Page 1 of 342
PEARSON VUE TEXAS LIFE AND HEALTH
INSUARANCE EXAM 2026/2027 COMPLETE
ACCURATE TEST REAL QUESTIONS AND
CORRECT DETAILED ANSWERS (CORRECT
VERIFIED SOLUTIONS) A NEW UPDATED
VERSION |GUARANTEED PASS A+
1. The accounting measurement of an insurer‘s future
obligations to its policyholders is called:
A) Surplus
B) Reserves
C) Premiums
D) Dividends
Answer: B) Reserves
,Page 2 of 342
Rationale: Reserves are liability items on an insurer’s balance
sheet representing the amount that must be set aside to pay
future claims. The Texas Insurance Code requires insurers to
maintain adequate reserves to satisfy policyholder obligations.
This ensures the company remains solvent and can pay death
benefits when due.
2. Who elects the governing body (board of directors) of a
mutual insurance company?
A) Stockholders
B) Policyholders
C) The Texas Commissioner of Insurance
D) The company‘s officers
Answer: B) Policyholders
Rationale: Mutual insurance companies are owned by their
policyholders, not stockholders. As owners, policyholders have
the right to vote for the board of directors. This distinguishes
,Page 3 of 342
mutual companies from stock companies, where stockholders
elect the board.
3. Which of the following describes a participating life
insurance policy?
A) Policyowners are entitled to receive dividends
B) Policyowners pay assessments for company losses
C) Policyowners are not entitled to vote for board members
D) Policyowners cannot share in company earnings
Answer: A) Policyowners are entitled to receive dividends
Rationale: A “participating” policy is one issued by a mutual
insurer, where policyholders receive dividends (refunds of
unused premiums) when the insurer‘s actual mortality, expense,
and investment experience is more favorable than assumed.
Dividends are not guaranteed. This contrasts with
“nonparticipating” policies issued by stock companies.
, Page 4 of 342
4. In an insurance contract, the insurer is the only party who
makes a legally enforceable promise. What kind of contract is
this?
A) Adhesion contract
B) Bilateral contract
C) Unilateral contract
D) Conditional contract
Answer: C) Unilateral contract
Rationale: A unilateral contract is one where only one party
(the insurer) makes a legally enforceable promise. The insured
makes no promise to pay premiums; instead, the insured
performs an act (paying premiums). If the insured stops
paying, the insurer has no legal recourse — it simply stops
coverage. This differs from bilateral contracts (both parties
promise). The insurer promises to pay a death benefit when a
covered loss occurs.
PEARSON VUE TEXAS LIFE AND HEALTH
INSUARANCE EXAM 2026/2027 COMPLETE
ACCURATE TEST REAL QUESTIONS AND
CORRECT DETAILED ANSWERS (CORRECT
VERIFIED SOLUTIONS) A NEW UPDATED
VERSION |GUARANTEED PASS A+
1. The accounting measurement of an insurer‘s future
obligations to its policyholders is called:
A) Surplus
B) Reserves
C) Premiums
D) Dividends
Answer: B) Reserves
,Page 2 of 342
Rationale: Reserves are liability items on an insurer’s balance
sheet representing the amount that must be set aside to pay
future claims. The Texas Insurance Code requires insurers to
maintain adequate reserves to satisfy policyholder obligations.
This ensures the company remains solvent and can pay death
benefits when due.
2. Who elects the governing body (board of directors) of a
mutual insurance company?
A) Stockholders
B) Policyholders
C) The Texas Commissioner of Insurance
D) The company‘s officers
Answer: B) Policyholders
Rationale: Mutual insurance companies are owned by their
policyholders, not stockholders. As owners, policyholders have
the right to vote for the board of directors. This distinguishes
,Page 3 of 342
mutual companies from stock companies, where stockholders
elect the board.
3. Which of the following describes a participating life
insurance policy?
A) Policyowners are entitled to receive dividends
B) Policyowners pay assessments for company losses
C) Policyowners are not entitled to vote for board members
D) Policyowners cannot share in company earnings
Answer: A) Policyowners are entitled to receive dividends
Rationale: A “participating” policy is one issued by a mutual
insurer, where policyholders receive dividends (refunds of
unused premiums) when the insurer‘s actual mortality, expense,
and investment experience is more favorable than assumed.
Dividends are not guaranteed. This contrasts with
“nonparticipating” policies issued by stock companies.
, Page 4 of 342
4. In an insurance contract, the insurer is the only party who
makes a legally enforceable promise. What kind of contract is
this?
A) Adhesion contract
B) Bilateral contract
C) Unilateral contract
D) Conditional contract
Answer: C) Unilateral contract
Rationale: A unilateral contract is one where only one party
(the insurer) makes a legally enforceable promise. The insured
makes no promise to pay premiums; instead, the insured
performs an act (paying premiums). If the insured stops
paying, the insurer has no legal recourse — it simply stops
coverage. This differs from bilateral contracts (both parties
promise). The insurer promises to pay a death benefit when a
covered loss occurs.
