Texas Statutes and Rules Pertinent to Life Insurance Only

Is it illegal for an insurance company to advertise that it is the leader of the financial industry and therefore pays the most claims each year? A) Yes, as long as no one can prove otherwise. B) No, as long as the advertisement has a disclaimer that all facts are misleading. C) No D) Yes; advertisements must not mislead the public in terms of financial standing.

D) Yes; advertisements must not mislead the public in terms of financial standing. Correct! Advertisements must not mislead the public or attempt to induce a person to purchase insurance because of false advertisement.

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

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

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

Upon the submission of a death claim under a life insurance policy, when must the insurer pay the policy benefit? A) Immediately after receiving written proof of loss B) On the next anniversary of the policy C) Within 30 days D) Within 2 months

D) Within 2 months Correct! Upon receipt of a written proof of death and the right of the claimant to the proceeds, the insurer must pay death claims within 2 months.

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

D) Federal government Correct! 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 solicitation is connected with a government agency.

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

A) Paid endorsement Correct! 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.

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called A) Decreasing whole life. B) Multiple Protection insurance. C) Credit life. D) Credit health.

C) Credit life. Correct! Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. Credit 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.

Which of the following types of insurance policies is most commonly used in credit life insurance? A) Whole life B) Equity indexed life C) Decreasing term D) Increasing term

C) Decreasing term Correct! Credit 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. It is usually written as decreasing term insurance.

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) A paid-up nonforfeiture benefit B) Nothing C) The death benefit D) A cash surrender value

D) A cash surrender value Correct! 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 been paid for at least 3 full years for ordinary life insurance policies, or 5 years for industrial life insurance.

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

C) Obtain a list of all life insurance policies that will be replaced Correct! The replacing insurance company must require from the producer a list of the applicant's life insurance or annuity contracts 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.

What provision in a life or health insurance policy extends coverage beyond the premium due date? A) Grace period B) Free look C) Automatic premium loan D) Waiver of premium

A) Grace period Correct! The grace period is a mandatory provision found in all life and health insurance policies that provides coverage for a period of time after the premium becomes past due.

Which of the following would be the beneficiary in credit life insurance? A) Borrower B) Creditor C) Insured D) Company

B) Creditor Correct! The creditor is the owner and the beneficiary of the policy.

Viatical settlements may be rescinding within what time period after the viator receives the proceeds? A) 15 days B) 30 days C) 90 days D) Indefinitely

A) 15 days Correct! The viator has a right to rescind a viatical settlement within 15 days of receiving the viatical settlement proceeds.

Conversion to an individual whole life policy is permitted without evidence of insurability within how many days of the termination of employment? A) 14 B) 28 C) 30 D) 31

D) 31 Correct! Terminated employees and their dependents have 31 days to convert to an individual policy issued without evidence of insurability. The new policy can be any type of insurance EXCEPT term. The premium will be based on the current age of the insured.

An individual covered under a group life insurance policy may convert the policy to any of the following EXCEPT A) 15-year level term. B) 20-pay life. C) Life paid up at age 65. D) Whole Life.

A) 15-year level term. Correct! Individuals and dependents insured on a group life policy may convert to an individual policy issued by the same insurer. They can convert to any individual policy except term.

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

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

Which of the following documents must be provided to the policyowner or applicant during policy replacement? A) Buyer's Guide and Policy Summary B) Policy illustrations C) Notice Regarding Replacement D) Disclosure Authorization Form

C) Notice Regarding Replacement Correct! During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

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

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

Which of the following is TRUE about credit life insurance? A) Creditor is the policyowner. B) Debtor is the annuitant. C) Creditor is the insured. D) Debtor is the policy beneficiary.

A) Creditor is the policyowner. Correct! In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.

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

B) Reduction of premium Correct! 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 this state.

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

B) The creditor can only insure the debtor for the amount owed. Correct! 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.

How long is the grace period in group policies? A) 10 days B) 21 days C) 31 days D) 90 days

C) 31 days Correct! Group policies also have many of the same policy provisions included in individual insurance such as a 2-year incontestability period and a 31-day grace period.

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. Correct! 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.

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

Which of the following CANNOT be included along with illustrations 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 Correct! Illustrations used to sell life insurance cannot use the term "vanishing premium" - or any similar term - that implies the policy becomes paid up.

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

C) availability of stranger-originated life insurance (STOLI). Correct! STOLIs are initiated for the purpose of obtaining a policy that 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.

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 the premium.

D) Adjust the premium. Correct! In group insurance, if the insured participant misstated his or her 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 Correct! 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.