Texas Life Insurance Exam

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

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

$50,000

An insured may assign up toof policy ownership under an individual life insurance policy

100%

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

2 years

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be carrer?

20-Pay Life accumulates cash value faster than Straight Life

J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20-pay life

A new agent must complete at LEAST_ licensure. hours of continuing education within 24 months of initial

24

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

30

N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?

30 Pay Life

In Texas, an individual life insurance policy is required to have a grace period of

31 days

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

50%

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

6 months

Which of the following types of policies pays a benefit if the insured goes blind?

AD&D

All are true statements regarding the underwriting process, EXCEPT:

AIDS and HIV virus exams can be conducted in a discriminatory fashion

Which of the following Dividend options results in taxable income to the policyowner?

Accumulation at interest

How long does the coverage normally remain on a limited-pay life policy?

Age 100

An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called

An installment Refund annuity

An example of false advertising would be

An insurer exaggerating its dividends in a magazine advertisement

With whom may an agent legally share commissions?

Another agent with the same line of insurance

What action can a policyowner take if an application for a bank loan requires collateral?

Assign policy ownership to the bank

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation exclusion

Which of the following is a requirement for obtaining a Texas insurance agent's license?

Be honest, trustworthy, and reliable

What type of employee welfare plans are not subject to ERISA regulations?

Church plans

The phrase "transacting business" includes

Collecting premiums

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

Company's mortality table

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional receipt

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

Conversion privilege

When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?

Conversion provision

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

Decreasing term policy

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum Jpon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distribution is subject to federal income tax withholding

G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer

Does not have to make any further payments

Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?

Each partner must own a policy on the other partners

What provision in a life insurance policy states that the application is considered part of the contract?

Entire Contract provision

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?

Establishes the needs of the individual and his dependents

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

Extended Term

What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?

Face amount plus the policy's cash value

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Flexible Installment Deferred

What action should a producer take if the initial premium is NOT submitted with the application?

Forward the application to the insurer without the initial premium

An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

Full face amount minus any past due premiums

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?

If Tom's employment is terminated, 20% of the funds would be forfeited

In regards to representations or warranties, which of these statements is TRUE?

If material to the risk, false representations will void a policy

The type of annuity that can be purchased with one monetary deposit is called a(n)

Immediate annuity

How does an indexed annuity differ from a fixed annuity ?

Indexed annuity owners receive credited interest tied to the fluctuations of the linked index

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

Individuals who are related by blood

Credit Life insurance is

Insurance issued on a debtor to cover outstanding loan balances

Which of the following statements about accumulated interest eared on dividends from an insurance policy is TRUE?

It is taxed as ordinary income

D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?

Level term

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Life Annuity with Period Certain

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life Income

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n) )

Living Benefit

Which of these is NOT relevant when determining the amount of personal life insurance needed?

Local unemployment rate

Which of these is an element of a Single Premium annuity?

Lump-sum payment

A policyowner is allowed to pay premiums more than once a year under which provision?

Mode of Premium

Which type of policy is considered to be overfunded, as stated by IRS guidelines?

Modified Endowment Contract

K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

Modified Whole Life

All of these statements concerning Settlement Options are true, EXCEPT:

Only the beneficiary may select

P completes an application for a $10,000 life policy, but does not give the producer the initial premium. P's coverage becomes effective when

P receives the policy and pays the premium

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor clause

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?

Payor provision

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

Policy Loan provision

The underwriting process involves all of these EXCEPT for

Policy loan

Which statement is correct regarding the premium payment schedule for whole life policies?

Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J. because the check is made out to J instead of the insurance company. What action should I take?

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company

An example of rebating would be

Returning a portion of a premium as inducement to purchase insurance

Which of the following is NOT a required provision in group life policies?

Right to loan

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?

Risk classification

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

Send termination notice to the Texas Department of Insurance

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)

Straight Life annuity

What kind of life insurance product covers children under their parent's policy?

Term rider

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount

Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT?

The income from the TSA is received income tax-free

Which statement regarding the Change of Beneficiary provision is true?

The policyowner can change the beneficiary

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds

Why would the Insurance Commissioner examine the records of an insurance company?

To determine the solvency of the company

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

Waiver of Premium

When must insurable interest be present in order for a life insurance policy to be valid?

When the application is made

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the

applicant's physician

In a qualified retirement plan, the yearly contributions to an employee's account

are restricted to maximum levels set by the IRS

The automatic premium loan provision is designed to

avoid a policy lapse

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:

bilateral

Whose life is covered on a life insurance policy that contains a payor benefit clause?

child

Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?

conversion

K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?

daughter

Taking receipt of premiums and holding them for the insurance company is an example of:

fiduciary responsibility

A Renewable Term Policy is renewable at the option of the

insured

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

insured

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

make a prospect understand that dividends are NOT guaranteed

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

mandatory income tax withholding on the transfer amount

Insurance policies are considered aleatory contracts because

performance is conditioned upon a future occurrence

T has a term policy that allows him to continue the coverage after expiration of the initial policy period What type of term coverage is this?

renewable

T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable eneficiary. What action will the insurance company take if I requests a change of beneficiary?

request of the change will be refused

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

Who owns a stock insurance company?

stockholders

The amount of coverage on a group credit life policy is limited to

the insured's total loan value

The Consideration clause of an insurance contract includes:

the schedule and amount of premium payments

The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:

to cost

ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering

unfair methods of competition

A term life insurance policy matures:

upon the insured's death during the term of the policy

A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.

variable