Texas Statutes and Rules Common to Life and Health — practice questions

10.8% of the exam ≈14 real questions 17 free questions here

The commissioner, licensing, temporary licenses, continuing education, unfair practices, prompt claim payment and the guaranty association: 14 of the 130 scored questions, the biggest Texas section.

Where people lose points

• A temporary license lasts 180 days and needs no exam; older books still say 90.
• CE is 24 hours per license period, 3 of them ethics, at least half in a classroom setting.
• Promotional items over $25 given to induce a sale are illegal rebates.
• Alien means another country; the Spanish exam calls it 'internacional', and 'extranjera' means another state.

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 common to life and health.

1. Who appoints the Texas Commissioner of Insurance, and how long is the term?

   • ATexas voters, in a statewide election held every four years
   • BThe governor, with the advice and consent of the senate, for a two-year termCorrect
   • CThe attorney general, to serve with no fixed term
   • DThe Texas legislature, by joint resolution, for a four-year term

   Why: Under TIC 31.022 the governor appoints the commissioner with the advice and consent of the senate, and the term is two years, expiring February 1 of each odd-numbered year. The commissioner is not elected; some states elect their insurance commissioner, which is why the election distractor sounds plausible.

   Reference TIC 31.022 — Texas outline I.A.1

2. Besides revoking an authorization, the commissioner may suspend it. What is the longest suspension TIC Chapter 82 allows?

   • AOne yearCorrect
   • BSix months
   • CTwo years
   • DFive years

   Why: TIC 82.052 lets the commissioner suspend an authorization for a specified time not to exceed one year, order the holder to cease and desist, assess an administrative penalty, order restitution, or combine those sanctions.

   Reference TIC 82.052 — Texas outline I.A.4

3. What must an insurance company obtain from the Texas Department of Insurance before it may act as an insurer in Texas?

   • AAn appointment
   • BAn agent's license
   • CA certificate of authorityCorrect
   • DA certificate of insurance

   Why: Under TIC Chapter 801 the department approves an application and issues, under its seal, a certificate of authority to act as an insurer. Agents are licensed and appointed; insurers hold a certificate of authority. A certificate of insurance is the document a group member receives.

   Reference TIC 801.051 — Texas outline I.B.1

4. Which kind of insurer is owned by its policyholders, who may receive dividends as a return of excess premium?

   • AAn alien insurer
   • BA stock insurer
   • CA reciprocal exchange managed by an attorney-in-fact for its subscribers
   • DA mutual insurerCorrect

   Why: A mutual insurer is owned by its policyholders and typically issues participating policies whose dividends are a return of premium, not taxable income. A stock insurer is owned by shareholders who receive dividends from profits. A reciprocal is a different structure in which subscribers insure one another through an attorney-in-fact.

   Reference TIC 547.001, 801.001 — Texas outline I.B.4

5. Daniel just received his Texas general life, accident, and health license. What else does he need before he may engage in business as an agent for an insurer?

   • ACompletion of his first 24 hours of continuing education
   • BA second exam on the insurer's products
   • CA surety bond filed with the commissioner
   • DAn appointment by an authorized insurerCorrect

   Why: TIC 4001.201 says a licensed person may not engage in business as an agent unless appointed by an insurer authorized to do business in Texas. The license shows he is qualified; the appointment authorizes him to represent that particular insurer.

   Reference TIC 4001.201 — Texas outline I.C.3

6. An applicant intentionally leaves a prior fraud conviction off her Texas license application, and the department discovers it. Under TIC 4005.101, this is a ground to:

   • AIssue the license on probation, since an omission on an application only calls for a warning
   • BDeny the application, because she intentionally made a material misstatement in itCorrect
   • CRefer the matter to her future insurer to decide
   • DIssue the license, since only convictions within the past year matter

   Why: TIC 4005.101(b)(2) and (3) make intentionally making a material misstatement in the license application, and obtaining or attempting to obtain a license by fraud or misrepresentation, grounds for denial or discipline.

   Reference TIC 4005.101 — Texas outline I.C.6-7

7. An agent who no longer holds a Texas license continues to receive renewal commissions on policies he sold while licensed. Under TIC 4005.053, the insurer:

   • AMay pay them only if he passes the exam again
   • BMay keep paying them, because deferred commissions earned while licensed are not barredCorrect
   • CMust pay them to the state until he becomes licensed again
   • DMust stop all payments on the day his license lapses, including renewals already earned

   Why: TIC 4005.053(b) states that the licensing requirement does not prevent paying, or accepting, a renewal or other deferred commission solely because the person no longer holds an agent license.

   Reference TIC 4005.053(b) — Texas outline I.E.1

8. A trustee named to receive a life policy's proceeds for a trust receives the death benefit. Under TIC 1104.024, the trustee:

   • AMay commingle the proceeds with other assets properly in the trustCorrect
   • BMust pay them directly to the insured's estate
   • CMust return them to the insurer until a court approves the trust
   • DMust hold them in a separate account for at least two years before any distribution

   Why: TIC 1104.024 allows life insurance proceeds received by a trustee to be commingled with other assets properly coming into the trust. That is a narrow trust rule. An agent who mixes premiums collected for an insurer with personal funds is different: that money belongs to the insurer, and withholding or converting it is a ground for discipline under TIC 4005.101.

   Reference TIC 1104.024, 4005.101 — Texas outline I.D.1.h

Topics inside this domain

• Texas agent licensing: temporary license, appointment and renewal
• Texas continuing education for life and health agents
• Texas unfair practices: rebating, twisting, defamation and discrimination
• Texas prompt claim payment deadlines
• Texas Life and Health Insurance Guaranty Association limits

Drill other domains

• Types of Life Policies and Annuities (11.5%)
• Life Policy Riders, Provisions, Options and Exclusions (11.5%)
• Life Application, Underwriting and Policy Delivery (9.2%)
• Retirement and Other Life Insurance Concepts (6.2%)
• Types of Health Policies (12.3%)
• Health Policy Provisions, Clauses and Riders (11.5%)

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