Insurance License Texas Life and Health MCQs

Which of these describe a participating life insurance policy?

Policyowners are entitled to receive dividends
Policyowners pay assessments for company losses
Stock companies allow their policyowners to share in any company earnings
Policyowners are not entitled to vote for members of the board of directors

Which of these require an offer, acceptance, and consideration?

Warranty
Estoppel
Contract
Representation

Which of these arrangements allows one to bypass insurable interest laws?

Concealment
Indemnity contract
Contract of adhesion
Investor-Originated Life Insurance

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...

F
The dissolved partnership
E's family
E's estate

Which of these is NOT a type of agent authority?

Express
Implied
Principal
Apparent

A variable insurance policy...

guarantees a minimum rate of return
does not allow the policyowner to assume the investment risk
does not guarantee a return on its investment accounts
does not guarantee an assignment provision

Which of these is an element of a Variable Life policy?

A fixed, level premium
Insurer assumes the investment risk
No investment risk to the policyowner
Rate of returns are guaranteed

Which of these would be considered a Limited-Pay Life policy?

10-year Renewable and Convertible Term
Life Paid-Up at Age 70
Straight Whole Life
Renewable Term to Age 100

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
Premiums are payable for a set period/ coverage expires at that point
Premiums are payable until age 65/ coverage lasts a lifetime
A single premium is paid at time of application/ coverage lasts until retirement

Variable Whole Life Insurance can be described as

both an insurance and securities product
an insurance product only
a securities product only
the insurance company assumes the investment risk

All of these are characteristics of an Adjustable Life policy EXCEPT

adjustable premiums
adjustable premium payment period
combination of term and whole life insurance
face amount can be adjusted using policy dividends

What type of life policy covers two people and pays upon the death of the last insured?

Shared
Survivorship
Adjustable
Joint

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

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 ...

Family Benefit policy
Family Maintenance policy
Family Income policy
Family Survivor policy

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 poli...

Straight life accumulates faster than Limited-pay Life
20-Pay Life accumulates cash value faster than Straight Life
Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating
20-Pay Life and Straight Life accumulate cash value at the same rate

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

Modified Whole Life
Modified Endowment Contract
Variable Universal Life
Interest-Sensitive Whole Life

What kind of special need would a policyowner require with an Adjustable Life insurance policy?

level premiums
flexible premiums
flexible nonforfeiture options
level death benefits

What type of life policy covers 2 lives and pays the face amount after the first one dies?

Group Life
Joint Life Policy
Family Income Policy
Last Survivor Policy

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

Term insurance has which of the following characteristics?

Expires at the end of the policy period
Builds cash value
Has nonforfeiture options
Endows at the end of the policy period

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
Face amount plus the policy's dividends
The greater amount of the policy's death benefit or the cash value
Face amount plus total premium paid throughout the life of the policy

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 protectio...

30 Pay Life
Term to Age 70
Universal Life
Adjustable Life

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

Modified whole life
20-year paid up policy
Endowment
Decreasing term

A 15-year mortgage is best protected by what kind of life policy?

Modified whole life
15-year level term
15-year decreasing term
Adjustable life

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 ...

Limited-pay life
Graded Premium
Level term
Endowment

What type of policy would offer a 40-year old the quickest accumulation of cash value?

Paid-up at 65
20-pay life
30-pay life
Straight whole life

A life insurance policy that provides a policyowner with cash value along with a level face amount is called

Whole life
Level term
Credit life
Ordinary life

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
Increasing
Level
Decreasing

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

Modified Whole Life
Variable Life
Universal Life
Adjustable Life

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

Extended term option
Conversion provision
1035 Exchange
Incontestable period

What type of life insurance are credit policies issued as?

Whole
Variable
Term
Universal

Which of these statements describe a Modified Endowment Contract (MEC)?

Falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
The 7-pay test is used to determine the minimum death benefit of the policy
The 7-pay test is used to determine the maximum death benefit of the policy

A variable insurance policy

guarantees a minimum rate of return
does not allow the policyowner to assume the investment risk
does not guarantee a return on its investment accounts
does not guarantee an assignment provision

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

half of the insured’s total loan value
the insured’s total loan value
75% of the insured's total loan value
$25,000

What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?

Endowment policy
Limited-Pay Whole life
Convertible Term
Decreasing Term

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?

Interest-Sensitive Whole Life
Ten-Year Endowment
Variable Universal Life
Ten-Year Renewable Term

Which of these life products is NOT considered interest-sensitive?

Modified Whole Life
Variable Universal Life
Interest Sensitive Whole Life
Variable Life

Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?

increase face amount
decrease face amount
increase premium-paying period
decrease premium payment

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?

Term Life
Whole Life
Credit Life
Universal Life

Which of these is an element of a Variable Life policy?

A fixed, level premium
Insurer assumes the investment risk
No investment risk to the policyowner
Rate of returns are guaranteed

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 providi...

Owner's Rights clause
Incontestable Period
Insuring Agreement
Conversion privilege

How does a typical Variable Life Policy investment account grow?

Tied to price of gold
Through mutual funds, stocks, bonds
Based on returns from insurer's general account
Tied to Treasury Bills

The investment gains from a Universal Life Policy usually go toward

the death benefit
the dividends
the cash value
paying off a policy loan

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 3...

Family Lump Sum Policy
Family Maintenance Policy
Family Survivor Policy
Family Income Policy

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 provi...

Payor provision
Accelerated Benefits provision
Assignment provision
Waiver of Premium provision

Which of these characteristics is consistent with a Straight Life policy?

Owner can adjust both premium and death benefit
Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract
Owner has the option of converting to term insurance
Premiums are payable for as long as there is insurance coverage in force

Life insurance that covers an insured's whole life with level premiums paid over a limited time is called

Adjustable Life
Renewable Term
Limited-Pay Life
Joint Life

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

Void the policy if found during the Contestable period
Void the policy, no matter when it is discovered
Void the policy at any time only if it is found to be material
Void the policy only if it is discovered during the Contestable period and proven to be material

Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of poli...

Joint policy
Joint survivor policy
Whole life policy with other insured rider
Whole life policy with a Guaranteed Insurability option

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 receiv...

5 years
10 years
15 years
20 years

Additional coverage can be added to a Whole Life policy by adding a(n)

payor rider
accelerated benefit rider
decreasing term rider
automatic premium loan rider

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 cove...

type of life insurance
S's attained age
dividend amount used toward purchase
beneficiary’s age

Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy...

Policy Exclusion
Incontestable
Entire Contract
Assignment

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Reinstatement
Grace period
Automatic premium loan
Waiver of premium

The incontestable clause allows an insurer to

disallow a change of ownership throughout the Contestable period
disallow a change of beneficiary during the Contestable period
contest a claim at anytime if the cause of death was accidental
contest a claim during the contestable period

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Payor clause
Automatic Premium Loan provision
Reinstatement provision
Waiver of Premium

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied under the Suicide clause of the policy
Company pays twice the face amount under the double indemnity clause
Claims are paid in full
Premiums are returned under the Consideration clause

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer tak...

Collect premium from M's estate
Deny the claim
Pay face amount minus the past due premium
Subtract past due premium from cash value

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,5...

Accelerated death benefit rider
Return of premium rider
Family income rider
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 Exclu...

Refund of premiums paid plus interest
Nothing, due to actively serving in the armed forces
Double the face amount because cause of death was accidental
The full face amount

The automatic premium loan provision is designed to

provide a source of revenue to the insurance company
avoid a policy lapse
allow a policyowner to request a policy loan
allow a policyowner to take out additional coverage without evidence of insurability

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financ...

Nonforfeiture
Entire Contract
Insuring Clause
Owner’s Rights

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

Payor benefit
Family Maintenance rider
Term rider
Family Income rider

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)

Term rider
Accidental Death and Dismemberment rider (AD&D)
Family rider
Annuity

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT

Fixed Period
Interest Only
Fixed Amount
Life Income

Which statement is TRUE in regards to a policy loan?

Past-due interest payments not paid after 3 months will void the policy
Past-due interest on a policy loan is added to the total debt
Insurance companies can send delinquent interest accounts to a collection agency
Insurance companies can charge an interest rate based on the policyowner's credit report

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

10 year increments
at future dates specified in the contract with proof of insurability required
at future dates specified in the contract with no evidence of insurability required
at any time while policy is active

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is cal...

Entire Contract provision
Consideration clause
Insuring agreement
Assignment agreement

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

Application provision
Policy Exclusions provision
Entire Contract provision
Incontestability 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 in...

The total premiums paid minus any policy loans
Nothing
$50,000
$100,000

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accelerated Benefits provision
Entire Contract
Accidental Death and Dismemberment provision
Consideration clause

Which of these life insurance riders allows the applicant to have excess coverage?

Automatic Premium Loan rider
Waiver of Premium rider
Guarantee Insurability rider
Term rider

In a Life insurance contract, an insurance company's promise to pay stated benefits is called the

Insuring clause
Consideration clause
Entire Contract
Owner's rights

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
Automatic Premium Loan provision
Accelerated Benefits provision
Consideration clause

The Consideration clause in a life insurance contract contains what pertinent information?

Summary of benefits
Offer and acceptance
Entire Contract
Amount of premium payments and when they are due

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Revocable assignment
Beneficiary change
Irrevocable assignment
Collateral assignment

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 duri...

Refund of all premiums paid, plus interest
Refund of all premiums paid
Full face amount minus any past due premiums
Full face amount

What action will an insurer take if an interest payment on a policy loan is not made on time?

cancel the policy if not paid within the grace period
automatically add the amount of interest due to the loan balance
subtract from any dividends owed
disallow any further loans

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Reinstatement
Grace period
Automatic premium loan
Waiver of premium

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and ...

Automatic Policy Loan
Assignment
Grace Period
Waiver of Premium

What does the ownership clause in a life insurance policy state?

Who the policyowner is and what rights the policyowner is entitled to
Who the beneficiary is and what rights the beneficiary is entitled to
Ownership cannot be assigned after the incontestable period
Allows the policyowner to adjust the death benefit and premium amount at anytime

A policy loan is made possible by which of these life insurance policy features?

Policy loan clause
Cash value provision
Owner's rights provision
Consideration clause

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Revocable assignment
Beneficiary change
Irrevocable assignment
Collateral assignment

What does the insuring agreement in a Life insurance contract establish?

An insurer’s basic promise
The insurance policy's grace period
An insurer's required reserve amount
The obligations of the beneficiary

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Irrevocable
Contingent
Primary
Revocable

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named conti...

$1,000,000
$500,000
$250,000
$0

A policyowner would like to change the beneficiary on a Life insurance policy and make the change permanent. Which type of designation would fulfill t...

Revocable
Contingent
Irrevocable
Primary

A policyowner's rights are limited under which beneficiary designation?

Revocable
Tertiary
Contingent
Irrevocable

Which statement is true regarding a minor beneficiary?

Normally, the death proceeds are required to be held in trust until the beneficiary reaches the age of 21
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
The minor must pay the debts of the insured's estate before receiving any of the proceeds
The minor is entitled to receive the death proceeds immediately

C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What fact...

The cost
The nonforfeiture options
The contestable period
The assignment of ownership

A level premium indicates

the premium is fixed for a period stated in the contract, then becomes variable
the premium can only be changed with the consent of the insurer
the premium stays level until the policy's renewal date
the premium is fixed for the entire duration of the contract

A policyowner is able to choose the frequency of premium payments through what policy feature?

Consideration
Payor benefit
Premium Mode
Assignment provision

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

P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q'...

R's estate
Q's estate
P and Q's estate
P only

What kind of life insurance beneficiary requires his/her consent when a change of beneficiary is made?

Irrevocable beneficiary
Tertiary beneficiary
Primary beneficiary
Revocable beneficiary

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Irrevocable
Contingent
Primary
Revocable

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 ...

Daughter
Husband's estate
K's estate
Trust fund

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designatio...

Tertiary
Irrevocable
Revocable
Contingent

If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds t...

Primary beneficiary's estate
Primary beneficiary's next of kin
Insured's estate
Insured’s contingent beneficiary

Which premium schedule results in the lowest cost to the policyowner?

Semi-annual
Monthly
Quarterly
Annual

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Insurance License Texas Life and Health MCQs