Texas Life and Health Insurance Exam (question and answers) 2022/2023

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At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? - ANSWER Upon completion of the application Who elects the governing body of... a mutual insurance company? - ANSWER policyholders An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the - ANSWER Fair Credit Reporting Act What type of reinsurance contract involves two companies automatically sharing their risk exposure? - ANSWER Treaty The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called - ANSWER reserves Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated - ANSWER 1970 - Fair Credit Reporting Act What is the consideration given by an insurer in the Consideration clause of a life policy? - ANSWER Promise to pay a death benefit When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have - ANSWER insurable interest in the proposed insured Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called - ANSWER representations The part of a life insurance policy guaranteed to be true is called a(n) - ANSWER warranty Which of these is NOT a type of agent authority? Express Implied Principal Apparent - ANSWER Principal The Consideration clause of an insurance contract includes - ANSWER the schedule and amount of premium payments E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? - ANSWER In this situation, the proceeds from E's life insurance policy will go to F. Which of the following terms defines the legally enforceable promise in an insurance contract by the insurer? - ANSWER Unilateral When must insurable interest exist for a life insurance contract to be valid? - ANSWER Inception of the contract Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. - ANSWER conditional Which of these require an offer, acceptance, and consideration? - ANSWER Contract Which of these arrangements allows one to bypass insurable interest laws? - ANSWER Investor-Originated Life Insurance Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies. Which of these is NOT considered to be an element of an insurance contract? the offer acceptance negotiating consideration - ANSWER negotiating An agent is an individual that represents whom? - ANSWER Insurer Insurable interest must exist at what time? - ANSWER at the time of application Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? - ANSWER Variable Life Which of the following actions require a policy owner to provide proof of insurability in an Adjustable Life policy? - ANSWER increase face amount When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply? - ANSWER Conversion provision What type of life insurance are credit policies issued as? - ANSWER Term How long does the coverage normally remain on a limited-pay life policy? - ANSWER age 100 All of these statements about Equity Indexed Life Insurance are correct EXCEPT Cash value has a minimum rate of accumulation If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index The premiums can be lowered or raised, based on investment performance Tied to an equity index such as the S&P 500 - ANSWER The premiums can be lowered or raised, based on investment performance Which of these is an element of a Variable Life policy? - ANSWER A fixed, level premium What type of life insurance incorporates flexible premiums and an adjustable death benefit? - ANSWER Universal Life T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase? - ANSWER Ten-Year Endowment What type of life policy covers 2 lives and pays the face amount after the first one dies? - ANSWER Joint Life Policy Life insurance that covers an insured's whole life with level premiums paid over a limited time is called - ANSWER Limited-Pay Life What kind of life insurance product covers children under their parent's policy? - ANSWER Term rider Which is true concerning a Variable Universal Life policy? Policyowner controls where the investment will go and selects the amount of the premium payment Policyowner has no say where the investment will go but can choose the premium mode The investment vehicle for this type of policy is held in the insurer's general portfolio The death benefit can vary but the policyowner has no say in the premium amount paid - ANSWER Policyowner controls where the investment will go and selects the amount of the premium payment P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase? - ANSWER Family Maintenance policy Which of the following statements about a Variable Whole Life policy is CORRECT? It provides a minimum guaranteed Death benefit It is a combination of a Limited Period Endowment and a Decreasing Term policy Its premiums and benefits are variable It has a guaranteed rate of return - ANSWER It provides a minimum guaranteed Death benefit Credit Life insurance is - ANSWER issued in an amount not to exceed the amount of the loan The amount of coverage on a group credit life policy is limited to - ANSWER the insured's total loan value Term insurance has which of the following characteristics? - ANSWER Expires at the end of the policy period What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death? - ANSWER Face amount plus the policy's cash value A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as - ANSWER Variable Life 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? - ANSWER Modified Whole Life Which of these life products is NOT considered interest-sensitive? - ANSWER Modified Whole Life What type of life policy covers two people and pays upon the death of the last insured? - ANSWER Survivorship Which is true concerning a Variable Universal Life policy? - ANSWER Policyowner controls where the investment will go and selects the amount of the premium payment 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? - ANSWER Renewable 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? - ANSWER Decreasing term policy G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income? - ANSWER 10 years 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 - ANSWER the cost S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT - ANSWER beneficiary's age When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n) - ANSWER exclusions Which statement regarding the Misstatement of Age provision is considered to be true? Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered Requires that a new policy must be applied for if a misstatement of age is found on the current policy Misstatement of Age provision is valid only during the contestable period Insurer may void the policy if a misstatement of age is discovered - ANSWER Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered Which of these is NOT considered to be a right given to a policyowner? - ANSWER Modify a provision in the insurance contract J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? - ANSWER Reinstatement provision T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay? - ANSWER 50,000 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? - ANSWER The full face amount Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE? Coverage can be added at specific events such as marriage or having a child Evidence of insurability is not required when the option is exercised Evidence of insurability is required when the option is exercised Coverage can be added at specific ages - ANSWER Evidence of insurability is required when the option is exercised 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? - ANSWER Full face amount minus any past due premiums Which of these are NOT an example of a Nonforfeiture option? Extended Term Reduced Paid-up Cash Surrender Life Income - ANSWER life income A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the - ANSWER Policy Loan provision The Consideration clause in a life insurance contract contains what pertinent information? - ANSWER Amount of premium payments and when they are due What does the insuring agreement in a Life insurance contract establish? - ANSWER An insurer's basic promise A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options? - ANSWER Paid-Up Additional Insurance Which of the following statements is CORRECT about accumulated interest earned on dividends from an insurance policy? - ANSWER It is taxed as ordinary income When can a policyowner change a revocable beneficiary? - ANSWER anytime 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? - ANSWER daughter M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son? - ANSWER revocable K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? - ANSWER Proceeds will be paid to P's estate Which statement regarding the Change of Beneficiary provision is true? - ANSWER The policyowner can change the beneficiary A policyowner's rights are limited under which beneficiary designation? - ANSWER Irrevocable What is the underlying concept regarding level premiums? - ANSWER The early years are charged more than what is needed A level premium indicates - ANSWER the premium is fixed for the entire duration of the contract On a life insurance policy, who is qualified to change the beneficiary designation? - ANSWER Policyowner J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct? The gross premium is higher on a monthly payment mode as compared to being paid annually The gross premium is lower on a monthly payment mode as compared to being paid annually The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis - ANSWER The gross premium is higher on a monthly payment mode as compared to being paid annually An incomplete life insurance application submitted to an insurer will result in which of these actions? - ANSWER Application will be returned to the writing agent At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid? - ANSWER At the time of application Any changes made on an insurance application requires the initials of whom? - ANSWER Applicant An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n) - ANSWER exclusion for the medical condition In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and - ANSWER the initial premium Why is an applicant's signature required on a life insurance application? - ANSWER To attest that the statements on the application are accurate to the best of the applicant's knowledge Which of these factors do NOT play a role in the underwriting of a life insurance policy? Avocations Credit status Marital status Occupation - ANSWER marital status Before a life insurance policy is issued, which of these components of the contract is required? - ANSWER Applicant's signature on application An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors? Height Weight Gender Medical history - ANSWER gender 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 - ANSWER P receives the policy and pays the premium What type of group plan involves employees sharing the cost? - ANSWER contributory plan A noncontributory group term life plan is characterized by - ANSWER the entire cost of the plan is paid for by the employer Under a trustee group life policy, who would be eligible for a certificate of coverage? - ANSWER Employee Which provision is NOT a requirement in a group life policy? - ANSWER Accidental If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have? - ANSWER Contributory W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n) Flexible Premium Deferred annuity Variable annuity Immediate annuity Straight Life annuity - ANSWER Immediate annuity 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? - ANSWER Life Annuity with Period Certain Which of these is an element of a Single Premium annuity? - ANSWER Lump-sum payment The annuity that represents the largest possible monthly payment to an individual annuitant is a(n) - ANSWER Straight Life annuity Which of these statements concerning an Individual Straight Life annuity is accurate? - ANSWER Payments are made to an annuitant for life What is considered to be a characteristic of an immediate annuity? - ANSWER Benefit payments start within one payment period of purchase Which type of contract liquidates an estate through recurrent payments? - ANSWER Annuity P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase? - ANSWER Deferred Which of the following annuities pays benefits based on units rather than specific dollar amounts? - ANSWER A Variable annuity P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy? - ANSWER An immediate annuity One becomes eligible for Social Security disability benefits after having been disabled for - ANSWER 5 months What is Old Age and Survivors Health Insurance (OASDHI) also known as? - ANSWER Social Security All of these are considered to be a benefit under Social Security EXCEPT for - ANSWER unemployment Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits? - ANSWER 5 What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive? - ANSWER Primary Insurance Amount (PIA) Which of these retirement plans can be started by an employee, even if another plan is in existence? - ANSWER Individual Retirement Account (IRA) Which plan is intended to be used by a sole proprietor and the employees of that business? - ANSWER Keogh Plan Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company? - ANSWER Annuity An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age? - ANSWER 59 1/2 Which of the following is TRUE about a qualified retirement that is "top heavy"? - ANSWER More than 60% of plan assets are in key employee accounts What type of employee welfare plans are not subject to ERISA regulations? - ANSWER church plans A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed? - ANSWER Company X Which statement regarding third-party ownership of a life insurance policy is true? - ANSWER It is used extensively in estate-planning as well as business circumstances 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? - ANSWER Each partner must own a policy on the other partners Which statement regarding a Key Employee Life policy is NOT true? - ANSWER The beneficiary is named by the key employee The premiums paid by an employer for his employee's group life insurance are usually considered to be - ANSWER tax-deductible to the employer The difference between group insurance and blanket health policies is - ANSWER Blanket health policies do not issue certificates Which of the following statements BEST describes how a policy that uses the "accidental bodily injury" definition of an accident differs from one that uses the "accidental means" definition? - ANSWER Less restrictive Which contract permits the remaining partners to buy-out the interest of a disabled business partner? - ANSWER Disability Buy-Sell A Business Overhead Expense policy - ANSWER reimburses the company for any reduction in sales due to the owner's disability All students attending a large university could be covered by - ANSWER a blanket policy To obtain group Major Medical insurance from an employer, a new employee MUST perform which of the following actions during the open enrollment period? - ANSWER Sign an enrollment card The benefits under a Disability Buy-Out policy are - ANSWER payable to the company or another shareholder The Health Insurance Portability and Accountability Act (HIPAA) gives privacy protection for - ANSWER health information The Coordination of Benefits provision - ANSWER prevents an insured covered by two health plans from making a profit on a covered loss Which type of provider is known for stressing preventative medical care? - ANSWER Health Maintenance Organizations (HMO's) The individual who provides general medical care for a patient as well as the referral for specialized care is known as a - ANSWER Primary Care Physician A 66 year-old is covered under a group health plan while employed with a business that has 40 employees. If she injures herself while walking in the park, what coverage would be considered primary? - ANSWER Her group health plan The health insurance program which is administered by each state and funded by both the federal and state governments is called - ANSWER Medicaid Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures? - ANSWER Commercial insurer What does Medicare Parts A and B cover? - ANSWER Part A covers hospitalization; Part B covers doctor's services Medicare - ANSWER is a hospital and medical expense insurance program Medicaid was designed to assist individuals who are - ANSWER below a specific income limit Which of the following does Social Security NOT provide benefits for? Survivorship Dismemberment Disability Retirement - ANSWER Dismemberment J's Major Medical policy has a $2,000 deductible and an 80/20 Coinsurance clause. If J is hospitalized and receives a bill for $10,000, J would pay - ANSWER In this situation, ($2,000) + 20% of $8,000 the remaining bill ($1,600) = $3,600. Which of the following statements BEST defines usual, customary, and reasonable (UCR) charges? - ANSWER The maximum amount considered eligible for reimbursement by an insurance company under a health plan An individual has a Major Medical policy with a $5,000 deductible and an 80/20 Coinsurance clause. How much will the INSURED have to pay if a total of $15,000 in covered medical expenses are incurred? - ANSWER $7,000". In this situation, $5,000 + 20% of the remaining bill = $7,000 T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition? - ANSWER Insurer will likely treat as a pre-existing condition which may not be covered for one year Which of the following BEST describes a Hospital Indemnity policy? - ANSWER Coverage that pays a stated amount per day of a covered hospitalization Which of the following costs would a Basic Hospital/Surgical policy likely cover? - ANSWER Surgically removing a facial birthmark cosmetic surgery A Hospital/Surgical Expense policy was purchased for a family of four in March of 2013. The policy was issued with a $500 deductible and a limit of four deductibles per calendar year. Two claims were paid in September 2013, each incurring medical expenses in excess of the deductible. Two additional claims were filed in 2014, each in excess of the deductible amount as well. What would be this family's out-of-pocket medical expenses for 2013? - ANSWER 1,000 All of the following statements about Major Medical benefits are true EXCEPT - ANSWER Benefits have no maximum limit In order to establish a Health Reimbursement Arrangement (HRA), it MUST - ANSWER be established by the employer All of the following are limited benefit plans EXCEPT cancer policies life insurance policies dental policies critical illness policies - ANSWER life insurance policies M becomes disabled and is unable to work for six months. M dies soon after from complications arising from this disability. M has a Disability Income policy that pays $2,000 a month. Which [Show More]

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