Pearson VUE Texas Life & Health Insurance ExamPractice
Questions & Correct Answers (2025 Updated)
1. What is the primary purpose of life insurance?
a. To provide investment growth
b. To create financial protection against income loss from death (correct answer)
c. To cover everyday medical costs
d. To reduce funeral costs
Rationale: Life insurance creates an economic safety net for beneficiaries when the insured dies.
2. A contract of adhesion means:
a. Both parties negotiate terms equally
b. Only the policyowner writes the contract
c. The insurer writes the contract and the insured must accept as is (correct answer)
d. The agent writes the policy terms
Rationale: Insurance contracts are drafted by insurers with no negotiation from applicants.
3. A life insurance policy becomes effective when:
a. The insurer prints the policy
b. The agent signs the application
c. The initial premium is paid and the policy is delivered (correct answer)
d. The underwriting period ends
Rationale: Policy delivery plus initial premium activates coverage.
4. A representation is best described as:
a. A guaranteed fact
b. A contract amendment
c. A statement believed to be true to the best of one’s knowledge (correct answer)
d. A legally binding warranty
Rationale: Representations are truthful to the applicant’s knowledge but not guaranteed.
,5. Which policy builds cash value?
a. Term life insurance
b. Whole life insurance (correct answer)
c. Accidental death only
d. Temporary coverage rider
Rationale: Permanent policies like whole life accumulate cash values.
6. What provision prevents an insurer from denying a claim after a certain period?
a. Insuring clause
b. Free-look period
c. Incontestability clause (correct answer)
d. Grace period
Rationale: Incontestability prevents rescission after two years except for fraud.
7. The insured pays premiums, and the insurer promises benefits. This describes:
a. Tort liability
b. Indemnification
c. Unilateral contract (correct answer)
d. Contract adhesion
Rationale: Only the insurer has a legally enforceable promise.
8. What type of risk is insurable?
a. Speculative risk
b. Pure risk (correct answer)
c. Intentional risk
d. Financial gambling loss
Rationale: Only risks with the possibility of loss (not gain) are insurable.
9. A beneficiary designation that cannot be changed is:
a. Contingent
b. Revocable
c. Irrevocable (correct answer)
d. Primary
Rationale: Requires written consent to modify.
, 10. What is the purpose of underwriting?
a. To increase sales
b. To assess risk and determine eligibility (correct answer)
c. To regulate insurance laws
d. To process claims only
Rationale: Underwriting evaluates applicant risk to set coverage terms.
11. The free-look period in Texas for life insurance is at least:
a. 5 days
b. 20 days
c. 10 days (correct answer)
d. 45 days
Rationale: Texas minimum free-look is 10 days for standard policies.
12. Which term describes the legal transfer of a policy owner’s rights to another person?
a. Assignment
b. Absolute assignment (correct answer)
c. Conversion
d. Automatic exchange
Rationale: Transfers all ownership rights to a new party.
13. Which rider waives premiums if the insured becomes disabled?
a. Accelerated benefit rider
b. Waiver of premium rider (correct answer)
c. Return of premium rider
d. Guaranteed insurability rider
Rationale: Disability prevents loss of coverage due to inability to pay.
14. Which life policy has flexible premiums and cash value dependent on investment performance?
a. Term life
b. Universal life
c. Variable life (correct answer)
Questions & Correct Answers (2025 Updated)
1. What is the primary purpose of life insurance?
a. To provide investment growth
b. To create financial protection against income loss from death (correct answer)
c. To cover everyday medical costs
d. To reduce funeral costs
Rationale: Life insurance creates an economic safety net for beneficiaries when the insured dies.
2. A contract of adhesion means:
a. Both parties negotiate terms equally
b. Only the policyowner writes the contract
c. The insurer writes the contract and the insured must accept as is (correct answer)
d. The agent writes the policy terms
Rationale: Insurance contracts are drafted by insurers with no negotiation from applicants.
3. A life insurance policy becomes effective when:
a. The insurer prints the policy
b. The agent signs the application
c. The initial premium is paid and the policy is delivered (correct answer)
d. The underwriting period ends
Rationale: Policy delivery plus initial premium activates coverage.
4. A representation is best described as:
a. A guaranteed fact
b. A contract amendment
c. A statement believed to be true to the best of one’s knowledge (correct answer)
d. A legally binding warranty
Rationale: Representations are truthful to the applicant’s knowledge but not guaranteed.
,5. Which policy builds cash value?
a. Term life insurance
b. Whole life insurance (correct answer)
c. Accidental death only
d. Temporary coverage rider
Rationale: Permanent policies like whole life accumulate cash values.
6. What provision prevents an insurer from denying a claim after a certain period?
a. Insuring clause
b. Free-look period
c. Incontestability clause (correct answer)
d. Grace period
Rationale: Incontestability prevents rescission after two years except for fraud.
7. The insured pays premiums, and the insurer promises benefits. This describes:
a. Tort liability
b. Indemnification
c. Unilateral contract (correct answer)
d. Contract adhesion
Rationale: Only the insurer has a legally enforceable promise.
8. What type of risk is insurable?
a. Speculative risk
b. Pure risk (correct answer)
c. Intentional risk
d. Financial gambling loss
Rationale: Only risks with the possibility of loss (not gain) are insurable.
9. A beneficiary designation that cannot be changed is:
a. Contingent
b. Revocable
c. Irrevocable (correct answer)
d. Primary
Rationale: Requires written consent to modify.
, 10. What is the purpose of underwriting?
a. To increase sales
b. To assess risk and determine eligibility (correct answer)
c. To regulate insurance laws
d. To process claims only
Rationale: Underwriting evaluates applicant risk to set coverage terms.
11. The free-look period in Texas for life insurance is at least:
a. 5 days
b. 20 days
c. 10 days (correct answer)
d. 45 days
Rationale: Texas minimum free-look is 10 days for standard policies.
12. Which term describes the legal transfer of a policy owner’s rights to another person?
a. Assignment
b. Absolute assignment (correct answer)
c. Conversion
d. Automatic exchange
Rationale: Transfers all ownership rights to a new party.
13. Which rider waives premiums if the insured becomes disabled?
a. Accelerated benefit rider
b. Waiver of premium rider (correct answer)
c. Return of premium rider
d. Guaranteed insurability rider
Rationale: Disability prevents loss of coverage due to inability to pay.
14. Which life policy has flexible premiums and cash value dependent on investment performance?
a. Term life
b. Universal life
c. Variable life (correct answer)
