Policy Riders, Provisions, Options, and Exclusions — Texas exam
18.8% of the scored questions — about 15 of 80. This section is general life insurance knowledge, shared with every state's exam.
1 / 8
A beneficiary asks which part of the policy states the insurer's core promise to pay. Which provision should the producer point to?
Answer and explanation
Answer: B. The insuring clause is the insurer's basic promise: on receipt of due proof of the insured's death, and subject to the policy terms, it will pay the death benefit to the named beneficiary.Source: NAIC Life Insurance Buyer's Guide — Policy provisions: the insuring agreement
2 / 8
A beneficiary selects a straight life-income settlement. Which tradeoff is most important?
Answer and explanation
Answer: B. A straight life-income option pays while the beneficiary lives. A long lifetime may yield payments exceeding the original proceeds, while early death can result in fewer total payments unless a period-certain or refund feature applies.Source: Texas Department of Insurance — Life Insurance Guide — How life insurance pays the death benefit > Life refund and lifetime payments
3 / 8
A beneficiary wants equal installments of proceeds and interest for a selected number of years. Which settlement option fits?
Answer and explanation
Answer: A. Under a fixed-period settlement, the insurer pays proceeds plus interest in equal payments over the period selected. Interest-only leaves principal with the insurer, while the other choices are not death-benefit settlement options.Source: Texas Department of Insurance — Life Insurance Guide — How life insurance pays the death benefit > Fixed period
4 / 8
A buyer compares annual and monthly premium modes for the same term policy. Which cost point should the buyer verify?
Answer and explanation
Answer: A. NY DFS advises that more frequent premium modes generally carry a higher total cost. The buyer should compare modal amounts and total annual cost rather than assume monthly payments are cheaper overall.Source: New York State Department of Financial Services — Consumer Life Insurance FAQ — What premium mode should I choose when purchasing term life insurance?
5 / 8
A cash-value policy has an elected automatic premium loan provision and an unpaid premium at the end of the grace period. If sufficient loan value exists, what occurs?
Answer and explanation
Answer: D. An elected automatic premium loan provision uses available policy loan value to pay an overdue premium, helping prevent unintended lapse. The transaction creates policy indebtedness and requires sufficient value.Source: New York State Department of Financial Services — Life Insurance Information for Consumers — Optional Riders & Supplemental Benefits > Automatic Premium Loan Provision
6 / 8
A cash-value policyowner stops paying premiums but wants to preserve some policy value. Which group contains nonforfeiture choices?
Answer and explanation
Answer: A. Nonforfeiture choices allow the owner to retain value after discontinuing premiums. Common options are cash surrender, extended term insurance, and reduced paid-up insurance.Source: New York State Department of Financial Services — Life Insurance Information for Consumers — Glossary > Non-Forfeiture
7 / 8
A compliance reviewer checks a Texas life policy form before filing. Which entire-contract clause fits Texas law?
Answer and explanation
Answer: A. Texas Insurance Code Section 1101.003 requires the policy to state that the policy, or the policy and the application, constitute the entire contract between the parties.Source: Texas Insurance Code — Section 1101.003, Entire Contract — Sec. 1101.003. ENTIRE CONTRACT
8 / 8
A cost of living rider is attached to a life policy. What does it do as an inflation index rises?
Answer and explanation
Answer: A. A cost of living rider periodically raises the face amount in step with a published inflation index. The increases are issued without new underwriting, though the premium rises with the added coverage.Source: NAIC Life Insurance Buyer's Guide — Riders: cost of living adjustment of the face amount
All 110 policy riders, provisions, options, and exclusions questions
- A designation names three primary beneficiaries but assigns no percentages. All three survive the insured. Under the default stated in the Compact application standard, how are proceeds divided?
- A family has a children's rider that covers eligible children at one premium rate. They later adopt another eligible child. Which rider feature may apply?
- A flexible-premium life policy has lapsed and the owner applies for reinstatement within the contractual period. Which combination may the insurer require?
- A flexible-premium policyowner pays the illustrated planned premium, but policy value later becomes insufficient for the monthly deduction. Which conclusion is most accurate?
- A governing beneficiary instrument expressly states how to distribute proceeds after simultaneous deaths. How does that fact affect Texas's default survival rules?
- A grandparent buys a juvenile life policy on a 5-year-old grandchild with a payor benefit rider. The grandparent dies 3 years later. What occurs regarding policy premiums?
- A life policy contains a status-type war exclusion and the insured, a service member, dies of an illness while stationed overseas in peacetime. How does the exclusion operate?
- 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?
- A parent wants life proceeds reserved for a young child. Which arrangement best addresses the problem that an insurer will not pay proceeds directly to a minor?
- A participating whole life owner wants to apply a declared dividend toward the next premium. Which dividend use matches that goal?
- A permanent policyowner withdraws the entire available cash value. What may happen to the policy?
- A policy beneficiary designation reads 'my surviving children, per capita.' If one child predeceases the insured leaving two offspring, how are proceeds divided?
- A policy contains a war exclusion. Which document must be reviewed to determine whether a particular death falls within it?
- A policy insures Jordan's life, but Casey is the policyowner. Who generally controls beneficiary designations and permitted policy changes?
- A policy names one primary beneficiary and one contingent beneficiary. The primary beneficiary dies before the insured, but the contingent beneficiary survives the insured. Who receives the proceeds under the usual designation?
- A policyowner compares a cash-value withdrawal with a policy loan. Which distinction is generally accurate?
- A policyowner exercises a long-term care rider on a life policy and receives benefits. What is the effect on the policy's death benefit?
- A policyowner wants a lender to receive enough death proceeds to satisfy a loan balance. Which policy action may accomplish this?
- A policyowner wants disability protection on a flexible-premium universal life policy. Which rider most directly addresses the policy's recurring mortality charge?
- A policyowner wants level term coverage on a spouse under the owner's base life policy. Which rider is designed for that purpose?
- A policyowner's guaranteed insurability rider lists the birth of a child as an alternate option date. What may the owner generally do on that date?
- A producer describes a term rider added to a permanent life policy. Which statement avoids overstating what the rider provides?
- A proposed insured disclosed membership in the U.S. military on the application. Under the Compact standard, may the base policy exclude death solely as a result of war or military service?
- A return of premium rider is attached to a permanent life policy. What does the rider add to the amount payable at the insured's death?
- A scheduled-premium life policy's grace period expires without payment, and no nonforfeiture or automatic-loan protection continues coverage. What follows?
- A terminally ill insured accelerates part of a policy's death benefit. What should the beneficiary expect at the insured's later death?
- A Texas individual life premium is overdue, but the insured dies during the policy's usual 31-day grace period. What is the usual claim result?
- A Texas life policy has remained in force for more than two years. A claim is filed based on information from the original application. What is the ordinary effect of the incontestability period?
- A universal life owner wants to vary the timing and amount of premium payments. Which condition remains essential?
- A universal life policy carries a waiver of monthly deduction rider. How does that rider differ from a standard waiver of premium rider?
- A variable life owner takes a policy loan and leaves it outstanding. Which effect should the owner expect?
- A waiver of premium rider is in force and the insured becomes totally disabled. What does the rider do once the waiting period has been satisfied?
- A whole life owner needs extra protection only while a business loan is outstanding. Which addition most directly fits that limited-duration need?
- After a Texas life policy has been in force for 2 years during the lifetime of the insured, under what condition can the insurer contest a claim?
- An accidental death benefit (double indemnity) rider pays an additional death benefit under what circumstance?
- An applicant discloses private-pilot activity during underwriting. How may an approved policy address that identified aviation risk?
- An applicant discloses work as a demolition blaster, and underwriting approves the policy with an occupation exclusion. Which provision is consistent with official life policy standards?
- An elected automatic premium loan provision is triggered, but available cash surrender value is less than the required loan plus interest. Which limitation applies?
- An insured and beneficiary die in quick succession, and the policy does not supply a different survival rule. What issue does a simultaneous-death rule resolve?
- An insured dies by suicide during the policy's valid initial suicide exclusion period. What minimum settlement does the Compact standard require?
- An insured dies during a Texas policy's two-year contestable period. The insurer discovers a material false application statement. What may the insurer do?
- An insured dies on day 20 of a policy's 31-day grace period with an overdue premium. What benefit does the beneficiary receive?
- An insured exercises a guaranteed insurability option after adopting a child. Which premium basis generally applies to the newly purchased coverage?
- An insured understated her age by 5 years on the application. At death, the insurer discovers the misstatement. How does the insurer handle the claim?
- An insured wants a benefit that supplies income after a qualifying total disability rather than merely waiving policy charges. Which rider most directly fits?
- An insured whose policy carries a standard aviation exclusion dies as a fare-paying passenger on a scheduled commercial airline. What does the insurer ordinarily pay?
- An insured with an accidental death and dismemberment rider loses the sight of both eyes in a covered accident. What does the rider ordinarily provide?
- An insurer tries to add an aviation exclusion after issue even though no aviation risk was disclosed or identified during underwriting. How does that compare with the Compact standard?
- An insurer wants to rely on a company underwriting manual to deny a claim, although the manual was never attached to the policy. What does the entire contract provision mean for that argument?
- An owner adds a spouse term rider to a base whole life policy. How is coverage structured for the spouse?
- An owner creates a trust for minor children and names the trust as policy beneficiary. What is the trustee's relevant role after the insured's death?
- An owner names 'my children, per stirpes.' One child dies before the insured but leaves two children. What result is the designation intended to produce?
- An owner signs a policy assignment before the insurer receives notice. The insurer takes an allowed action without knowledge of it. Under the Compact standard, how is the timing handled?
- An owner wants only the children who survive the insured to divide the class benefit equally, without preserving a deceased child's branch. Which designation most directly expresses that intent?
- An owner wants the original permanent insurance plan to continue for a smaller amount with no further premiums. Which nonforfeiture option fits?
- An owner wants to replace a named irrevocable beneficiary with someone else. What additional requirement applies?
- Flexible premium features in universal life policies allow the owner to perform which action?
- How does a cost of living (COLA) rider adjust policy coverage over time?
- How does a long-term care (LTC) rider attached to a life policy fund care expenses?
- If a cash-value policyowner stops paying premiums and selects the extended term nonforfeiture option, what coverage is provided?
- If a policy contains a valid underwriting-based hazardous occupation exclusion and the insured dies from that excluded hazard, what must the insurer refund at minimum?
- If a policy is delivered by mail, how can the insurer prove valid delivery for free-look tracking under Texas guidelines?
- If a traditional policy uses the amount-purchased method for a misstated age, what is adjusted?
- In an insurance contract, what constitutes the applicant's legal consideration?
- Qualifying events for accelerated death benefits under Texas regulation include which condition?
- The insured is not the owner of a cash-value life policy. The insured asks to take a policy loan without the owner's authorization. Which response best reflects the parties' roles?
- The insured's age was misstated on a flexible-premium life application. When discovered, how should the provision generally respond?
- Under standard individual life policy provisions, what is the maximum initial suicide exclusion period permitted under IIPRC compact standards?
- Under the entire contract provision, what elements constitute the legal agreement between the owner and insurer?
- Under the Uniform Simultaneous Death Act, if the insured and primary beneficiary die in a common accident and evidence cannot prove who died first, how are proceeds distributed?
- What benefit does a return of premium (ROP) term rider provide if the insured survives to the end of the term?
- What condition must be satisfied before a waiver of premium rider waives the policyowner's premium obligations?
- What distinguishes a collateral assignment from an absolute assignment of a life policy?
- What does a life policy's suicide provision generally limit?
- What does an accelerated death benefit provide when its qualifying conditions are met?
- What does an accidental death benefit rider generally provide when the insured dies from a covered accident?
- What does reinstatement do to an eligible lapsed life policy?
- What dual protection does a disability income rider provide when attached to a life insurance policy?
- What element of consideration does the insurance company bring to a life insurance contract?
- What expense is a long-term care insurance feature intended to cover?
- What happens to life insurance proceeds if the primary beneficiary predeceases the insured, and a contingent beneficiary is named?
- What is the function of a payor benefit rider attached to a juvenile life insurance policy?
- What is the main purpose of a life policy's free-look period?
- What is the primary operational objective of an automatic premium loan (APL) provision?
- What restriction applies to an owner who names an irrevocable beneficiary?
- What right does a guaranteed insurability rider (GIR) grant to the policyowner?
- What standard requirements must a policyowner satisfy to reinstate a lapsed life insurance policy?
- When an increasing term rider is added to a whole life policy to provide a return-of-premium death benefit, what does the total benefit equal at death?
- When does the free-look period for a newly delivered life insurance policy begin?
- When is a contingent beneficiary generally next in line to receive life insurance proceeds?
- Where is the insurer's fundamental obligation to pay the death benefit upon receipt of proof of death set forth?
- Which beneficiary designation generally allows the owner to make a change without the beneficiary's consent?
- Which description best identifies the coverage supplied by a term rider?
- Which dividend option allows a participating policyowner to purchase additional small paid-up permanent coverage without evidence of insurability?
- Which exchange describes consideration in a life insurance contract?
- Which key details are summarized in the policy face page and insuring clause?
- Which life policy exclusion addresses death caused by hazards of the insured's specifically identified job?
- Which list contains common life insurance premium payment modes?
- Which party holds the exclusive right to borrow against policy cash values or request nonforfeiture options?
- Which premium mode results in the lowest total annual premium outlay for a life policy?
- Which statement about dividends on a participating whole life policy is correct?
- Why is naming a minor child directly as a life insurance beneficiary problematic?
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