Texas Life and Health Insurance Exam
Questions And Answers Graded 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
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of
$10,000 policy should T purchase?
Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited time is
called
Limited-Pay Life
What kind of life insurance product covers children under their parent's policy?
Term rider
Questions And Answers Graded 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
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of
$10,000 policy should T purchase?
Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited time is
called
Limited-Pay Life
What kind of life insurance product covers children under their parent's policy?
Term rider
