Texas Statutes and Rules — Life Insurance Only — practice questions

12.5% of the exam ≈10 real questions 11 free questions here

Advertising and buyer's guides, required life and annuity provisions, group and credit life, replacement and nonforfeiture under the Texas Insurance Code: 10 of the 80 scored questions.

Where people lose points

• Grace period at least one month; group life 31 days.
• A group life member converts by applying and paying within 31 days of leaving the job.
• Group life benefits can be assigned to anyone except the insured's employer.
• The replacing insurer sends the existing insurer the required notice within five business days.

Questions and answers, explained

All 8 questions above, with the correct answer and why it is correct. Everything here is on texas statutes and rules — life insurance only.

1. Under TIC 1101.005, how long must the grace period be for paying a renewal premium on an individual life insurance policy in Texas?

   • AAt least 60 days
   • BAt least one monthCorrect
   • CAt least 90 days
   • DAt least 10 calendar days

   Why: TIC 1101.005 requires a grace period of at least one month for each premium after the first, during which the policy stays in force. The policy may charge interest on a premium paid in the grace period, or deduct the overdue premium from the death benefit if the insured dies during it.

   Reference TIC 1101.005 — Texas outline II.B.2

2. Under TIC 1101.003, what constitutes the entire contract of a Texas life insurance policy?

   • AThe policy, or the policy together with the applicationCorrect
   • BOnly the application signed by the applicant
   • CThe policy plus the agent's sales illustration and notes
   • DThe insurer's bylaws as amended from time to time

   Why: TIC 1101.003 requires the policy to state that the policy, or the policy and the application, make up the entire contract. Nothing outside it, such as the insurer's bylaws or the agent's notes, can be added later to change the terms.

   Reference TIC 1101.003 — Texas outline II.B.6

3. Under TIC 1101.009, when must a Texas cash value life insurer make a policy loan available to the owner?

   • AOnly if the owner proves financial hardship to the insurer
   • BOnly after the policy has been in force for 10 years, and only if the insurer approves each loan
   • CFrom the first day, on every policy including term life
   • DAfter premiums are paid for three full years, with the policy assigned as loan securityCorrect

   Why: TIC 1101.009 requires a loan of up to the cash value plus dividend additions once the policy is in force, premiums have been paid for at least three full years, and the policy is properly assigned. The loan is secured only by the policy, and the policy is not voided until the debt equals or exceeds the cash value. Term policies are exempt because they have no cash value.

   Reference TIC 1101.009 — Texas outline II.B.3

4. A Texas whole life policy lapsed for nonpayment and went onto extended term, but was never surrendered for cash. Within what period after the default may the owner reinstate it?

   • A31 days, with no evidence of insurability required at all
   • BSix months, with a new application that starts a new two-year incontestable period
   • CThree years, with evidence of insurability and payment of overdue premiums with interestCorrect
   • DTen years, by paying only the current premium, with no interest charged and no health questions

   Why: 28 TAC 4.611 requires policies with nonforfeiture benefits to allow reinstatement within three years of default, or longer at the insurer's option, if the policy has not been surrendered, on evidence of insurability satisfactory to the insurer and payment of the overdue premiums with interest.

   Reference 28 TAC 4.611 — Texas outline II.B.14

5. A Texas endowment policy matures. Under 28 TAC 4.621, the settlement at maturity may not be less than:

   • AThe total premiums paid, without interest
   • BThe cash surrender value shown for the end of the tenth policy year
   • CThe face amount plus any dividend additions, less any policy debtCorrect
   • DWhatever amount the insurer declares that year

   Why: 28 TAC 4.621(c) bars any mode of settlement at maturity worth less than the face amount plus dividend additions, less any indebtedness and any premium the policy allows to be deducted.

   Reference 28 TAC 4.621 — Texas outline II.B.16

6. Under TIC 1111.052, which condition can qualify an insured for an accelerated benefit under a Texas term life policy?

   • AReaching age 65 with the policy in force for ten years
   • BA job loss that leaves the insured unable to keep paying the policy's premiums on time
   • CA temporary illness expected to resolve within a month
   • DA condition requiring an organ transplant, confirmed by a written medical opinionCorrect

   Why: TIC 1111.052 allows an accelerated term life benefit when the insurer has a satisfactory written medical opinion that the insured has a terminal illness, a long-term care illness, or a condition likely to cause permanent disability or premature death, such as AIDS, a malignant tumor, a condition requiring an organ transplant, or coronary artery disease causing acute infarction or requiring surgery. The benefit is deducted from the death benefit.

   Reference TIC 1111.052 — Texas outline II.B.13

7. A car dealer sells credit life insurance to buyers it finances. Which practice violates TIC Chapter 1153?

   • ACharging the buyer more for the coverage than the premium the insurer charges the dealerCorrect
   • BIssuing a group certificate to the buyer as evidence of insurance
   • CReporting the buyer's death claim promptly to the insurer
   • DStarting coverage on the same date the buyer becomes legally obligated to the dealer on the loan

   Why: TIC 1153.201 bars a creditor from charging a debtor more than the premium the insurer charges the creditor. Coverage normally begins when the debtor becomes obligated (1153.157), evidence is an individual policy or group certificate (1153.153), and claims must be reported promptly; the creditor may not act as the insurer's claim representative (1153.204).

   Reference TIC 1153.153, 1153.157, 1153.201, 1153.204 — Texas outline II.E

8. A Texas annuity buyer did not receive the buyer's guide and disclosure document at or before the time of application. What free look period must the contract provide?

   • AAt least 10 days, counted from the date of the application
   • BNone, because annuities have no free look in Texas
   • CAt least 3 business days from the application date
   • DAt least 15 calendar days from receipt of the contractCorrect

   Why: 28 TAC 4.2311 requires a free look of at least 15 calendar days when the buyer's guide and disclosure document were not provided at or before application. The period starts when the consumer receives the contract and runs concurrently with any other free look period.

   Reference 28 TAC 4.2310-4.2311 — Texas outline II.A.2, II.B.1

Topics inside this domain

• Texas life agent license rules: applying, renewing and appointments
• Texas group life insurance rules: conversion, grace period and assignment

Drill other domains

• Types of Life Policies and Annuities (18.75%)
• Life Policy Riders, Provisions, Options and Exclusions (18.75%)
• Application, Underwriting, Policy Delivery and Contract Law (15%)
• Retirement and Other Insurance Concepts (10%)
• Texas Statutes and Rules Common to Life and Health (25%)

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