Texas Life and Health Insurance Exam 2024
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit
Reporting Act? -CORRECT ANS-Upon completion of the application
Who elects the governing body of a mutual insurance company? -CORRECT ANS-policyholders
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character
according to the -CORRECT ANS-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk exposure? -
CORRECT ANS-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 -CORRECT ANS-reserves
Which of the following requires insurers to disclose when an applicant's consumer or credit history is
being investigated -CORRECT ANS-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy? -CORRECT ANS-
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 -CORRECT ANS-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 -CORRECT ANS-representations
The part of a life insurance policy guaranteed to be true is called a(n) -CORRECT ANS-warranty
Which of these is NOT a type of agent authority?
Express
,Implied
Principal
Apparent -CORRECT ANS-Principal
The Consideration clause of an insurance contract includes -CORRECT 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? -CORRECT ANS-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? -CORRECT ANS-Unilateral
When must insurable interest exist for a life insurance contract to be valid? -CORRECT ANS-Inception of
the contract
Insurance contracts are known as ____ because certain future conditions or acts must occur before any
claims can be paid. -CORRECT ANS-conditional
Which of these require an offer, acceptance, and consideration? -CORRECT ANS-Contract
Which of these arrangements allows one to bypass insurable interest laws? -CORRECT 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.
, Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration -CORRECT ANS-negotiating
An agent is an individual that represents whom? -CORRECT ANS-Insurer
Insurable interest must exist at what time? -CORRECT ANS-at the time of application
Which policy requires an agent to register with the National Association of Securities Dealers (NASD)
before selling? -CORRECT ANS-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable
Life policy? -CORRECT ANS-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? -CORRECT ANS-Conversion provision
What type of life insurance are credit policies issued as? -CORRECT ANS-Term
How long does the coverage normally remain on a limited-pay life policy? -CORRECT ANS-age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that
of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 -CORRECT ANS-The premiums can be lowered or raised,
based on investment performance
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit
Reporting Act? -CORRECT ANS-Upon completion of the application
Who elects the governing body of a mutual insurance company? -CORRECT ANS-policyholders
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character
according to the -CORRECT ANS-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk exposure? -
CORRECT ANS-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 -CORRECT ANS-reserves
Which of the following requires insurers to disclose when an applicant's consumer or credit history is
being investigated -CORRECT ANS-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy? -CORRECT ANS-
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 -CORRECT ANS-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 -CORRECT ANS-representations
The part of a life insurance policy guaranteed to be true is called a(n) -CORRECT ANS-warranty
Which of these is NOT a type of agent authority?
Express
,Implied
Principal
Apparent -CORRECT ANS-Principal
The Consideration clause of an insurance contract includes -CORRECT 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? -CORRECT ANS-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? -CORRECT ANS-Unilateral
When must insurable interest exist for a life insurance contract to be valid? -CORRECT ANS-Inception of
the contract
Insurance contracts are known as ____ because certain future conditions or acts must occur before any
claims can be paid. -CORRECT ANS-conditional
Which of these require an offer, acceptance, and consideration? -CORRECT ANS-Contract
Which of these arrangements allows one to bypass insurable interest laws? -CORRECT 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.
, Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration -CORRECT ANS-negotiating
An agent is an individual that represents whom? -CORRECT ANS-Insurer
Insurable interest must exist at what time? -CORRECT ANS-at the time of application
Which policy requires an agent to register with the National Association of Securities Dealers (NASD)
before selling? -CORRECT ANS-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable
Life policy? -CORRECT ANS-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? -CORRECT ANS-Conversion provision
What type of life insurance are credit policies issued as? -CORRECT ANS-Term
How long does the coverage normally remain on a limited-pay life policy? -CORRECT ANS-age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that
of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 -CORRECT ANS-The premiums can be lowered or raised,
based on investment performance
