TEXAS LIFE AND HEALTH INSURANCE COMPLETE EXAM QUESTIONS AND
VERIFIED ANSWERS NEWEST VERSION
Q: What is the definition of risk? ANSWER The uncertainty of financial loss.
Q: What is the Law of Large Numbers? ANSWER The larger the group of
insured individuals, the more accurately future losses can be predicted.
Q: What is insurable interest? ANSWER A financial or blood relationship that
exists at the time of application, proving the insured would suffer a financial
loss upon the insured's death or illness.
Q: When must insurable interest exist for life insurance? ANSWER Only at the
time the policy is applied for.
Q: What is an aleatory contract? ANSWER A contract where the outcome
depends on an uncertain event (one party might pay more than they receive).
Q: What is a contract of adhesion? ANSWER A contract prepared by one party
(the insurer) that the other party must accept as written.
Q: What does "utmost good faith" mean? ANSWER Both parties must disclose
all material facts honestly.
Q: What is the difference between a representation and a warranty? ANSWER
A representation is a statement believed to be true to the best of one's
knowledge; a warranty is a strict guarantee of truth.
Q: What is indemnity? ANSWER The principle that insurance restores a person
to the financial position they were in just prior to the loss, no better, no worse.
Q: What is subrogation? ANSWER The insurer's right to pursue a third party
that caused the loss to recover the amount paid to the insured.
Q: What is a peril? ANSWER The actual cause of a loss (e.g., fire, illness).
Q: What is a hazard? ANSWER A condition that increases the chance of a loss
occurring (e.g., smoking, faulty wiring).
,Q: What is a moral hazard? ANSWER Dishonesty or character defects in an
applicant that increase risk (e.g., lying on an application).
Q: What is a morale hazard? ANSWER Carelessness or indifference to loss
(e.g., leaving keys in a car).
Q: What is pure risk? ANSWER A risk that only offers the possibility of loss, no
chance of gain (e.g., death).
Q: What is speculative risk? ANSWER A risk that offers the chance of either
loss or gain (e.g., gambling, investing).
Q: What does "consideration" mean in an insurance contract? ANSWER The
premium paid by the insured and the promise to pay by the insurer.
Q: What is a binder? ANSWER Temporary insurance coverage until the actual
policy is issued or denied.
Q: What is the difference between an agent and a broker? ANSWER An agent
represents the insurer; a broker represents the applicant.
Q: What is a field underwriter? ANSWER The sales agent who performs the
initial screening of an applicant.
Q: What is a home office underwriter? ANSWER The company employee who
makes the final decision to accept or reject a risk.
Q: What does adverse selection mean? ANSWER The tendency of people with
a higher risk of loss to purchase insurance more often than those with lower
risk.
Q: What is morbidity? ANSWER The incidence or frequency of disease in a
population.
Q: What is mortality? ANSWER The incidence or frequency of death in a
population.
Q: What is the premium? ANSWER The amount of money paid by the
policyholder to keep the insurance policy in force.
Section 2: Life Insurance Policy Types (26-75)
Q: What is term life insurance? ANSWER Pure life insurance that provides a
death benefit only if the insured dies during a specified term.
, Q: What is level term insurance? ANSWER A term policy where the face
amount and premium remain the same throughout the term.
Q: What is decreasing term insurance? ANSWER A term policy where the
death benefit decreases over time, but the premium remains level.
Q: What is increasing term insurance? ANSWER A term policy where the death
benefit increases over time, usually tied to inflation or a specific age.
Q: What is renewable term insurance? ANSWER Allows the insured to renew
the policy at the end of the term without proving insurability.
Q: What is convertible term insurance? ANSWER Allows the insured to convert
the term policy to a permanent policy without proving insurability.
Q: What is whole life insurance? ANSWER Permanent insurance that provides
a death benefit and builds cash value for the insured's entire life.
Q: What is ordinary whole life? ANSWER Whole life insurance where
premiums are paid until the insured's death or age 100.
Q: What is limited-pay whole life? ANSWER Premiums are paid for a specific
number of years (e.g., 20-pay life) or to a specific age (e.g., age 65).
Q: What is single-premium whole life? ANSWER The entire premium is paid in
one lump sum at policy inception.
Q: What is the cash value of a whole life policy? ANSWER The savings element
that grows tax-deferred and can be borrowed against or surrendered for cash.
Q: When does the cash value of a whole life policy equal the face amount?
ANSWER At the insured's attained age 100 (maturity date).
Q: What is straight whole life? ANSWER Another term for ordinary whole life.
Q: What is universal life insurance? ANSWER A flexible premium, adjustable
death benefit permanent policy that separates the cash value from the
protection (death benefit) elements.
Q: What are the three components of a universal life policy? ANSWER
Premiums, cash value (accumulation fund), and the cost of insurance (mortality
charge).
VERIFIED ANSWERS NEWEST VERSION
Q: What is the definition of risk? ANSWER The uncertainty of financial loss.
Q: What is the Law of Large Numbers? ANSWER The larger the group of
insured individuals, the more accurately future losses can be predicted.
Q: What is insurable interest? ANSWER A financial or blood relationship that
exists at the time of application, proving the insured would suffer a financial
loss upon the insured's death or illness.
Q: When must insurable interest exist for life insurance? ANSWER Only at the
time the policy is applied for.
Q: What is an aleatory contract? ANSWER A contract where the outcome
depends on an uncertain event (one party might pay more than they receive).
Q: What is a contract of adhesion? ANSWER A contract prepared by one party
(the insurer) that the other party must accept as written.
Q: What does "utmost good faith" mean? ANSWER Both parties must disclose
all material facts honestly.
Q: What is the difference between a representation and a warranty? ANSWER
A representation is a statement believed to be true to the best of one's
knowledge; a warranty is a strict guarantee of truth.
Q: What is indemnity? ANSWER The principle that insurance restores a person
to the financial position they were in just prior to the loss, no better, no worse.
Q: What is subrogation? ANSWER The insurer's right to pursue a third party
that caused the loss to recover the amount paid to the insured.
Q: What is a peril? ANSWER The actual cause of a loss (e.g., fire, illness).
Q: What is a hazard? ANSWER A condition that increases the chance of a loss
occurring (e.g., smoking, faulty wiring).
,Q: What is a moral hazard? ANSWER Dishonesty or character defects in an
applicant that increase risk (e.g., lying on an application).
Q: What is a morale hazard? ANSWER Carelessness or indifference to loss
(e.g., leaving keys in a car).
Q: What is pure risk? ANSWER A risk that only offers the possibility of loss, no
chance of gain (e.g., death).
Q: What is speculative risk? ANSWER A risk that offers the chance of either
loss or gain (e.g., gambling, investing).
Q: What does "consideration" mean in an insurance contract? ANSWER The
premium paid by the insured and the promise to pay by the insurer.
Q: What is a binder? ANSWER Temporary insurance coverage until the actual
policy is issued or denied.
Q: What is the difference between an agent and a broker? ANSWER An agent
represents the insurer; a broker represents the applicant.
Q: What is a field underwriter? ANSWER The sales agent who performs the
initial screening of an applicant.
Q: What is a home office underwriter? ANSWER The company employee who
makes the final decision to accept or reject a risk.
Q: What does adverse selection mean? ANSWER The tendency of people with
a higher risk of loss to purchase insurance more often than those with lower
risk.
Q: What is morbidity? ANSWER The incidence or frequency of disease in a
population.
Q: What is mortality? ANSWER The incidence or frequency of death in a
population.
Q: What is the premium? ANSWER The amount of money paid by the
policyholder to keep the insurance policy in force.
Section 2: Life Insurance Policy Types (26-75)
Q: What is term life insurance? ANSWER Pure life insurance that provides a
death benefit only if the insured dies during a specified term.
, Q: What is level term insurance? ANSWER A term policy where the face
amount and premium remain the same throughout the term.
Q: What is decreasing term insurance? ANSWER A term policy where the
death benefit decreases over time, but the premium remains level.
Q: What is increasing term insurance? ANSWER A term policy where the death
benefit increases over time, usually tied to inflation or a specific age.
Q: What is renewable term insurance? ANSWER Allows the insured to renew
the policy at the end of the term without proving insurability.
Q: What is convertible term insurance? ANSWER Allows the insured to convert
the term policy to a permanent policy without proving insurability.
Q: What is whole life insurance? ANSWER Permanent insurance that provides
a death benefit and builds cash value for the insured's entire life.
Q: What is ordinary whole life? ANSWER Whole life insurance where
premiums are paid until the insured's death or age 100.
Q: What is limited-pay whole life? ANSWER Premiums are paid for a specific
number of years (e.g., 20-pay life) or to a specific age (e.g., age 65).
Q: What is single-premium whole life? ANSWER The entire premium is paid in
one lump sum at policy inception.
Q: What is the cash value of a whole life policy? ANSWER The savings element
that grows tax-deferred and can be borrowed against or surrendered for cash.
Q: When does the cash value of a whole life policy equal the face amount?
ANSWER At the insured's attained age 100 (maturity date).
Q: What is straight whole life? ANSWER Another term for ordinary whole life.
Q: What is universal life insurance? ANSWER A flexible premium, adjustable
death benefit permanent policy that separates the cash value from the
protection (death benefit) elements.
Q: What are the three components of a universal life policy? ANSWER
Premiums, cash value (accumulation fund), and the cost of insurance (mortality
charge).
