Life Insurance Regulations

Credit Life Insurance: A. Shall not exceed the total amount of the indebtedness B. Shall not exceed the total amount of the unpaid installments C. Has a maximum suicide clause of six months D. All of the above

D. All of these are true. Although credit life is a type of decreasing term insurance, it may not be written on loans in excess of 10 years.

All of the following are true about Credit Life insurance EXCEPT: A. It may not be written in connection with loans of more than 10 years B. It is usually decreasing term insurance C. It may not be written for more than the amount of the loan D. It must be written as group insurance

D. Although most credit life is written on a group basis, individual credit life insurance may also be purchased.

All of the following are true about Group Life insurance EXCEPT: A. It is usually written as annual renewable term insurance B. There must be a minimum of 10 employees C. The employee is the insured D. The employer is the beneficiary

D. The employee, as the insured, may designate any beneficiary they so desire, which would usually be either their spouse or children.

All are true about variable products sold in this state EXCEPT: A. Insurers invest the customer's premiums in their general account B. Agents must have state Life insurance license and a federal Securities license C. Rates of return are not guaranteed D. Customers must bear the investment risk

A. Insurers selling variable products invest their customer's monies in a 'separate' account, which is very similar to a mutual fund, and since there is no guaranteed rate of return, customers must bear the investment risk. Variable products are not covered by the L*H Guaranty Association.

Where there is no unconditional refund provision of at least 10 days, a Buyer's Guide and a policy summary must be delivered to the prospective life insurance purchaser: A. Prior to accepting an initial premium B. Prior to filling out an application for insurance C. With the policy D. Upon issuance of the policy

A. Life insurance policies usually contain a 10-day free look. If they do, the policy summary and buyers guide may be delivered with the policy. If they don't they have to be delivered prior to accepting the initial premium.

Which of the following is NOT true regarding the replacement of Life insurance: A. It is unlawful B. It may be detrimental C. It may lead to liability for Errors and Omissions D. Both the agent and the customer must sign the Notice Regarding Replacement

A. Replacement is not unlawful, if the rules are followed. Agents who make misleading presentations of facts to customers in order to induce replacement may be guilty of 'twisting', which is a form of misrepresentation.

Which of the following is true about the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association: A. It protects the customers of insolvent insurance companies B. Coverage is unlimited C. All insurers must participate D. Agents may use it's presence as an inducement to the sale

A. The L&H Guaranty Association protects the customers of insolvent (or bankrupt) insurers up to certain specified limits. Only authorized insurers (those who have Certificates of Authority) are required to participate.

"Twisting" is a commonly-used term describing: A. A misrepresentation made to a policyholder for the purpose of inducing the lapse, forfeiture, surrender, retention or conversion of any policy of insurance B. The making of misleading representations as to the financial condition of any insurer C. Giving, or promising to give, tangible or intangible items of value or service in order to induce a prospect to buy a policy of insurance D. Unfair avoidance of payment of policy benefits to which a claimant is entitled

A. Twisting has to do with miss-representing the facts regarding replacement of life insurance, by making it appear that the client is better off replacing when he might not be.

The Life Insurance Replacement Rule does not apply to which of the following: A. Credit Life B. Whole Life Insurance C. Endowment D. 10 year Convertible and Renewable Level Term

A. You do not have to follow the rules on replacement when replacing Credit Life. However, you do have to follow the rules when replacing term insurance, UNLESS the term policy you are replacing is non-convertible term which will expire in five years or less and cannot be renewed.

Under what circumstances may a partially or totally blind person be offered life insurance at rates different from those applying to persons with unimpaired sight: A. No such discrimination is permitted B. When such handicap is relevant to the risk of loss C. Upon application by the insurer to the Commissioner D. When the risk is placed under the Guarantee Association

B. Blind or physically handicapped persons may not be turned down or uprated for life insurance, unless their handicap can be proven to increase the risk of loss.

Conversions of a Group Life Insurance policy may not be made to: A. Whole Life B. 15 year level term C. 20-pay life D. Life paid up to age 65

B. Individuals and dependents insured on a group life policy may convert to an individual policy issued by the same insurer without a physical exam for up to 31 days after termination of employment. They can convert to any individual policy sold by the insurer EXCEPT term.

Conversion to an individual Whole Life Insurance policy written by the same company is permitted without a physical exam for _____ days after termination of your employment: A. 28 B. 30 C. 31 D. Group Life is not convertible

C. Terminated employees and their dependents have the 31-day grace period to convert to an individual policy issued by the same insurer without a physical exam. The new policy can be any type of insurance EXCEPT term. The premium will be based on the current age of the insured and you cannot convert to more coverage than you had on the group contract.

False advertising includes with of the following: A. Stating to a client that there is a difference in benefits between Whole Life Insurance and Term Life Insurance B. Stating that the policy you are selling has limitations and reductions C. Failing to include the premium in sales material you are disseminating D. Implying that you are the insurer rather than the agent

D. Premiums do not have to be included in all sales material you distribute, since they vary depending on the client's age and health. Most policies do have limitations and reductions and there is a big difference between whole life and term. However, you cannot hold yourself out to be the insurer, when in face you are simply an agent of the insurer.

Which of the following is an unfair or deceptive act in connection with the sale of a life insurance policy: A. Using a name or title that misrepresents the true nature of the policy B. Referring to the guarantees available in the event of insurer insolvency C. Making a misleading statement concerning the financial condition of the insurer D. All of the above

D. Referring to the provisions of the Life & Health Guaranty Association is not permitted. Making false statements concerning financial condition of an agent or insurer is defamation.

In the replacement of existing life insurance policies, regulations mandate disclosure of relevant information to all of the following EXCEPT: A. The applicant B. The replacing insurer C. The existing insurer D. The beneficiaries of the existing policy

D. Replacement is not illegal, but certain regulations must be followed. However, the purpose of these regulations is to protect the policyholder, not the beneficiary.