Texas Life and Health Insurance Exam
When should a life insurance applicant be informed of their rights under the Fair Credit
Reporting Act?
ANS: Upon completion of the application
Who elects the governing body of a mutual insurance company?
ANS: policyholders
An insurance applicant MUST be notified about any investigation related to their reputation
and character according to the…
ANS: Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk
exposure?
ANS: Treaty
What is the term for the specified amount or percentage of liquid assets that an insurer is
required to maintain in order to meet its future obligations to policyholders?
ANS: reserves
Which of the following mandates that insurers must inform applicants when their consumer or
credit history is being reviewed?
ANS: 1970 - Fair Credit Reporting Act
What is the consideration provided by an insurer in the consideration clause of a life insurance
policy?
ANS: Promise to pay a death benefit
When third-party ownership is present, what must applicants who are also designated as the
primary beneficiary have?
ANS: insurable interest in the proposed insured
,What are the statements made on an insurance application that the applicant believes to be true
to the best of their knowledge called?
ANS: representations
The part of a life insurance policy guaranteed to be true is called a (n)
ANS: warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent
ANS: Principal
The Consideration clause of an insurance contract includes
ANS: 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?
ANS: In this situation, the proceeds from E's life insurance policy will go to F.
Which term describes the legally binding promise made by the insurer in an insurance contract?
ANS: Unilateral
When is it necessary for insurable interest to be present for a life insurance contract
to be considered valid?
ANS: Inception of the contract
Insurance contracts are known as because certain future conditions or acts must
occur before any claims can be paid.
,ANS: conditional
, Which of these requires an offer, acceptance, and consideration to be valid?
ANS: Contract
Which of these arrangements permits an individual to circumvent insurable interest
laws?
ANS: 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.
a. Which of these is NOT regarded as a component of an insurance contract?
b. The offer
c. Acceptance
d. Negotiating
e. Consideration
ANS: negotiating
An agent is an individual that represents whom?
ANS: Insurer
Insurable interest must exist at what time?
ANS: at the time of application
Which type of policy necessitates that an agent register with the National Association of
Securities Dealers (NASD) prior to selling?
ANS: Variable Life
Which of the following actions necessitates that a policy owner provide proof of insurability in
an Adjustable Life policy?
ANS: increase face amount
When a policy owner converts a term policy to a whole life policy without needing to provide
When should a life insurance applicant be informed of their rights under the Fair Credit
Reporting Act?
ANS: Upon completion of the application
Who elects the governing body of a mutual insurance company?
ANS: policyholders
An insurance applicant MUST be notified about any investigation related to their reputation
and character according to the…
ANS: Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk
exposure?
ANS: Treaty
What is the term for the specified amount or percentage of liquid assets that an insurer is
required to maintain in order to meet its future obligations to policyholders?
ANS: reserves
Which of the following mandates that insurers must inform applicants when their consumer or
credit history is being reviewed?
ANS: 1970 - Fair Credit Reporting Act
What is the consideration provided by an insurer in the consideration clause of a life insurance
policy?
ANS: Promise to pay a death benefit
When third-party ownership is present, what must applicants who are also designated as the
primary beneficiary have?
ANS: insurable interest in the proposed insured
,What are the statements made on an insurance application that the applicant believes to be true
to the best of their knowledge called?
ANS: representations
The part of a life insurance policy guaranteed to be true is called a (n)
ANS: warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent
ANS: Principal
The Consideration clause of an insurance contract includes
ANS: 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?
ANS: In this situation, the proceeds from E's life insurance policy will go to F.
Which term describes the legally binding promise made by the insurer in an insurance contract?
ANS: Unilateral
When is it necessary for insurable interest to be present for a life insurance contract
to be considered valid?
ANS: Inception of the contract
Insurance contracts are known as because certain future conditions or acts must
occur before any claims can be paid.
,ANS: conditional
, Which of these requires an offer, acceptance, and consideration to be valid?
ANS: Contract
Which of these arrangements permits an individual to circumvent insurable interest
laws?
ANS: 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.
a. Which of these is NOT regarded as a component of an insurance contract?
b. The offer
c. Acceptance
d. Negotiating
e. Consideration
ANS: negotiating
An agent is an individual that represents whom?
ANS: Insurer
Insurable interest must exist at what time?
ANS: at the time of application
Which type of policy necessitates that an agent register with the National Association of
Securities Dealers (NASD) prior to selling?
ANS: Variable Life
Which of the following actions necessitates that a policy owner provide proof of insurability in
an Adjustable Life policy?
ANS: increase face amount
When a policy owner converts a term policy to a whole life policy without needing to provide
