Chap 8 Texas Laws and Rules

As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?

Coercion. A creditor who requires a debtor to obtain insurance from a particular company or agent as a condition for a loan is guilty of coercion.

Which of the following groups may NOT be insured by a group life insurance policy?

Individuals who are related by blood. A group life insurance policy may NOT insure groups consisting exclusively of persons who are related by marriage, blood or legal adoption.

Credit Life insurance is

Insurance issued on a debtor to cover outstanding loan balances. Credit Life insurance can be best described as insurance issued on a debtor to cover outstanding loan balances.

Which actions will a life insurance company most likely take if an insured dies and it is discovered that the insured's age was misstated on the application?

Pay an amount the premiums would have purchased at the insured's actual age. The company will most likely pay the policy proceeds in the amount the premiums would have purchased at the insured's actual age.

Which of these is NOT an example of doing insurance business?

Selling shares of stock.

Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?

The agent and the company. Any agent that sells an insurance policy for an unauthorized insurer runs the risk of being responsible for unpaid claims if the unauthorized insurer does not pay.

A Medicare Supplement policy may be cancelled for which of the following reasons?

The premium has not been paid by the insured. Failing to pay the premium would cause a Medicare Supplement policy to be cancelled.

Which of the following benefits is NOT required under a group health plan for drug and alcohol treatment?

Transportation to and from a treatment facility

A license may be denied, suspended, or revoked if the licensee

is found guilty of misrepresentation in obtaining the license. The Commissioner of insurance may suspend, revoke, or refuse to renew the license of an agent who if found guilty of misrepresentation or fraud in obtaining the license.

To terminate an agent's appointment, an insurance company must

send termination notice to the Texas Department of Insurance. An insurance company that terminates an agent's appointment must send notice of the termination to the Texas Department of Insurance.

___ of continuing education MUST be completed in the classroom or classroom equivalent.

50%. 50% of continuing education must be spent in a classroom setting.

The phrase "transacting business" includes

collecting premiums. Under Texas insurance law, the term " transacting business" includes collecting premiums.

A domestic insurance company in Texas is considered a company that

is incorporated and formed in Texas.

During a sales presentation for a participating life insurance policy, an agent MUST

make a prospect understand that dividends are NOT guaranteed. During a sales presentation for a participating life insurance policy, an agent MUST include a statement that dividends are not guaranteed.

An employee is covered under a company group life plan with a $50,000 death benefit. What is the MAXIMUM amount a spouse may be insured for under this program?

$25,000. Group life insurance on an employee's spouse may not exceed 1/2 of the amount of insurance on the life of the insured employee under the group policy.

What is the MINIMUM benefit period that must be offered by a Long-Term Care policy?

12-months. A Long-Term Care policy must offer a MINIMUM benefit period of 12 months.

When advertising, an insurance company MUST use its

Legal corporate name. An insurance company must use its true corporate name in its advertising.

Which of the following may NOT charge fees for insurance advice?

Legal reserve agents

Who owns a stock insurance company?

Stockholders. A stock insurance company is owned by it's stockholders.

An example of an unfair claims settlement practice is

Turning down a claim without providing the basis of denial. Denying an insured's claim without indicating the basis of denial under the policy is considered an unfair claim settlement practice.

What is required for an agent whose license has been revoked?

Wait at least five years before applying for a new license. An individual whose license has been denied or revoked cannot apply again for an agent's license for at least 5 years.

A foreign insurance company conducting insurance business in Texas

was formed under the laws of another state. A foreign insurance company is one that is incorporated under the laws of another state.

How long can a cash surrender value payment be deferred by the insurance company under the Nonforfeiture Law?

6 months. A company shall reserve the right to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy.

With whom may an agent legally share commissions?

Another agent with the same line of insurance. An agent may legally share commissions only with another agent who is licenses in the same line of insurance.

Which of the following actions does the Commissioner of Insurance NOT have the power to conduct?

Activate insurance companies' financial reserves. The Commissioner of insurance has the power and duty to take all of these actions EXCEPT activate insurance companies' financial reserves.

Which of these provisions is NOT required in life insurance policies?

Extended Term. All of these provisions must be included in life insurance policies EXCEPT Extended Term.

Which Unfair Trade Practice involves an agent telling a prospective client that a policy's dividends are guaranteed?

Misrepresentation. An agent who tells a client that dividends are guaranteed may be guilty of misrepresentation.

An insurer is NOT required to provide information on fraudulent claims if requested by

an insured. On the written request of an authorized government entity (such as the Commissioner, Attorney General, or a local law enforcement agency), an insurer will provide to that entity any relevant information or material relating to a fraudulent matter under investigation.

An applicant MUST receive an Outline of Coverage when an application is taken for a(n)

Medicare Supplement policy An agent MUST give a prospective insured an Outline of Coverage when taking an application for a Medicare Supplement policy.

In Texas, how long must a policy be in force before an insurance company must pay death benefits for suicide?

2 years, under the Texas insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of two years.

The insurance commissioner must give how many days notice prior to holding a hearing regarding an agent's unfair or deceptive practice?

30. Before holding a hearing regarding an agent's unfair or deceptive practice, the Insurance Commissioner MUST give 30 days notice.

Every 12-months after the initial enrollment period, an HMO must hold an open enrollment period of

31 days. Fully insured group health plans and HMO's must have at least one 31-day open enrollment period each year.

An Evidence of Coverage form may be issued by a Health Maintenance Organization (HMO) after being approved by the

Commissioner. A Health Maintenance Organization (HMO) may issue an Evidence of Coverage form after it has been approved by the Commissioner of Insurance.

Which of the following is NOT included in a life insurance illustration?

Company's mortality table. A life insurance illustration is NOT required to include the company's mortality table.

Which of the following statements about health coverage for newborns is NOT true?

Coverage is limited to only congenital defects.

Which of the following is a valid reason for an enrollee to be cancelled by a Health Maintenance Organization (HMO) plan?

Nonpayment of coverage. An enrollee of a Health Maintenance Organization (HMO) may be cancelled or non-renewed for failure to pay for coverage.

An example or rebating would be

returning a portion of a premium as inducement to purchase insurance. Returning a portion of a premium as inducement to purchase insurance is an example of rebating.

A plan through the Marketplace may be purchased by

any legal resident (except those imprisoned). Any legal resident, except those incarcerated, can purchase a plan through the Marketplace.

An insurance agent has a fiduciary responsibility to all of the following, EXCEPT

other agents. Because the agent handles money of the insured and insurer, he/she has a fiduciary responsibility.