CH11. Texas Statues And Rules Pertinent To Life Insurance Only

How long is the incontestability period in group life insurance policies issued in Texas? A. 1 year B. 2 years C. 3 Years D. Indefinitely

B. 2 years Life insurance policies (individual and group) are incontestable after the policy has been in force for a period of 2 years

When possible, what should insurers strive to eliminate from illustrations? A. Policy amendments more than a page long B. Words they don't know C. Footnotes and caveats D. Reference to other products

C. Footnotes and caveats Insurers will, as often as possible, eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed.

Which of the following is TRUE regarding the insurance amount in a credit life policy? A. Allowable amount of coverage is determined by the State Insurance Commissioner B. The amount of coverage can be greater than the amount owed C. The creditor can only insure the debtor for the amount owed D. The creditor may insure the debtor for an unlimited amount of coverage

C. The creditor can only insure the debtor for the amount owned Credit life insurance cannot pay out more than the balance of the debt, so that there is no financial incentive for the death of the insured.

Dividend

a payment made by a policy (distribution of profits or return of unused funds)

Nonguaranteed elements

policy components that are not guaranteed in the contract or that may fluctuate

The usage of words or symbols that are similar to what entity is prohibited in life insurance advertisements? A. Federal government B. Insurer C. Department of Insurance D. Stock

A. Federal government No combination of words, symbols, etc. similar to those of state or federal government agencies may be used that might mislead prospective insureds into believing the solictiation is connected with a government agency

Which of the following must be included in all life insurance advertisements? A. Contract information for each local office of the insurer B. Identity of the actual insurer C. Names of any parent companies D. Contract information for the Commissioner of Insurance

B. Identity of the actual insurer The identity of the actual insurer must be stated in all advertisements

If a policyowner surrenders his life insurance policy that has been in force for 5 years within 60 days after the premium due date, what will the insurer be required to pay? A. Paid-up nonforfeiture benefit B. Nothing C. The death benefit D. A cash surrender value

D. A cash surrender value A Life insurance policy must ensure that upon surrender of the policy no later than 60 days after the due date of a premium payment, the company will pay a cash surrender value (instead of a paid-up nonforfeiture benefit) if the premiums have bene paid for at least 3 full years for ordinary life insurance policies, or 5 years for industrial life insurance.

Claimant

a person who submits a claim for payments of benefits

Lapse

policy termination due to nonpayment of premium

Rescind

remove or cancel

Disclosure

revealed information to help someone make an intelligent and education decision

Testimonial

statements or endorsements made by clients based on their experience with products or services

An insured in a group policy has misstated his age on the insurance application. As a result, the insurer will most likely A. Cancel the coverage B. Impose a fine on the insured C. Issue an amended policy D. Adjust teh premium

D. Adjust the premium In group insurance, if the insured participant misstated their age, the premium and/or the benefit will be adjusted to the correct age

Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced? A> Policy cost guides B. Consumer price indices C. Policy cost indices D. Cost comparison methods

D. Cost comparison methods Cost comparison methods are used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced

Policy proceeds

in life insurance, the death benefit

Which of the following is NOT required on an illustration used in the sale of a life insurance policy? A. Generic name of policy B. Name of insurer C. Underwriting or rating classification upon which the illustration is based D. The name of the primary and secondary beneficiares

D. The name of the primary and secondary beneficiaries Other required items include the name and business address of producer or insurer's authorized representative; the name, age and sex of proposed insured; underwriting or rating classification upon which the illustration is based; and the initial death benefit.

Nonforfeiture values

benefits in a life insurance policy that the policyowner cannot lose

Which of the following is correct regarding credit life insurance? A. It insures the life of a creditor B. It has a maximum term of 20 years C. It insures the life of a debtor D. It is purchased on an installment basis

C. It insures the life of a debtor Credit life insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor

What is the main purpose of the regulation on life insurance policy illustrations? A. To help producers submit proper reports to the department of insurance B. To present a life policy in a visual way C. To help customers make educated decisions in buying life insurance D. To compare life policies

C. To help customers make educated decisions in buying life insurance The purpose of the regulation on individual and group life insurance policy illustrations is to provide standards that will protect and educate consumers.

Which of the following may be included on an insurance advertisement? A. Trade names in place of the insurer's name B. Claims settlement illustration which imply special treatment C. Words and symbols similar to those of government agencies D. Testimonials from compensated individual

D. Testimonials from compensated individuals An insurer may use a testimonial from an individual in exchange for compensation, as long as the advertisement is identified as "Paid Endorsement"

During replacement of life insurance, a replacing insurer must do which of the following? A. Guarantee a replacement for each existing policy B. Designate a new producer for a replaced policy C. send a copy of the Notice Regarding Replacement to the Department of Insurance D. Obtain a list of all life insurance policies that will be replaced

D. Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice provided to the applicant and send each existing insurance company a written communication advising of the proposed replacement

All advertisements are the responsibility of the A. Soliciting agent B. Advertising agency C. Department of Insurance D. Insurer

D. Insurer The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? A. Disclosure rule B. Replacement rule C. Reinstatement rule D. Conversion rule

B. Replacement rule Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company

All of the following are mandatory life insurance policy provisions EXCEPT A. Incontestability B. Grace period C. Policy backdating D. Misstatement of age

C. Policy backdating Policy backdating is not a mandatory provision; in fact, backdating a policy more than 6 months is prohibited

According to the state nonforfeiture law for life insurance policies, insurers must offer at least one of the following nonforfeiture options EXCEPT A. Extended term B. Shortened benefit period C. Reduction of premium D. Reduced paid-up

C. Reduction of premium Reduction of premium is not a nonforfeiture option (it's a dividend option). The other answer choices are the required nonforfeiture options in life insurance policies issued in the state.

All of the following statements are correct regarding credit life insurance EXCEPT A. Benefit are paid to the borrower's beneficiary B. The amount of insurance permissible is limited per borrower C. Premiums are usually paid by the borrower D. Benefits are paid to the creditor

A. Benefits are paid to the borrower's beneficiary In credit life insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan

The regulations regarding replacement apply to which of the following? A. Renewable term B. Replacement of existing policy by the same insurer C. Credit life D. Group life

A. Renewable term Replacement rules apply to all life insurance policies except group life policies, group annuities, credit life or nonconvertible term which will expire in 5 years or less and cannot be renewed. Purchasing additional coverage under the GIR is not a replacement of coverage, simply an addition of coverage

All of the following information must be disclosed to the viator prior to the execution of a viatical settlement contract EXCEPT A. The amount of compensation received by any person from the viatical settlement B. Availability of stranger0originated life insurance (STOLI) C. Alternatives to the viatical settlement D. Tax consequences resulting from entering into the settlement

B. Availability of stranger0originated life insurance (STOLI) STOLIs are initiated for the purpose of obtaining a policy taht would benefit a person who has no insurable interest in the life of the insured at the time of policy origination and are usually prohibited by state law. All the other answer choices are required disclosures.

Which of the following is NOT allowed in credit life insurance? A. Creditor becoming a policy beneficiary B. Creditor requiring that a debtor buys insurance from a certain insurer C. Creditor having a collateral assignment on the policy. D. Creditor requiring that a debtor has a life insurance

B. Creditor requiring that a debtor buys insurance from a certain insurer In credit life insurance, a creditor may require that the debtor have life insurance, but they cannot require the debtor to purchase insurance through a specific insurer

If a person is compensated for a testimonial in an advertisement, which of the following statements should be included in the advertisement? A. Commissioned advertisement B. Paid endorsement C. Insurer is not responsible for the contents of the testimonial D. The author is the employee of the insurer

B. Paid endorsement The ad must disclose whether the person making the testimonial has a financial interest in the insurer. If the person is compensated, the testimonial must include "Paid Endorsement" or similar language

Which of the following CANNOT be included along with illustration used to sell life insurance? A. Rating information B. Original death benefit C. Vanishing premium information D. Name of the insurer

C. Vanishing premium information Illustrations used to sell life insurance cannot use the term "vanishing premium" - or any similar term - that implies the policy becomes paid up

How soon from the termination of debt under a credit life insurance policy must a creditor provide notice to the insurer? A. 7 days B. 10 days C. 30 days D. 60 days

D. 60 days In the event a credit life insurance policy is terminated, a creditor must provide the insurer with a notice of termination of debt within 60 days of the payoff date

To which of the following situations does the Replacement Regulation apply? A. Group life insurance B. An immediate annuity purchased with proceeds from an existing policy C. Coverage under a binding receipt issued by the same company D. A whole life policy reissued with reduction in cash value

D. A whole life policy reissued with reduction in cash value Replacement means any transaction in which new life insurance or a new annuity is to be purchased and it is known or should be known to the proposing producer that by reason of transaction, existing life insurance or annuities have been or will be converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values. All other answer choices are also exceptions to the replacement rules

The initial amount of credit life insurance may NOT exceed A. An amount set by statue and adjusted regularly for inflation B. The borrower's monthly income C. The borrower's annual income D. The amount to be repaid under the contract

D. The amount to be repaid under the contract The initial amount of credit life insurance may not exceed the total amount repayable under the contract of indebtedness