Texas Life Health Insurance Exam 2023
At what point must a life insurance applicant be informed of their rights that fall under the
Fair Credit Reporting Act? - ANSWER Upon completion of the application
Who elects the governing body of a mutual insurance company? - ANSWER
policyholders
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the - ANSWER Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their
risk exposure? - 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 - ANSWER reserves
Which of the following requires insurers to disclose when an applicant's consumer or
credit history is being investigated - ANSWER 1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy?
- 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 - 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 - ANSWER representations
The part of a life insurance policy guaranteed to be true is called a(n) - ANSWER
warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - ANSWER Principal
,The Consideration clause of an insurance contract includes - 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? -
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? - ANSWER Unilateral
When must insurable interest exist for a life insurance contract to be valid? - ANSWER
Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must
occur before any claims can be paid. - ANSWER conditional
Which of these require an offer, acceptance, and consideration? - ANSWER Contract
Which of these arrangements allows one to bypass insurable interest laws? - 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 - ANSWER negotiating
An agent is an individual that represents whom? - ANSWER Insurer
Insurable interest must exist at what time? - ANSWER at the time of application
Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling? - ANSWER Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an
Adjustable Life policy? - 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? - ANSWER Conversion provision
What type of life insurance are credit policies issued as? - ANSWER Term
How long does the coverage normally remain on a limited-pay life policy? - 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 - ANSWER The premiums can be
lowered or raised, based on investment performance
Which of these is an element of a Variable Life policy? - ANSWER A fixed, level
premium
At what point must a life insurance applicant be informed of their rights that fall under the
Fair Credit Reporting Act? - ANSWER Upon completion of the application
Who elects the governing body of a mutual insurance company? - ANSWER
policyholders
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the - ANSWER Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their
risk exposure? - 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 - ANSWER reserves
Which of the following requires insurers to disclose when an applicant's consumer or
credit history is being investigated - ANSWER 1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy?
- 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 - 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 - ANSWER representations
The part of a life insurance policy guaranteed to be true is called a(n) - ANSWER
warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - ANSWER Principal
,The Consideration clause of an insurance contract includes - 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? -
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? - ANSWER Unilateral
When must insurable interest exist for a life insurance contract to be valid? - ANSWER
Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must
occur before any claims can be paid. - ANSWER conditional
Which of these require an offer, acceptance, and consideration? - ANSWER Contract
Which of these arrangements allows one to bypass insurable interest laws? - 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 - ANSWER negotiating
An agent is an individual that represents whom? - ANSWER Insurer
Insurable interest must exist at what time? - ANSWER at the time of application
Which policy requires an agent to register with the National Association of Securities
Dealers (NASD) before selling? - ANSWER Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an
Adjustable Life policy? - 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? - ANSWER Conversion provision
What type of life insurance are credit policies issued as? - ANSWER Term
How long does the coverage normally remain on a limited-pay life policy? - 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 - ANSWER The premiums can be
lowered or raised, based on investment performance
Which of these is an element of a Variable Life policy? - ANSWER A fixed, level
premium
