TEXAS LIFE AND HEALTH INSURANCE
EXAM (QUESTION AND ANSWERS)
2026/2027
At what point must a life insurance applicant be informed of their rights that fall
under the Fair Credit Reporting Act? - ANSWER✅✅ -Upon completion of the
application
Who elects the governing body of a mutual insurance company? - ANSWER✅✅ -
policyholders
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the - ANSWER✅✅ -Fair Credit Reporting
Act
What type of reinsurance contract involves two companies automatically sharing
their risk exposure? - ANSWER✅✅ -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 - ANSWER✅✅ -
reserves
Which of the following requires insurers to disclose when an applicant's consumer
or credit history is being investigated - ANSWER✅✅ -1970 - Fair Credit
Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life
policy? - ANSWER✅✅ -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 - ANSWER✅✅ -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 - ANSWER✅✅ -representations
The part of a life insurance policy guaranteed to be true is called a -
ANSWER✅✅ -warranty
Which of these is NOT a type of agent authority? Express/ Implied/ Principal/
Apparent. - ANSWER✅✅ -Principal
The Consideration clause of an insurance contract includes - ANSWER✅✅ -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? - ANSWER✅✅ -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? - ANSWER✅✅ -Unilateral
,When must insurable interest exist for a life insurance contract to be valid? -
ANSWER✅✅ -Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts
must occur before any claims can be paid. - ANSWER✅✅ -conditional
Which of these require an offer, acceptance, and consideration? - ANSWER✅✅ -
Contract
Which of these arrangements allows one to bypass insurable interest laws? -
ANSWER✅✅ -Investor-Originated Life Insurance
Which of these is NOT considered to be an element of an insurance contract? the
offer acceptance negotiating consideration - ANSWER✅✅ -negotiating
An agent is an individual that represents whom? - ANSWER✅✅ -Insurer
Insurable interest must exist at what time? - ANSWER✅✅ -*At the time of
application
(It is important to note that insurable interests must exist upon issuance of a life or
health insurance contract. It does not have to continue throughout the duration of
the policy nor does it have to exist at the time of claim.)
Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? - ANSWER✅✅ -Variable Life
, Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? - ANSWER✅✅ -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? - ANSWER✅✅ -
Conversion provision
What type of life insurance are credit policies issued as? - ANSWER✅✅ -Term
How long does the coverage normally remain on a limited-pay life policy? -
ANSWER✅✅ -age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT -
ANSWER✅✅ -The premiums can be lowered or raised, based on investment
performance
Which of these is an element of a Variable Life policy? - ANSWER✅✅ -A fixed,
level premium
What type of life insurance incorporates flexible premiums and an adjustable death
benefit? - ANSWER✅✅ -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? - ANSWER✅✅ -Ten-
Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one
dies? - ANSWER✅✅ -Joint Life Policy
EXAM (QUESTION AND ANSWERS)
2026/2027
At what point must a life insurance applicant be informed of their rights that fall
under the Fair Credit Reporting Act? - ANSWER✅✅ -Upon completion of the
application
Who elects the governing body of a mutual insurance company? - ANSWER✅✅ -
policyholders
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the - ANSWER✅✅ -Fair Credit Reporting
Act
What type of reinsurance contract involves two companies automatically sharing
their risk exposure? - ANSWER✅✅ -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 - ANSWER✅✅ -
reserves
Which of the following requires insurers to disclose when an applicant's consumer
or credit history is being investigated - ANSWER✅✅ -1970 - Fair Credit
Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life
policy? - ANSWER✅✅ -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 - ANSWER✅✅ -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 - ANSWER✅✅ -representations
The part of a life insurance policy guaranteed to be true is called a -
ANSWER✅✅ -warranty
Which of these is NOT a type of agent authority? Express/ Implied/ Principal/
Apparent. - ANSWER✅✅ -Principal
The Consideration clause of an insurance contract includes - ANSWER✅✅ -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? - ANSWER✅✅ -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? - ANSWER✅✅ -Unilateral
,When must insurable interest exist for a life insurance contract to be valid? -
ANSWER✅✅ -Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts
must occur before any claims can be paid. - ANSWER✅✅ -conditional
Which of these require an offer, acceptance, and consideration? - ANSWER✅✅ -
Contract
Which of these arrangements allows one to bypass insurable interest laws? -
ANSWER✅✅ -Investor-Originated Life Insurance
Which of these is NOT considered to be an element of an insurance contract? the
offer acceptance negotiating consideration - ANSWER✅✅ -negotiating
An agent is an individual that represents whom? - ANSWER✅✅ -Insurer
Insurable interest must exist at what time? - ANSWER✅✅ -*At the time of
application
(It is important to note that insurable interests must exist upon issuance of a life or
health insurance contract. It does not have to continue throughout the duration of
the policy nor does it have to exist at the time of claim.)
Which policy requires an agent to register with the National Association of
Securities Dealers (NASD) before selling? - ANSWER✅✅ -Variable Life
, Which of the following actions require a policy owner to provide proof of
insurability in an Adjustable Life policy? - ANSWER✅✅ -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? - ANSWER✅✅ -
Conversion provision
What type of life insurance are credit policies issued as? - ANSWER✅✅ -Term
How long does the coverage normally remain on a limited-pay life policy? -
ANSWER✅✅ -age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT -
ANSWER✅✅ -The premiums can be lowered or raised, based on investment
performance
Which of these is an element of a Variable Life policy? - ANSWER✅✅ -A fixed,
level premium
What type of life insurance incorporates flexible premiums and an adjustable death
benefit? - ANSWER✅✅ -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? - ANSWER✅✅ -Ten-
Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one
dies? - ANSWER✅✅ -Joint Life Policy
