverage
in designated coastal counties of Texas. It addresses market gaps where private
insurers limit exposure to catastrophic wind risk, fulfilling a critical consumer protection
role under Texas Insurance Code Chapter 2210.
Question 11: In health insurance, what does "COBRA" primarily allow?
A. Conversion of group coverage to individual coverage without evidence of insurability
upon termination
B. Continuation of group health coverage for eligible individuals after qualifying events
C. Coordination of benefits between multiple health plans to prevent overpayment
D. Comprehensive outpatient benefit riders for major medical policies
CORRECT ANSWER: B. Continuation of group health coverage for eligible
individuals after qualifying events
Rationale: COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law
requiring employers with 20+ employees to offer continued group health coverage to
employees and dependents after qualifying events like job loss, reduction in hours, or
divorce. Texas agents must understand this federal mandate alongside state
continuation laws.
Question 12: Which provision in a life insurance policy specifies that if the insured
and primary beneficiary die in the same accident with no evidence of order of
death, the proceeds will be paid as if the beneficiary died first?
A. Spendthrift clause
B. Common disaster clause
C. Facility of payment clause
D. Uniform Simultaneous Death Act provision
CORRECT ANSWER: B. Common disaster clause
Rationale: The common disaster clause (often aligned with the Uniform Simultaneous
Death Act) establishes a default order of payment when insured and beneficiary die
simultaneously. This prevents proceeds from passing through the beneficiary's estate
unnecessarily and ensures distribution aligns with the policyowner's probable intent.
Question 13: Under Texas law, which of the following activities constitutes an
"unfair claims settlement practice"?
A. Requesting a proof of loss form within 30 days of claim notification
B. Denying a claim based on a policy exclusion clearly stated in the contract
