Texas Life and Health Insurance
1. 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
2. Who elects the governing body of a mutual insurance company?: policyhold-
ers
3. An insurance applicant MUST be informed of an investigation regarding
his/her reputation and character according to the: Fair Credit Reporting Act
4. What type of reinsurance contract involves two companies automatically
sharing their risk exposure?: Treaty
5. 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
6. Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated: 1970 - Fair Credit Reporting
Act
,7. What is the consideration given by an insurer in the Consideration clause
of a life policy?: Promise to pay a death benefit
8. 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
9. Statements made on an insurance application that are believed to be true
to the best of the applicant's knowledge are called: representations
10. The part of a life insurance policy guaranteed to be true is called a(n): war-
ranty
11. Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent: Principal
12. The Consideration clause of an insurance contract includes: the schedule
and amount of premium payments
,13. 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.
14. Which of the following terms defines the legally enforceable promise in an
insurance contract by the insurer?: Unilateral
, 15. When must insurable interest exist for a life insurance contract to be
valid?: Inception of the contract
16. Insurance contracts are known as because certain future conditions
or acts must occur before any claims can be paid.: conditional
17. Which of these require an offer, acceptance, and consideration?: Contract
18. 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.
19. Which of these is NOT considered to be an element of an insurance
contract?
1. 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
2. Who elects the governing body of a mutual insurance company?: policyhold-
ers
3. An insurance applicant MUST be informed of an investigation regarding
his/her reputation and character according to the: Fair Credit Reporting Act
4. What type of reinsurance contract involves two companies automatically
sharing their risk exposure?: Treaty
5. 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
6. Which of the following requires insurers to disclose when an applicant's
consumer or credit history is being investigated: 1970 - Fair Credit Reporting
Act
,7. What is the consideration given by an insurer in the Consideration clause
of a life policy?: Promise to pay a death benefit
8. 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
9. Statements made on an insurance application that are believed to be true
to the best of the applicant's knowledge are called: representations
10. The part of a life insurance policy guaranteed to be true is called a(n): war-
ranty
11. Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent: Principal
12. The Consideration clause of an insurance contract includes: the schedule
and amount of premium payments
,13. 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.
14. Which of the following terms defines the legally enforceable promise in an
insurance contract by the insurer?: Unilateral
, 15. When must insurable interest exist for a life insurance contract to be
valid?: Inception of the contract
16. Insurance contracts are known as because certain future conditions
or acts must occur before any claims can be paid.: conditional
17. Which of these require an offer, acceptance, and consideration?: Contract
18. 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.
19. Which of these is NOT considered to be an element of an insurance
contract?
