Texas life Insurance exam
minor
a person under legal age
coercion
forceful act or threat aimed to influence a person to act against his or her will
policy proceeds
in life insurance, the death benefit
home office
insurer's headquarters, principal place of business
commission
payment to the agent by the insurance company for placing insurance, usual a percentage of the policy premium
nonguaranteed elements
policy components that are not guaranteed in the contract or that may fluctuate (e.g. dividends, interest)
lapse
policy termination due to a non payment of premium
Insurance Transaction
Solicitation, negotiations, sale, advising an individual concerning coverage or claims
All of the following statements are correct regarding Credit Life Insurance EXCEPT a) Benefits 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.
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 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 must be included in all life insurance advertisements? a) Identity of the actual insurer b) Names of any parent companies c) Contact information for the Commissioner of Insurance d) Contact information for each local office of the insurer
a) Identity of the actual insurer The identity of the actual insurer must be stated in all advertisements.
Which of the following is NOT required on an illustration used in the sale of a life insurance policy? a) Name of insurer b) Underwriting or rating classification upon which the illustration is based c) The name of the primary and secondary beneficiaries d) Generic name of policy
c) 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.
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 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.
NAIC
National Association of Insurance Commissioners, an organization composed of insurance commissioners from all states and jurisdictions formed to resolve insurance regulatory issues.
exempt
not subject to an obligation
assignment
transfer of rights of policy ownership
insolvent
unable to meet financial obligations
inducement
an offer that attempts to influence the other party
Anyone who violates the Insurance Code of Texas may be fined up to a) $20,000. b) $25,000. c) $5,000. d) $10,000.
b) $25,000 Anyone who violates the Insurance Code may be fined up to $25,000 and/or directed to make complete restitution to Texas residents or entities injured by the original violation.
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.
Credit Life insurance a) Has a maximum term for insurance of 20 years. b) Insures the life of a debtor. c) Is purchased on an installment basis. d) Insures the life of a creditor.
b) Insures the life of a debtor. 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.
How long is the grace period in group policies? a) 10 days b) 21 days c) 31 days d) 90 days
c) 31 days 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 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 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.
moral turpitude
conduct that is contrary to community standards of justice, honesty or good morals
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 the 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 regulations regarding replacement apply to which of the following? a) Group life b) Renewable term c) Replacement of existing policy by the same insurer d) Credit life
b) 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.
statute
a formal written law enacted by legislature; insurance statutes can be found in the state insurance code
Reciprocity
a mutual interchange of rights and privileges
dividend
a payment made by a policy (distribution of profits or returned of unused funds)
*claimant*
a person who submits a claim for payment of benefits
indemnity
a principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss
Nonforfeiture Values
benefits in a life insurance policy that the policy owner cannot lose even if the policy is surrendered or lapses
principal
the face value of the policy; the original amount invested before the earnings
rescind
to remove or cancel
Lump sum
payment of the entire benefit in one sum
testimonials
statements or endorsements made by clients based on their experience with products or services
cease and desist
to stop or discontinue
The term "illustration" in a life insurance policy refers to a) A depiction of policy benefits and guarantees. b) Pictures accompanying a policy. c) Charts and graphs. d) A presentation of nonguaranteed elements of a policy.
d) A presentation of nonguaranteed elements of a policy. The term "illustration" means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.
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 In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.
All of the following are mandatory life insurance policy provisions EXCEPT a) Grace period. b) Policy backdating. c) Misstatement of age. d) Incontestability.
b) Policy backdating. Policy backdating is not a mandatory provision; in fact, backdating a policy more than 6 months is prohibited.
restitiution
restoration to the original condition or repayment
Consideration
something of value that each party gives to the other (binding force in any contract)
The initial amount of credit life insurance may NOT exceed a) The borrower's annual income. b) The amount to be repaid under the contract. c) An amount set by statute and adjusted regularly for inflation. d) The borrower's monthly income.
b) 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.
The usage of words or symbols that are similar to what entity is prohibited in life insurance advertisements? a) Department of Insurance b) Stock c) Federal government d) Insurer
c) 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 solicitation is connected with a government agency.
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as a) Unlawful distribution of dividends. b) Coercion. c) Rebating. d) Twisting.
c) Rebating
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 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.
Which of the following is NOT allowed in credit life insurance? a) Creditor having a collateral assignment on the policy b) Creditor requiring that a debtor has a life insurance c) Creditor becoming a policy beneficiary d) Creditor requiring that a debtor buys insurance from a certain insurer
d) Creditor requiring that a debtor buys insurance from a certain insurer In credit life insurance, creditor may require that the debtor has a life insurance, but they cannot tell you who to buy the insurance from.
Which of the following is true regarding the insurance amount in a credit life policy? a) Creditor may insure the debtor for an unlimited amount of coverage. b) Allowable amount of coverage is determined by the State Insurance Commissioner. c) The amount of coverage can be greater than the amount owed. d) Creditor can only insure the debtor for the amount owed.
d) Creditor can only insure the debtor for the amount owed. 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.
All of the following are requirements for life insurance illustrations EXCEPT a) They may only be used as approved. b) They must identify nonguaranteed values. c) They must differentiate between guaranteed and projected amounts. d) They must be part of the contract.
d) They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation? a) Deceptive claim settlement practice b) There is no misconduct c) Fraud d) Misrepresentation
b) There is no misconduct Although the agent misrepresented the insurance policy, in order to be charged with conducting a deceptive claim settlement, the agent would have had to misrepresent knowingly and/or chronically.
An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies, "Yes," which of the following best describes the agent's next step? a) The agent must get his supervisor involved in the transaction. b) The agent has no further duties. c) The agent must provide a replacement notice to the applicant. d) The agent must collect the existing policies and turn them over to the replacing insurer.
c) The agent must provide a replacement notice to the applicant. In a replacement transaction, an agent must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the agent.
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) No, as long as the advertisement has a disclaimer that all facts are misleading b) No c) Yes; Advertisements shall not mislead the public in terms of financial standing d) Yes, as long as no one can prove otherwise
c) Yes; Advertisements shall not mislead the public in terms of financial standing
An individual covered under a group life insurance policy may convert the policy to any of the following EXCEPT a) 20-pay life. b) Life paid up at age 65. c) Whole Life. d) 15-year level term.
d) 15-year level term. 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.
The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every a) Year. b) 2 years. c) 3 years. d) 5 years.
d) 5 years The Insurance Commissioner must examine each insurer at least once every 5 years.