Texas agent licensing: temporary license, appointment and renewal

The licensing questions on the Texas exam are short and number-heavy. Older study materials still quote a 90-day temporary license; the current statute says 180 days, and that is the kind of detail this section tests.

Questions and answers, explained

All 12 questions above, with the correct answer and why it is correct. Everything here is on texas agent licensing: temporary license, appointment and renewal.

1. An applicant pays the initial premium and receives a temporary insurance agreement (binding receipt) dated March 3. He dies of a heart attack on March 9, before underwriting is complete. The insurer later determines he would have been declined. Assuming the receipt's stated conditions were met, what must the insurer do?

   • APay the face amount — a binding receipt covers from its date regardless of insurabilityCorrect
   • BDeny the claim and refund the premium, because he would not in fact have been insurable
   • CPay only if the medical examination had been completed before his death
   • DPay a prorated amount equal to the coverage that the premium collected would have purchased

   Why: A binding (temporary insurance) receipt puts coverage in force on the receipt date for a stated period, commonly 60 days, whether or not the applicant later proves insurable; the insurer's remedy is to decline the permanent policy when the period ends. Choice B states the rule for a conditional receipt, where coverage depends on insurability — that is exactly the condition a binding receipt removes. Outline III.B — premium receipts and effective date.

   Reference Texas outline #124401, general section III (Completing the application, underwriting and delivering the policy)

2. An employer pays the entire premium for $200,000 of group term life insurance on a 52-year-old employee. What amount of coverage generates imputed income, and how is the cost measured?

   • A$150,000, measured by the IRS Table I uniform premium rate for the employee's ageCorrect
   • B$200,000, measured by the employer's actual premium outlay
   • C$200,000, measured by the IRS Table I uniform premium rate
   • DNone; employer-paid group term life is fully excludable from income

   Why: IRC Section 79 excludes the first $50,000 of employer-provided group term life; the cost of the excess $150,000 is imputed to the employee using the IRS Table I uniform premium rates for his age bracket, not the employer's actual cost. Any premium the employee pays with after-tax dollars reduces the imputed amount. Choice D forgets the $50,000 ceiling on the exclusion. Outline IV.

   Reference Texas outline #124401, general section IV (Retirement and other insurance concepts)

3. An insured's daughter has cared for her mother at home for two years and needs a two-week vacation. The mother's long-term care policy will pay for her to stay temporarily in a nursing facility during that time. This benefit is called:

   • ACustodial care
   • BAdult day care
   • CRespite careCorrect
   • DHome health care

   Why: Respite care exists to give temporary relief to an unpaid family caregiver, and it may be delivered in the home, in an adult day center, or through a short facility stay. Choice B is the closest distractor: adult day care is an ongoing daytime program at a center, whereas respite care is defined by its purpose — relieving the primary caregiver — not by the setting.

   Reference Texas outline #124401, general section V (Types of policies)

4. Which person is excluded from the definition of an agent under TIC 4001.003 and does not need an agent's license?

   • AA salaried insurer employee who handles clerical work, earns no commission, and does not solicit applicationsCorrect
   • BA person who collects premiums door to door for a commission
   • CA person who represents an HMO in enrolling new members
   • DA person who solicits annuity contracts by phone and is paid per sale

   Why: TIC 4001.003 defines an agent as anyone who solicits, negotiates, procures or collects premium on insurance or annuity contracts, or represents an HMO in enrolling members. It excludes a regular salaried officer or employee who devotes substantially all time to other activities, receives no commission tied to the business, and does not solicit or accept applications from the public.

   Reference TIC 4001.003 — Texas outline I.C.1.a

5. Which Texas license does a person need to represent an HMO in soliciting or enrolling new members?

   • AA property and casualty license
   • BA general life, accident, and health licenseCorrect
   • CNo license, because an HMO is not an insurance company
   • DA life agent license

   Why: Under TIC 4054.051 a person who acts as an agent representing an HMO must hold a general life, accident, and health license, and TIC 4001.003 includes anyone who represents an HMO in soliciting or effecting membership in the definition of an agent. A life agent license does not authorize HMO enrollment.

   Reference TIC 4054.051, 4001.003 — Texas outline IV

6. Which statement about the taxation of an employer-paid group term life insurance plan is correct?

   • AThe employer may not deduct the premiums it pays on group term coverage for its own employees
   • BThe employer deducts premiums, the first $50,000 is tax-free to the employee, and the death benefit is tax-freeCorrect
   • CThe employee may deduct the imputed income on coverage above $50,000 on his own personal tax return
   • DThe death benefit is taxable to the beneficiary because the employer deducted the premium as a business expense

   Why: Group term life premiums are a deductible employee-benefit expense because the employer is not the beneficiary — the contrast is key person insurance, where the employer IS the beneficiary and the premiums are therefore not deductible. Choice D links two unrelated rules: the employer's deduction has no effect on the beneficiary, who still receives the death benefit income-tax-free. Outline IV.

   Reference Texas outline #124401, general section IV (Retirement and other insurance concepts)

7. A person wants to sell life insurance, accident and health insurance, and memberships in an HMO in Texas. Which license is required?

   • AA limited lines license
   • BA temporary license, renewed every 180 days
   • CA general life, accident, and health licenseCorrect
   • DA life agent license

   Why: TIC 4054.051 requires the general life, accident, and health license for an agent who represents an HMO, who writes life, accident and health insurance, who writes only accident and health, or who writes fixed or variable annuities or variable life. The life agent license (TIC 4054.301) covers life and annuities but not HMO memberships or major medical coverage.

   Reference TIC 4054.051, 4054.301 — Texas outline I.C.1.a

8. How long is a Texas temporary agent's license valid after it is issued?

   • A180 daysCorrect
   • B90 days
   • C30 days
   • DOne year

   Why: TIC 4001.155 makes a temporary license valid for 180 days after the date of issuance. Older study materials quote 90 days; the current statute says 180.

   Reference TIC 4001.155 — Texas outline I.C.1.c

9. Which statement about obtaining a Texas temporary agent's license is correct?

   • AAny applicant may obtain one by paying a fee, with no sponsor
   • BThe applicant must first pass the state exam and wait for the regular license to be mailed
   • CIt is issued only to agents already licensed in another state
   • DNo exam is required, but an insurer, agent or HMO must certify that it is considering the applicant for appointmentCorrect

   Why: TIC 4001.152 says no written exam is required for a temporary license. TIC 4001.153 requires the application and fee plus a certificate from an agent, insurer or HMO stating it is considering the applicant for appointment as its full-time agent and will supervise the applicant's training.

   Reference TIC 4001.152-.153 — Texas outline I.C.1.c

10. Lucía holds a Texas temporary license. On which sale is she prohibited from receiving a commission?

    • AA policy on a customer she met at a community fair
    • BA policy on the owner of the bakery where she worked until four months agoCorrect
    • CA policy on a stranger referred by her supervising agent
    • DA policy on a neighbor she met only after getting the license

    Why: TIC 4001.157 bars a temporary license holder from receiving a commission on a policy covering herself, a relative, or anyone who is or within the past six months was her employer or her employee. Her employer of four months ago falls inside the six-month window.

    Reference TIC 4001.157 — Texas outline I.E.1

11. An insurer properly files a temporary-license application, fee and sponsor certificate. If the license has not arrived and no denial notice has been received, when may the applicant begin acting as an agent?

    • AImmediately on mailing, before the department sees it
    • BAfter 30 days, once the background check clears
    • COn the eighth day after the filing was delivered or mailedCorrect
    • DOnly after the license is physically received

    Why: Under TIC 4001.154, if the temporary license is not received before the eighth day after the application, fee and certificate are delivered or mailed, and no denial has been communicated, the sponsor may assume it will be issued and the applicant may proceed to act as an agent.

    Reference TIC 4001.154 — Texas outline I.C.1.c

12. Which applicant for a Texas general life, accident, and health license is exempt from the licensing examination?

    • AAn applicant who holds the Chartered Life Underwriter (CLU) designationCorrect
    • BAn applicant whose license expired three years ago
    • CAn applicant who holds the Chartered Property Casualty Underwriter (CPCU) designation
    • DAn applicant with a four-year degree in finance

    Why: TIC 4002.003 exempts a CLU from the exam for a life, accident, and health license; the CPCU exemption applies to property and casualty licenses. A license that expired less than one year ago can also be renewed without an exam, but not one expired three years.

    Reference TIC 4002.003 — Texas outline I.C.2

Drill the whole domain

• Types of Health Policies (12.3%)
• Texas Statutes and Rules Common to Life and Health (10.8%)
• Life Application, Underwriting and Policy Delivery (9.2%)

Other topics

• 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
• Texas required life insurance policy provisions
• Health policy uniform provisions, with the Texas numbers
• Replacing life insurance and annuities in Texas
• Texas health insurance mandates, Medicare supplements and the ACA
• Texas HMO rules for the life and health exam

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