TEXAS LIFE AND HEALTH INSURANCE EXAM. QUESTIONS AND ANSWERS.

Texas Life and Health
Insurance Exam

  1. At what point must a life insurance applicant be informed of their rights that fall under
    the Fair Credit Reporting Act?
    Upon completion of the application
  2. Who elects the governing body of a mutual insurance company?
    Policyholders
  3. An insurance applicant MUST be informed of an investigation regarding his/her
    reputation and character according to the
    Fair Credit Reporting Act
  4. What type of reinsurance contract involves two companies automatically sharing their
    risk exposure?
    Treaty
  5. The stated amount or percent of liquid assets that an insurer must have on hand that
    will satisfy future obligations to its policyholders is called
    Reserves
  6. Which of the following requires insurers to disclose when an applicant’s consumer or
    credit history is being investigated
    1970 – Fair Credit Reporting Act
  7. What is the consideration given by an insurer in the Consideration clause of a life
    policy?
    Promise to pay a death benefit
  8. When third-party ownership is involved, applicants who also happen to be the stated
    primary beneficiary are required to have
    Insurable interest in the proposed insured
  9. Statements made on an insurance application that are believed to be true to the best
    of the applicant’s knowledge are called
    Representations
  10. The part of a life insurance policy guaranteed to be true is called a(n)
    Warranty
  11. Which of these is NOT a type of agent authority?
    Express
    Implied
    Principal
    Apparent
  12. The Consideration clause of an insurance contract includes
    The schedule and amount of premium payments
  13. E and F are business partners. Each takes out a $500,000 life insurance policy on
    the other, naming himself as primary beneficiary. E and F eventually terminate their
    business, and four months later E dies. Although E was married with three children at

the time of death, the primary beneficiary is still F. However, an insurable interest no
longer exists. Where will the proceeds from E’s life insurance policy be directed to?
In this situation, the proceeds from E’s life insurance policy will go to F.

  1. Which of the following terms defines the legally enforceable promise in an insurance
    contract by the insurer?
    Unilateral
  2. When must insurable interest exist for a life insurance contract to be valid?
    Inception of the contract
  3. Insurance contracts are known as __ because certain future conditions or acts
    must occur before any claims can be paid.
    Conditional
  4. Which of these require an offer, acceptance, and consideration?
    Contract
  5. Which of these arrangements allows one to bypass insurable interest laws?
    Investor-Originated Life Insurance
    Investor-originated life insurance (or IOLI), sometimes called stranger-originated life
    insurance (or STOLI) is used to circumvent state insurable interest statutes. This is
    done when an investor (or stranger) persuades an individual to take out life insurance
    specifically for the purpose of selling the policy to the investor. The investor
    compensates the insured and makes the premiums, then collects the death benefit
    when the insured dies.
  6. Which of these is NOT considered to be an element of an insurance contract

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