Texas life insurance practice test
20 questions from our 590-question Texas bank, spread across the outline. Tap an answer to see the explanation and its source.
1 / 20 · Types of Policies
What primary guarantee is provided to the owner of a fixed annuity contract during the accumulation phase?
Answer and explanation
Answer: B. Fixed annuities guarantee principal preservation and a minimum interest rate backed by the insurer's general account.Source: NAIC Annuity Buyer's Guide — PDF page 3, Fixed Annuities
2 / 20 · Types of Policies
A client wants permanent life insurance but wants all required premiums completed within 20 years. Which policy best matches that goal?
Answer and explanation
Answer: B. Limited-payment whole life compresses premium payments into a shorter period while the coverage is designed to last for life. The term choices provide temporary protection, and an annuity is not life insurance protection on the client’s life.Source: NAIC — Life Insurance — Whole Life Insurance > Types of whole life insurance > Limited payment whole life insurance
3 / 20 · Types of Policies
What indexed feature defines a Fixed Indexed Annuity (FIA)?
Answer and explanation
Answer: D. FIAs link returns to an equity index performance while protecting principal from negative market performance.Source: NAIC Annuity Buyer's Guide — PDF page 4, Fixed Indexed Annuities
4 / 20 · Types of Policies
A renewable term policy states that renewal rights end at a specified age. The insured reaches that age and wants another term. Which statement is most accurate?
Answer and explanation
Answer: C. A renewable term contract may limit renewal rights at a specified age, so renewability does not necessarily continue for life. The feature does not require free permanent coverage, and a beneficiary cannot rewrite the policy’s renewal limit.Source: NAIC — Life Insurance Buyer’s Guide — PDF page 5, Renewable Term vs. Nonrenewable Term — possible loss of renewal right at a stated age
5 / 20 · Types of Policies
A buyer wants to fund a deferred annuity through a series of purchase payments rather than one lump sum. Which funding pattern should the buyer select?
Answer and explanation
Answer: A. Deferred annuities may be funded with one premium or more than one premium. A flexible-premium arrangement matches a series of purchase payments, while single premium requires one payment and the remaining choices are life-insurance structures.Source: NAIC — Buyer’s Guide for Deferred Annuities — Guide page 2, How Deferred Annuities Are Different — one or more than one premium payment
6 / 20 · Types of Policies
A term insured dies during the coverage period, and the insurer pays the death benefit. Under the usual return of premium condition, what result follows at the end of that term?
Answer and explanation
Answer: B. The usual return of premium feature refunds premiums at the end of the term only if no death benefit was paid during that period. Because the death benefit was paid, that condition is not satisfied.Source: New York State Department of Financial Services — Consumer Life Insurance FAQ — What is a Return of Premium feature?
7 / 20 · Types of Policies
How is interest credited to cash values in an interest-sensitive whole life policy?
Answer and explanation
Answer: B. Interest-sensitive whole life credits interest based on current market rates, but provides a safety net via a guaranteed minimum interest rate.Source: NAIC Buyer's Guide / Pearson Outline S1 — PDF page 5, Interest-Sensitive Whole Life
8 / 20 · Types of Policies
A term insured becomes uninsurable but wants permanent cash-value coverage during the policy’s conversion period. Which feature can meet that objective?
Answer and explanation
Answer: B. Convertible term permits conversion to permanent cash-value insurance under the contract’s terms without new evidence of insurability. A decreasing schedule changes the benefit, renewal does not create an annuity, and return-of-premium coverage does not refund premiums after a death benefit is paid.Source: NAIC — Life Insurance — Term Life Insurance > Convertible term insurance
9 / 20 · Policy Riders, Provisions, Options, and Exclusions
Which list contains common life insurance premium payment modes?
Answer and explanation
Answer: D. Premium mode is the frequency of premium payment. Common modes include annual, semiannual, quarterly, and monthly payments.Source: New York State Department of Financial Services — Consumer Life Insurance FAQ — What premium mode should I choose when purchasing term life insurance?
10 / 20 · Policy Riders, Provisions, Options, and Exclusions
A policy insures Jordan's life, but Casey is the policyowner. Who generally controls beneficiary designations and permitted policy changes?
Answer and explanation
Answer: D. The owner controls the life policy and may exercise rights such as naming beneficiaries, making permitted changes, accessing cash values, and changing ownership. The owner and insured can be different people.Source: National Association of Insurance Commissioners — Life Insurance Beneficiaries: Per Capita vs. Per Stirpes — Parties to a life insurance policy: owner controls the policy
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11 / 20 · Policy Riders, Provisions, Options, and Exclusions
Why is naming a minor child directly as a life insurance beneficiary problematic?
Answer and explanation
Answer: A. Insurance companies will not pay death benefits directly to minors; a court-appointed guardian or trust is required to receive funds.Source: NAIC Life Insurance Guide — PDF page 6, Minor Beneficiaries
12 / 20 · Policy Riders, Provisions, Options, and Exclusions
A flexible-premium life policy has lapsed and the owner applies for reinstatement within the contractual period. Which combination may the insurer require?
Answer and explanation
Answer: B. The reinstatement provision may require evidence of insurability, specified funding to restore the policy, and repayment or reinstatement of policy loans with permitted interest. The policy must describe these requirements.Source: Interstate Insurance Product Regulation Commission — Individual Flexible Premium Adjustable Life Insurance Policy Standards — § 3 > Y. Reinstatement (1)–(7)
13 / 20 · Policy Riders, Provisions, Options, and Exclusions
A policyowner wants a lender to receive enough death proceeds to satisfy a loan balance. Which policy action may accomplish this?
Answer and explanation
Answer: C. A policyowner may use an assignment to give a lender rights in policy proceeds as collateral for a debt. Texas guidance notes that existing life insurance can be assigned to a lender for a loan balance.Source: Texas Department of Insurance — Life Insurance Guide — Other types of life insurance > Credit life; assigning death benefits to a lender
14 / 20 · Policy Riders, Provisions, Options, and Exclusions
How does a long-term care (LTC) rider attached to a life policy fund care expenses?
Answer and explanation
Answer: A. LTC riders accelerate the base policy death benefit to cover nursing home, assisted living, or home health care costs.Source: NAIC Life Insurance Guide — PDF page 6, LTC Rider
15 / 20 · Policy Riders, Provisions, Options, and Exclusions
A parent pays premiums on a juvenile life policy and dies before the insured child reaches majority. If the policy has a payor benefit rider and its conditions are met, what happens next?
Answer and explanation
Answer: C. A payor benefit rider on a juvenile policy waives subsequent premiums when the payor dies or becomes totally disabled before the juvenile reaches majority, subject to the rider's terms. The rider does not pay the juvenile policy's death benefit merely because the payor dies.Source: New York State Department of Financial Services — Life Insurance Information for Consumers — Optional Riders & Supplemental Benefits > Payor Benefit Rider
16 / 20 · Policy Riders, Provisions, Options, and Exclusions
What happens to life insurance proceeds if the primary beneficiary predeceases the insured, and a contingent beneficiary is named?
Answer and explanation
Answer: B. If no primary beneficiary survives the insured, proceeds are paid to the surviving contingent beneficiary.Source: IIPRC Application Standards — Beneficiary Order
17 / 20 · Completing the Application, Underwriting, Delivering Policies, Contract Law
When an applicant submits a completed application WITH initial premium, what legal act does the applicant perform in contract law?
Answer and explanation
Answer: B. Submitting a completed application with premium constitutes an offer by the applicant to purchase insurance.Source: Texas Supreme Court (Menchaca) — Opinion pages 31-32
18 / 20 · Completing the Application, Underwriting, Delivering Policies, Contract Law
An applicant plans to surrender an existing whole life policy after the new policy is issued. How should the replacement question be answered?
Answer and explanation
Answer: B. Replacement questions ask whether the applicant has existing life insurance or annuity contracts and whether the coverage applied for is intended to replace or change a contract in force. A planned surrender of the old policy makes the truthful answer yes.Source: Interstate Insurance Product Regulation Commission — Individual Life Insurance Application Standards — § 3.I. Replacement of Insurance (1)(a)–(b)
19 / 20 · Completing the Application, Underwriting, Delivering Policies, Contract Law
During policy delivery, the owner notices a typo in the beneficiary's middle name. How should the producer assist?
Answer and explanation
Answer: C. Policy modifications must be processed officially through home office change request procedures.Source: IIPRC Policy Standards — Policy Amendments
20 / 20 · Completing the Application, Underwriting, Delivering Policies, Contract Law
An applicant with average health, normal build, and no hazardous hobbies is classified into which standard underwriting category?
Answer and explanation
Answer: B. Standard risks represent individuals who fit the average mortality profile and pay standard published premium rates.Source: NAIC Risk Classification Guide — Risk Classes
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