TEXAS LIFE INSURANCE EXAM ACTUAL EXAM 2026 | ALL QUESTIONS
AND CORRECT ANSWERS | VERIFIED ANSWERS | GRADED A+ |
UPDATED VERSION
Question 1
P completes an application for a $10,000 life policy but does not give the producer the initial
premium. P's coverage becomes effective when:
A) the application is signed and submitted
B) the insurer approves the application
C) a conditional receipt is issued
D) P receives the policy and pays the premium
E) the producer delivers the policy
Correct Answer: D) P receives the policy and pays the premium
Rationale: When the initial premium is not submitted with the application, the application is
considered an invitation for the insurer to make an offer. The insurer makes an offer by issuing
the policy. The applicant accepts this offer by taking delivery of the policy and paying the
initial premium. At this point, the contract is formed and coverage becomes effective.
Question 2
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash
value at a faster rate in the early years of the policy. Which of these statements made by the
producer would be correct?
A) "Straight Life accumulates cash value faster than 20-Pay Life."
B) "A Term Life policy would accumulate cash value the fastest."
C) "20-Pay Life accumulates cash value faster than Straight Life."
D) "All Whole Life policies accumulate cash value at the same rate."
E) "Cash value accumulation is not affected by the premium payment period."
Correct Answer: C) "20-Pay Life accumulates cash value faster than Straight Life."
Rationale: Limited-pay whole life policies, such as 20-Pay Life, feature higher premiums than a
continuous-premium Straight Life policy. Because the premiums are concentrated over a
,shorter period, more money is paid into the policy during the early years, causing the cash
value to accumulate at a significantly faster rate.
Question 3
How does an indexed annuity differ from a fixed annuity?
A) Indexed annuity owners receive credited interest tied to the fluctuations of the linked index.
B) Indexed annuities have a fixed interest rate for the life of the contract.
C) Indexed annuities are a type of variable annuity with no minimum guarantees.
D) Indexed annuities can only be funded with a single lump-sum payment.
E) Fixed annuities are linked to a stock market index, while indexed annuities are not.
Correct Answer: A) Indexed annuity owners receive credited interest tied to the fluctuations of
the linked index.
Rationale: A fixed annuity provides a guaranteed, fixed interest rate. An indexed annuity's
interest crediting mechanism is tied to the performance of a specific stock market index (like
the S&P 500). It offers the potential for higher returns than a fixed annuity while still
protecting the principal from market losses.
Question 4
During a sales presentation for a participating life insurance policy, an agent MUST:
A) guarantee the policy's dividends for the first five years
B) make a prospect understand that dividends are NOT guaranteed
C) explain that dividends are taxable as capital gains
D) recommend the client take all dividends in cash
E) show an illustration using only the highest possible dividend scale
Correct Answer: B) make a prospect understand that dividends are NOT guaranteed
Rationale: Dividends paid on a participating policy are a return of excess premiums and are
based on the insurer's favorable experience (mortality, expenses, investments). Because this
experience can change, dividends are not guaranteed. Stating or implying that dividends are
guaranteed is a prohibited unfair trade practice.
,Question 5
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable
beneficiary. What action will the insurance company take if T requests a change of beneficiary?
A) The request of the change will be refused.
B) The change will be made immediately.
C) The insurer will require a court order to approve the change.
D) The policy will be cancelled and reissued with the new beneficiary.
E) The change will be made, but the original beneficiary will be notified.
Correct Answer: A) The request of the change will be refused.
Rationale: An irrevocable beneficiary has a vested interest in the policy. The policyowner
cannot change the beneficiary, take a policy loan, or surrender the policy without the written
consent of the irrevocable beneficiary. Therefore, a unilateral request for change from the
policyowner will be refused by the insurer.
Question 6
Which provision allows the policyowner to change a term life policy to a permanent one
without providing proof of good health?
A) Reinstatement
B) Incontestability
C) Conversion
D) Automatic Premium Loan
E) Nonforfeiture
Correct Answer: C) Conversion
Rationale: The conversion provision gives the policyowner the right to convert or exchange
their term policy for a whole life (or other permanent) policy without having to provide
evidence of insurability. This is a valuable feature if the insured's health has declined.
Question 7
T has a term policy that allows him to continue the coverage after expiration of the initial policy
period. What type of term coverage is this?
, A) Level
B) Decreasing
C) Increasing
D) Renewable
E) Convertible
Correct Answer: D) Renewable
Rationale: Renewable term insurance allows the policyowner to renew the policy for another
term at the end of the initial period, without evidence of insurability. The premium for the
new term will be higher because it is based on the insured's attained (current) age.
Question 8
Which of the following is NOT a required provision in group life policies?
A) Grace Period
B) Incontestability
C) Conversion
D) Misstatement of Age
E) Right to loan
Correct Answer: E) Right to loan
Rationale: Group life insurance policies are typically term insurance and do not build cash
value. Because policy loans are taken against the cash value, this provision is not a feature of
or a requirement for group life policies. Grace Period, Incontestability, and Conversion are all
required provisions.
Question 9
The Insurance Commissioner must give how many days' notice prior to holding a hearing
regarding an agent's unfair or deceptive practice?
A) 10
B) 15
C) 20
AND CORRECT ANSWERS | VERIFIED ANSWERS | GRADED A+ |
UPDATED VERSION
Question 1
P completes an application for a $10,000 life policy but does not give the producer the initial
premium. P's coverage becomes effective when:
A) the application is signed and submitted
B) the insurer approves the application
C) a conditional receipt is issued
D) P receives the policy and pays the premium
E) the producer delivers the policy
Correct Answer: D) P receives the policy and pays the premium
Rationale: When the initial premium is not submitted with the application, the application is
considered an invitation for the insurer to make an offer. The insurer makes an offer by issuing
the policy. The applicant accepts this offer by taking delivery of the policy and paying the
initial premium. At this point, the contract is formed and coverage becomes effective.
Question 2
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash
value at a faster rate in the early years of the policy. Which of these statements made by the
producer would be correct?
A) "Straight Life accumulates cash value faster than 20-Pay Life."
B) "A Term Life policy would accumulate cash value the fastest."
C) "20-Pay Life accumulates cash value faster than Straight Life."
D) "All Whole Life policies accumulate cash value at the same rate."
E) "Cash value accumulation is not affected by the premium payment period."
Correct Answer: C) "20-Pay Life accumulates cash value faster than Straight Life."
Rationale: Limited-pay whole life policies, such as 20-Pay Life, feature higher premiums than a
continuous-premium Straight Life policy. Because the premiums are concentrated over a
,shorter period, more money is paid into the policy during the early years, causing the cash
value to accumulate at a significantly faster rate.
Question 3
How does an indexed annuity differ from a fixed annuity?
A) Indexed annuity owners receive credited interest tied to the fluctuations of the linked index.
B) Indexed annuities have a fixed interest rate for the life of the contract.
C) Indexed annuities are a type of variable annuity with no minimum guarantees.
D) Indexed annuities can only be funded with a single lump-sum payment.
E) Fixed annuities are linked to a stock market index, while indexed annuities are not.
Correct Answer: A) Indexed annuity owners receive credited interest tied to the fluctuations of
the linked index.
Rationale: A fixed annuity provides a guaranteed, fixed interest rate. An indexed annuity's
interest crediting mechanism is tied to the performance of a specific stock market index (like
the S&P 500). It offers the potential for higher returns than a fixed annuity while still
protecting the principal from market losses.
Question 4
During a sales presentation for a participating life insurance policy, an agent MUST:
A) guarantee the policy's dividends for the first five years
B) make a prospect understand that dividends are NOT guaranteed
C) explain that dividends are taxable as capital gains
D) recommend the client take all dividends in cash
E) show an illustration using only the highest possible dividend scale
Correct Answer: B) make a prospect understand that dividends are NOT guaranteed
Rationale: Dividends paid on a participating policy are a return of excess premiums and are
based on the insurer's favorable experience (mortality, expenses, investments). Because this
experience can change, dividends are not guaranteed. Stating or implying that dividends are
guaranteed is a prohibited unfair trade practice.
,Question 5
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable
beneficiary. What action will the insurance company take if T requests a change of beneficiary?
A) The request of the change will be refused.
B) The change will be made immediately.
C) The insurer will require a court order to approve the change.
D) The policy will be cancelled and reissued with the new beneficiary.
E) The change will be made, but the original beneficiary will be notified.
Correct Answer: A) The request of the change will be refused.
Rationale: An irrevocable beneficiary has a vested interest in the policy. The policyowner
cannot change the beneficiary, take a policy loan, or surrender the policy without the written
consent of the irrevocable beneficiary. Therefore, a unilateral request for change from the
policyowner will be refused by the insurer.
Question 6
Which provision allows the policyowner to change a term life policy to a permanent one
without providing proof of good health?
A) Reinstatement
B) Incontestability
C) Conversion
D) Automatic Premium Loan
E) Nonforfeiture
Correct Answer: C) Conversion
Rationale: The conversion provision gives the policyowner the right to convert or exchange
their term policy for a whole life (or other permanent) policy without having to provide
evidence of insurability. This is a valuable feature if the insured's health has declined.
Question 7
T has a term policy that allows him to continue the coverage after expiration of the initial policy
period. What type of term coverage is this?
, A) Level
B) Decreasing
C) Increasing
D) Renewable
E) Convertible
Correct Answer: D) Renewable
Rationale: Renewable term insurance allows the policyowner to renew the policy for another
term at the end of the initial period, without evidence of insurability. The premium for the
new term will be higher because it is based on the insured's attained (current) age.
Question 8
Which of the following is NOT a required provision in group life policies?
A) Grace Period
B) Incontestability
C) Conversion
D) Misstatement of Age
E) Right to loan
Correct Answer: E) Right to loan
Rationale: Group life insurance policies are typically term insurance and do not build cash
value. Because policy loans are taken against the cash value, this provision is not a feature of
or a requirement for group life policies. Grace Period, Incontestability, and Conversion are all
required provisions.
Question 9
The Insurance Commissioner must give how many days' notice prior to holding a hearing
regarding an agent's unfair or deceptive practice?
A) 10
B) 15
C) 20
