Texas Life and Health Insurance | Updated
Practice Questions & Answers | 100%
Correct (A+)
• At what point must a life insurance applicant be informed of their rights that fall
under the Fair Credit Reporting Act? -✓✓Upon completion of the application
• Who elects the governing body of a mutual insurance company? -
✓✓policyholders
• An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the -✓✓Fair Credit Reporting Act
• What type of reinsurance contract involves two companies automatically sharing
their risk exposure? -✓✓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 -✓✓reserves
• Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated -✓✓1970 - Fair Credit Reporting
Act
• What is the consideration given by an insurer in the Consideration clause of a life
policy? -✓✓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 -✓✓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 -✓✓representations
• The part of a life insurance policy guaranteed to be true is called a(n) -
✓✓warranty
• Which of these is NOT a type of agent authority?
,Express
Implied
Principal
Apparent -✓✓Principal
• The Consideration clause of an insurance contract includes -✓✓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? -✓✓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? -✓✓Unilateral
• When must insurable interest exist for a life insurance contract to be valid? -
✓✓Inception of the contract
• Insurance contracts are known as ____ because certain future conditions or acts
must occur before any claims can be paid. -✓✓conditional
• Which of these require an offer, acceptance, and consideration? -✓✓Contract
• Which of these arrangements allows one to bypass insurable interest laws? -
✓✓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 -✓✓negotiating
• An agent is an individual that represents whom? -✓✓Insurer
• Insurable interest must exist at what time? -✓✓at the time of application
• Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? -✓✓Variable Life
• Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? -✓✓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? -✓✓Conversion provision
• What type of life insurance are credit policies issued as? -✓✓Term
• How long does the coverage normally remain on a limited-pay life policy? -
✓✓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 -✓✓The premiums can be lowered or
raised, based on investment performance
• Which of these is an element of a Variable Life policy? -✓✓A fixed, level
premium
• What type of life insurance incorporates flexible premiums and an adjustable
death benefit? -✓✓Universal Life
Practice Questions & Answers | 100%
Correct (A+)
• At what point must a life insurance applicant be informed of their rights that fall
under the Fair Credit Reporting Act? -✓✓Upon completion of the application
• Who elects the governing body of a mutual insurance company? -
✓✓policyholders
• An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the -✓✓Fair Credit Reporting Act
• What type of reinsurance contract involves two companies automatically sharing
their risk exposure? -✓✓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 -✓✓reserves
• Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated -✓✓1970 - Fair Credit Reporting
Act
• What is the consideration given by an insurer in the Consideration clause of a life
policy? -✓✓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 -✓✓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 -✓✓representations
• The part of a life insurance policy guaranteed to be true is called a(n) -
✓✓warranty
• Which of these is NOT a type of agent authority?
,Express
Implied
Principal
Apparent -✓✓Principal
• The Consideration clause of an insurance contract includes -✓✓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? -✓✓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? -✓✓Unilateral
• When must insurable interest exist for a life insurance contract to be valid? -
✓✓Inception of the contract
• Insurance contracts are known as ____ because certain future conditions or acts
must occur before any claims can be paid. -✓✓conditional
• Which of these require an offer, acceptance, and consideration? -✓✓Contract
• Which of these arrangements allows one to bypass insurable interest laws? -
✓✓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 -✓✓negotiating
• An agent is an individual that represents whom? -✓✓Insurer
• Insurable interest must exist at what time? -✓✓at the time of application
• Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? -✓✓Variable Life
• Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? -✓✓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? -✓✓Conversion provision
• What type of life insurance are credit policies issued as? -✓✓Term
• How long does the coverage normally remain on a limited-pay life policy? -
✓✓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 -✓✓The premiums can be lowered or
raised, based on investment performance
• Which of these is an element of a Variable Life policy? -✓✓A fixed, level
premium
• What type of life insurance incorporates flexible premiums and an adjustable
death benefit? -✓✓Universal Life
