Flash Card Questions & Answers PDF

**LIFE-GENERAL KNOWLEDGE** **CONTENT OUTLINE** **Product Knowledge, Terms and Concepts** **(50 scoreable questions plus 5 pretest questions)** **\#\#\# A. Traditional Whole Life Products** 1\. \*\*Which type of policy provides lifetime coverage with level premiums and a guaranteed cash value?\*...

**LIFE-GENERAL KNOWLEDGE** **CONTENT OUTLINE** **Product Knowledge, Terms and Concepts** **(50 scoreable questions plus 5 pretest questions)** **\#\#\# A. Traditional Whole Life Products** 1\. \*\*Which type of policy provides lifetime coverage with level premiums and a guaranteed cash value?\*\* \- a. Universal life \- \*b. Ordinary whole life \- c. Term life \- d. Indexed life 2\. \*\*Which life insurance policy requires the policyholder to pay premiums for a limited number of years but still provides coverage for life?\*\* \- a. Universal life \- b. Ordinary whole life \- \*c. Limited-pay life \- d. Term life 3\. \*\*Which type of whole life policy allows the entire premium to be paid in a single payment?\*\* \- a. Universal life \- b. Indexed life \- c. Ordinary whole life \- \*d. Single-premium life **\#\#\# B. Interest/Market-Sensitive/Adjustable Life Products** 4\. \*\*Which life insurance policy offers flexible premiums and the ability to adjust death benefits?\*\* \- \*a. Universal life \- b. Ordinary whole life \- c. Term life \- d. Joint life 5\. \*\*What type of life insurance policy has a guaranteed minimum death benefit, but its cash value is dependent on the performance of investment sub-accounts?\*\* \- a. Indexed life \- \*b. Variable whole life \- c. Term life \- d. Limited-pay life 6\. \*\*Which type of policy combines the flexibility of universal life with investment options similar to variable life?\*\* \- a. Indexed life \- \*b. Variable universal life \- c. Ordinary whole life \- d. Decreasing term life 7\. \*\*Which life insurance policy is tied to the performance of a specific stock index, like the S&P 500?\*\* \- a. Variable universal life \- \*b. Indexed life \- c. Term life \- d. Limited-pay life 8\. \*\*Which life insurance policy is designed to offer flexible premiums and interest-sensitive cash value accumulation?\*\* \- a. Indexed life \- \*b. Interest-sensitive whole life \- c. Joint life \- d. Return of premium term life **\#\#\# C. Term Life** 9\. \*\*Which type of term life insurance policy offers a constant death benefit for the duration of the term?\*\* \- a. Decreasing term \- b. Return of premium term \- \*c. Level term \- d. Variable term 10\. \*\*Which type of term insurance decreases in coverage amount over time, often used for mortgage protection?\*\* \- \*a. Decreasing term \- b. Level term \- c. Annually renewable term \- d. Universal life 11\. \*\*Which type of term life insurance refunds all premiums if the insured survives the term period?\*\* \- a. Decreasing term \- \*b. Return of premium term \- c. Renewable term \- d. Convertible term 12\. \*\*What is the term life insurance policy that automatically renews each year with increased premiums?\*\* \- \*a. Annually renewable term \- b. Return of premium term \- c. Decreasing term \- d. Indexed life 13\. \*\*What special feature allows a term life policyholder to renew the policy without proof of insurability?\*\* \- a. Convertible \- \*b. Renewable \- c. Decreasing \- d. Indexed 14\. \*\*Which special feature allows a term life policyholder to convert their policy to a permanent life policy without medical underwriting?\*\* \- \*a. Convertible \- b. Renewable \- c. Decreasing \- d. Interest-sensitive **\#\#\# D. Annuities** 15\. \*\*Which type of annuity is purchased with a single lump sum payment?\*\* \- \*a. Single-premium annuity \- b. Flexible-premium annuity \- c. Indexed annuity \- d. Variable annuity 16\. \*\*Which type of annuity allows for multiple premium payments over time?\*\* \- a. Single-premium annuity \- \*b. Flexible-premium annuity \- c. Indexed annuity \- d. Immediate annuity 17\. \*\*What type of annuity begins making payments immediately after the purchase?\*\* \- a. Deferred annuity \- \*b. Immediate annuity \- c. Fixed annuity \- d. Indexed annuity 18\. \*\*Which annuity allows income payments to be deferred until a future date?\*\* \- \*a. Deferred annuity \- b. Immediate annuity \- c. Fixed annuity \- d. Variable annuity 19\. \*\*Which type of annuity offers a guaranteed interest rate and stable payments?\*\* \- \*a. Fixed annuity \- b. Variable annuity \- c. Indexed annuity \- d. Flexible-premium annuity 20\. \*\*What type of annuity is tied to the performance of a specific index, such as the S&P 500?\*\* \- a. Fixed annuity \- b. Variable annuity \- \*c. Indexed annuity \- d. Immediate annuity 21\. \*\*Which annuity has a payout amount that varies depending on the performance of investment accounts?\*\* \- a. Fixed annuity \- \*b. Variable annuity \- c. Indexed annuity \- d. Deferred annuity 22\. \*\*What are the two phases of an annuity?\*\* \- a. Annuity and Payment \- b. Premium and Payout \- \*c. Accumulation and Annuity Periods \- d. Flexible and Immediate 23\. \*\*Which payout option guarantees income for life, regardless of how long the annuitant lives?\*\* \- a. Fixed period \- \*b. Life income \- c. Joint and survivor \- d. Life with period certain **\#\#\# E. Combination Plans and Variations** 24\. \*\*Which type of life insurance policy covers two individuals and pays the death benefit upon the death of the first insured?\*\* \- \*a. Joint life (first to die) \- b. Survivorship life (second to die) \- c. Universal life \- d. Variable life 25\. \*\*Which type of life insurance policy covers two individuals and pays the death benefit after both insureds have passed away?\*\* \- a. Joint life (first to die) \- \*b. Survivorship life (second to die) \- c. Universal life \- d. Term life **\#\#\# A. Policy Riders** 1\. \*\*Which rider waives premium payments if the insured becomes totally disabled?\*\* \- a. Payor benefit \- \*b. Waiver of premium \- c. Guaranteed insurability \- d. Long term care 2\. \*\*What rider allows the policyholder to purchase additional coverage at specified intervals without proof of insurability?\*\* \- a. Waiver of premium \- \*b. Guaranteed insurability \- c. Term rider \- d. Return of premium 3\. \*\*Which rider waives premiums if the policy owner dies or becomes disabled, specifically for a juvenile policy?\*\* \- a. Waiver of premium \- b. Accidental death rider \- \*c. Payor benefit rider \- d. Long term care rider 4\. \*\*What rider pays an additional death benefit if the insured dies as a result of an accident?\*\* \- a. Term rider \- \*b. Accidental death rider \- c. Disability rider \- d. Waiver of premium rider 5\. \*\*Which rider provides life insurance protection on the insured\'s spouse or children?\*\* \- \*a. Other insureds rider \- b. Waiver of premium rider \- c. Term rider \- d. Long term care rider 6\. \*\*What rider is designed to help pay for long-term care costs if the insured becomes chronically ill?\*\* \- a. Waiver of premium rider \- \*b. Long term care rider \- c. Disability rider \- d. Term rider 7\. \*\*Which rider returns all or a portion of the premiums paid if the insured survives the policy term?\*\* \- a. Term rider \- \*b. Return of premium rider \- c. Payor benefit rider \- d. Disability rider 8\. \*\*Which rider pays an additional benefit if the insured becomes disabled, and also may provide waiver of premiums?\*\* \- a. Accidental death rider \- \*b. Disability rider \- c. Long term care rider \- d. Guaranteed insurability rider 9\. \*\*What rider allows for an increase in the policy\'s death benefit to keep pace with inflation?\*\* \- \*a. Cost of living rider \- b. Term rider \- c. Waiver of premium rider \- d. Return of premium rider **\#\#\# B. Policy Provisions and Options** 10\. \*\*What provision states that the insurance policy and the application together form the entire contract?\*\* \- \*a. Entire contract \- b. Insuring clause \- c. Reinstatement clause \- d. Consideration clause 11\. \*\*Which clause outlines the insurer\'s promise to pay the death benefit under specified conditions?\*\* \- \*a. Insuring clause \- b. Consideration clause \- c. Entire contract \- d. Suicide clause 12\. \*\*Which provision gives the policyholder a specific period to review the policy and return it for a full refund?\*\* \- \*a. Free look \- b. Grace period \- c. Reinstatement \- d. Settlement options 13\. \*\*What is the exchange of value, such as the premium and the promise to pay the death benefit, in a life insurance contract called?\*\* \- a. Insuring clause \- \*b. Consideration \- c. Reinstatement \- d. Assignment 14\. \*\*Which policyholder right allows the owner to transfer ownership of the policy to someone else?\*\* \- a. Beneficiary rights \- \*b. Owner\'s rights \- c. Assignment clause \- d. Insuring clause 15\. \*\*What are the two types of beneficiary designations that allow the policyholder to control changes made to the beneficiary?\*\* \- \*a. Revocable and irrevocable \- b. Primary and contingent \- c. Class and individual \- d. Common disaster and minor beneficiary 16\. \*\*Which provision ensures that a minor beneficiary cannot receive policy proceeds directly until reaching legal age?\*\* \- a. Common disaster clause \- b. Revocable beneficiary \- \*c. Minor beneficiaries clause \- d. Class designation clause 17\. \*\*Which provision specifies that premiums are due on a regular basis, such as monthly, quarterly, or annually?\*\* \- a. Automatic premium loan \- b. Grace period \- \*c. Modes of premium payment \- d. Consideration clause 18\. \*\*Which option allows for reinstatement of a lapsed policy if certain conditions are met?\*\* \- \*a. Reinstatement \- b. Incontestability \- c. Suicide clause \- d. Assignment clause 19\. \*\*What provision allows policyholders to access the cash value of their policy through loans or partial withdrawals?\*\* \- a. Premium payment modes \- \*b. Policy loans, withdrawals, and partial surrenders \- c. Non-forfeiture options \- d. Dividend options 20\. \*\*Which option guarantees that the policyholder will not lose the cash value of their policy even if they stop paying premiums?\*\* \- \*a. Non-forfeiture options \- b. Dividend options \- c. Policy loans \- d. Assignment clause 21\. \*\*What is the term for a life insurance policy that participates in the company's profits and may pay dividends?\*\* \- \*a. Participating policy \- b. Non-forfeiture policy \- c. Dividend option \- d. Settlement option 22\. \*\*Which clause prevents the insurer from voiding the policy after it has been in force for two years, except for fraud?\*\* \- \*a. Incontestability clause \- b. Suicide clause \- c. Assignment clause \- d. Reinstatement clause 23\. \*\*Which provision allows a policyholder to transfer their policy rights to another person?\*\* \- \*a. Assignment clause \- b. Reinstatement clause \- c. Suicide clause \- d. Insuring clause 24\. \*\*Which provision limits the insurer\'s liability if the insured commits suicide within a specified period?\*\* \- \*a. Suicide clause \- b. Misstatement of age clause \- c. Common disaster clause \- d. Incontestability clause 25\. \*\*What provision adjusts the benefits if the insured\'s age or gender has been misstated on the application?\*\* \- a. Suicide clause \- b. Incontestability clause \- \*c. Misstatement of age and gender clause \- d. Grace period 26\. \*\*Which option allows the policy\'s death benefit to be paid out in periodic installments rather than a lump sum?\*\* \- a. Non-forfeiture options \- \*b. Settlement options \- c. Dividend options \- d. Reinstatement clause 27\. \*\*Which benefit allows an insured to receive a portion of the death benefit if diagnosed with a terminal illness?\*\* \- a. Non-forfeiture options \- \*b. Accelerated death benefit \- c. Dividend options \- d. Policy loans **\#\#\# C. Policy Exclusions** 28\. \*\*Which policy exclusion denies payment if the insured dies during wartime or in the military?\*\* \- \*a. War exclusion \- b. Aviation exclusion \- c. Dangerous occupation exclusion \- d. Suicide exclusion 29\. \*\*Which exclusion might apply if the insured dies in a private plane crash?\*\* \- a. War exclusion \- \*b. Aviation exclusion \- c. Dangerous occupation exclusion \- d. Suicide exclusion 30\. \*\*Which exclusion applies to high-risk professions such as stunt work or skydiving?\*\* \- a. Aviation exclusion \- b. War exclusion \- \*c. Dangerous occupation exclusion \- d. Misstatement of age exclusion \#\#\# A. Completing the Application 1\. \*\*Whose signatures are required on a life insurance application?\*\* \- a. Policyholder and agent only \- b. Policyholder and insured only \- \*c. Policyholder, insured (if not the same), and agent \- d. Policyholder and beneficiary 2\. \*\*What must be done if a mistake is made on a life insurance application?\*\* \- a. Submit a new application \- b. Leave the mistake as is \- \*c. Applicant and agent must initial the changes \- d. Agent must correct the mistake without notifying the applicant 3\. \*\*What happens if an application for life insurance is incomplete?\*\* \- a. The policy is issued immediately \- \*b. The insurer may delay processing or deny the claim \- c. The agent fills in the missing information \- d. The insurer ignores the missing details 4\. \*\*Which statement best describes warranties in a life insurance application?\*\* \- a. Statements that are believed to be true to the best of the applicant's knowledge \- b. Statements that are made under oath in court \- \*c. Statements that are guaranteed to be true \- d. Statements that can be changed after the policy is issued 5\. \*\*What is typically issued when the initial premium is collected with the application?\*\* \- \*a. Conditional receipt \- b. Final policy \- c. Binding receipt \- d. Provisional receipt 6\. \*\*What is the process of replacing an existing life insurance policy with a new one called?\*\* \- \*a. Replacement \- b. Conversion \- c. Termination \- d. Reinstatement 7\. \*\*What disclosure is required at the point of sale to protect the privacy of medical information?\*\* \- \*a. HIPAA disclosure \- b. Gramm-Leach-Bliley disclosure \- c. Fair Credit Reporting Act disclosure \- d. STOLI disclosure 8\. \*\*Which act requires insurance companies to establish procedures to detect and prevent money laundering?\*\* \- a. Gramm-Leach-Bliley Act \- b. Fair Credit Reporting Act \- \*c. USA PATRIOT Act \- d. HIPAA 9\. \*\*Which act focuses on protecting consumers\' personal financial information and privacy?\*\* \- a. HIPAA \- b. USA PATRIOT Act \- \*c. Gramm-Leach-Bliley Act (GLBA) \- d. Fair Credit Reporting Act **\#\#\# B. Underwriting** 10\. \*\*What is the term for the financial or emotional loss a person would suffer if the insured dies?\*\* \- a. Moral hazard \- b. Replacement value \- \*c. Insurable interest \- d. Legal purpose 11\. \*\*What type of report may be required during underwriting to assess the applicant\'s medical history?\*\* \- a. Criminal background check \- \*b. Medical information and consumer reports \- c. Risk classification report \- d. Legal competence report 12\. \*\*What law requires that consumers be notified when their credit is checked during the underwriting process?\*\* \- a. HIPAA \- \*b. Fair Credit Reporting Act (FCRA) \- c. Gramm-Leach-Bliley Act (GLBA) \- d. USA PATRIOT Act 13\. \*\*What is used to classify applicants into risk categories during underwriting?\*\* \- \*a. Risk classification \- b. Insurable interest \- c. Replacement policy \- d. Medical underwriting 14\. \*\*What is the term for life insurance policies taken out on individuals by third-party investors, with no insurable interest?\*\* \- a. Replacement insurance \- \*b. Stranger/Investor-owned life insurance (STOLI/IOLI) \- c. Unilateral contract \- d. Adhesion contract \#\#\# C. Delivering the Policy 15\. \*\*When does coverage typically begin for a life insurance policy if a conditional receipt is issued?\*\* \- \*a. When the application is approved and any required medical exam is completed \- b. Immediately when the application is signed \- c. When the policy is delivered to the client \- d. When the first premium payment is received 16\. \*\*Which of the following should be explained to the client upon delivery of the policy?\*\* \- a. The medical underwriting process \- b. The premium payment modes \- \*c. Policy provisions, riders, exclusions, and ratings \- d. The investment options for policy loans \#\#\# D. Contract Law 17\. \*\*What are the elements of a legally binding contract?\*\* \- a. Offer, Policy Delivery, and Legal Purpose \- \*b. Offer and Acceptance, Consideration, Competent Parties, Legal Purpose \- c. Consideration, Grace Period, and Renewal \- d. Competent Parties, Premium Payment, and Underwriting 18\. \*\*What is the exchange of value required to form a contract, such as the premium and the promise to pay the death benefit?\*\* \- \*a. Consideration \- b. Offer and Acceptance \- c. Legal purpose \- d. Competent parties 19\. \*\*Which of the following describes an insurance contract where only one party (the insurer) is bound by a legally enforceable promise?\*\* \- \*a. Unilateral contract \- b. Conditional contract \- c. Adhesion contract \- d. Aleatory contract 20\. \*\*Which type of contract requires certain conditions to be met before the insurer will pay a claim?\*\* \- a. Unilateral contract \- \*b. Conditional contract \- c. Aleatory contract \- d. Adhesion contract 21\. \*\*Which contract is drafted by one party (the insurer) and offered on a \"take it or leave it\" basis, with no negotiation?\*\* \- a. Conditional contract \- \*b. Contract of Adhesion \- c. Unilateral contract \- d. Aleatory contract 22\. \*\*Which type of contract involves an unequal exchange of values, such as a small premium in exchange for a large death benefit?\*\* \- a. Conditional contract \- b. Contract of Adhesion \- \*c. Aleatory contract \- d. Unilateral contract \#\#\# A. Third-Party Ownership 1\. \*\*What is third-party ownership in life insurance?\*\* \- a. The policyholder and the insured are the same person \- \*b. The policyholder is different from the insured \- c. The policyholder is the beneficiary \- d. The insured owns the policy \#\#\# B. Life Settlements 2\. \*\*What is a life settlement?\*\* \- a. Selling a policy back to the insurance company \- \*b. Selling an existing life insurance policy to a third party for more than its cash surrender value \- c. Converting a term policy into a whole life policy \- d. Using a life insurance policy to pay for long-term care \#\#\# C. Group Life Insurance 3\. \*\*What is the conversion privilege in group life insurance?\*\* \- a. The ability to change the beneficiary at any time \- \*b. The right to convert group coverage to an individual policy without proof of insurability \- c. The ability to increase the face value of the policy \- d. The option to change the type of insurance coverage 4\. \*\*What is the primary difference between contributory and noncontributory group life insurance plans?\*\* \- a. The employer pays all premiums in a contributory plan \- \*b. Employees contribute to the premium in a contributory plan, while the employer pays all premiums in a noncontributory plan \- c. Only the employer can select the beneficiaries in noncontributory plans \- d. Noncontributory plans offer lower coverage amounts \#\#\# D. Retirement Plans 5\. \*\*What is the main feature of a qualified retirement plan?\*\* \- a. It allows for early withdrawals without penalty \- \*b. It meets IRS guidelines for tax benefits, such as tax-deferred growth \- c. It provides a guaranteed income for life \- d. It can be transferred to any beneficiary without taxes 6\. \*\*What distinguishes a nonqualified retirement plan from a qualified plan?\*\* \- \*a. Nonqualified plans do not meet IRS guidelines and may not provide tax advantages like qualified plans \- b. Nonqualified plans are always employer-sponsored \- c. Contributions to nonqualified plans are always tax-deductible \- d. Nonqualified plans require mandatory employer matching \#\#\# E. Life Insurance Needs Analysis/Suitability 7\. \*\*What is the primary focus of a life insurance needs analysis for personal insurance?\*\* \- a. Determining the best investment options for the policyholder \- \*b. Calculating the amount of life insurance needed to cover personal expenses and financial obligations \- c. Choosing a plan with the highest cash value \- d. Estimating future policy dividends 8\. \*\*What type of life insurance is used by businesses to cover the loss of a key employee?\*\* \- a. Buy-sell agreement insurance \- \*b. Key person insurance \- c. Group term life insurance \- d. Life settlement policy 9\. \*\*What is the purpose of a buy-sell agreement in life insurance?\*\* \- a. To transfer ownership of the policy to the beneficiary \- \*b. To ensure the smooth transfer of ownership in a business if an owner dies \- c. To provide tax-free income to the insured\'s family \- d. To increase the value of the policyholder\'s shares in the business \#\#\# F. Social Security Benefits 10\. \*\*Which benefit does Social Security provide to the surviving spouse and children of a deceased worker?\*\* \- a. Retirement benefits \- \*b. Survivor benefits \- c. Disability benefits \- d. Medicare benefits \#\#\# G. Tax Treatment of Insurance Premiums, Proceeds, and Dividends 11\. \*\*How are individual life insurance premiums treated for tax purposes?\*\* \- a. They are tax-deductible for the policyholder \- \*b. They are not tax-deductible \- c. They are subject to capital gains tax \- d. They are taxed as income 12\. \*\*How are life insurance death benefits received by the beneficiary generally treated for tax purposes?\*\* \- a. They are subject to income tax \- \*b. They are usually income tax-free \- c. They are always taxed as capital gains \- d. They are taxed only if the policy is a modified endowment contract (MEC) 13\. \*\*What is the tax treatment of dividends received from a participating life insurance policy?\*\* \- \*a. Dividends are typically not taxable because they are considered a return of premium \- b. Dividends are always taxable as income \- c. Dividends are taxed as capital gains \- d. Dividends are taxed as ordinary income 14\. \*\*How are premiums for group life insurance provided by an employer treated for tax purposes?\*\* \- a. Always tax-free for the employee \- b. Taxable as income if the coverage exceeds \$50,000 \- \*c. Employer-paid premiums for coverage over \$50,000 are taxable to the employee \- d. Tax-deductible for the employee 15\. \*\*What is a Modified Endowment Contract (MEC)?\*\* \- a. A life insurance policy with no cash value \- b. A life insurance policy that provides tax-free withdrawals \- \*c. A life insurance policy that exceeds IRS limits on premiums, making it subject to different tax rules \- d. A policy that allows unlimited tax-free loans **\-\-- LIFE AGENT** **STATE SPECIFIC CONTENT OUTLINE** **(30 scoreable questions plus 5 pretest questions)** \#\#\# A. Commissioner of Insurance 1\. \*\*What are the general powers and duties of the Texas Commissioner of Insurance?\*\* \- \*a. Regulate the insurance industry and enforce state insurance laws \- b. Draft new federal insurance legislation \- c. Set premium rates for all insurance policies \- d. Sell insurance policies on behalf of the state 2\. \*\*What authority does the Commissioner of Insurance have regarding the examination of insurance company records?\*\* \- a. Limited to financial audits only \- \*b. Can examine the records of any insurance company operating in the state \- c. Only during investigations of fraud \- d. Must get court approval before examining records 3\. \*\*What must the Commissioner provide before holding a hearing for an investigation into an insurance violation?\*\* \- a. Formal written consent \- b. Subpoena from the court \- \*c. Notice of hearing \- d. Penalty statement 4\. \*\*Which of the following is a potential penalty that the Commissioner can impose on an insurance company or agent?\*\* \- a. Termination of employment \- b. Mandatory premium refunds \- \*c. Fines and license suspension \- d. Tax penalties 5\. \*\*What is a cease and desist order in the context of Texas insurance regulation?\*\* \- a. A request for clarification on policy terms \- b. A directive to lower premium rates \- \*c. An order to stop a specific unlawful practice \- d. A demand to submit additional documentation \#\#\# B. Insurance Definitions 6\. \*\*What is a Certificate of Authority in the insurance industry?\*\* \- a. A license for agents to sell insurance \- \*b. A document issued by the state allowing an insurer to conduct business \- c. A certificate of insurance policy ownership \- d. A contract between the insured and insurer 7\. \*\*What does \"transacting insurance\" refer to?\*\* \- \*a. The process of soliciting, negotiating, or executing insurance contracts \- b. Selling policies to out-of-state customers \- c. Renewing policies automatically \- d. Making changes to existing policies without approval 8\. \*\*What term is used for an insurance company incorporated in another state but authorized to do business in Texas?\*\* \- a. Domestic \- \*b. Foreign \- c. Alien \- d. Fraternal 9\. \*\*Which type of insurer is owned by policyholders and shares profits in the form of dividends?\*\* \- a. Stock insurer \- b. Alien insurer \- \*c. Mutual insurer \- d. Fraternal insurer \#\#\# C. Licensing Requirements 10\. \*\*What is the difference between an agent and an agency license?\*\* \- \*a. An agent license is for individuals, and an agency license is for business entities \- b. An agency license is for insurance companies only \- \*c. An agent license allows individuals to sell insurance, while an agency license allows a business to sell insurance \- d. There is no difference between the two 11\. \*\*What is a temporary insurance license?\*\* \- a. A license issued for life insurance policies only \- \*b. A license issued for a limited period to allow someone to operate as an agent while completing requirements \- c. A license for non-residents \- d. A permanent license for part-time agents 12\. \*\*Which of the following is a licensing exemption?\*\* \- \*a. Individuals who sell only travel accident insurance \- b. Agents who sell policies for multiple companies \- c. Individuals who sell policies through the internet \- d. Non-resident agents selling policies to Texas residents 13\. \*\*How often must licensed insurance agents in Texas complete continuing education?\*\* \- a. Every year \- b. Every five years \- \*c. Every two years \- d. Every ten years 14\. \*\*Which action could result in the denial, suspension, or revocation of an insurance license in Texas?\*\* \- a. Failing to sell a certain number of policies \- \*b. Conviction of a felony \- c. Changing business addresses without notification \- d. Offering discounts to customers 15\. \*\*What must an agent do if they are convicted of a felony or have administrative action taken against them?\*\* \- a. Pay a fine immediately \- \*b. Notify the Texas Department of Insurance within 30 days \- c. Cancel all insurance policies \- d. File for an appeal within 60 days \#\#\# D. Marketing Practices 16\. \*\*What is considered false advertising in the insurance industry?\*\* \- \*a. Misrepresenting the benefits, advantages, or terms of an insurance policy \- b. Offering a discount on premiums \- c. Not informing the customer about exclusions \- d. Selling policies through the internet 17\. \*\*What is rebating in insurance?\*\* \- \*a. Offering customers additional coverage at no extra cost \- \*b. Offering inducements, like money or gifts, in exchange for purchasing an insurance policy \- c. Charging higher premiums for high-risk customers \- d. Combining multiple policies into one 18\. \*\*What is considered an unfair practice in claims methods?\*\* \- \*a. Denying valid claims without a reasonable investigation \- b. Paying claims within the required timeframe \- c. Offering settlement for less than the claim\'s value \- \*d. Both a and c 19\. \*\*Which of the following is prohibited as a marketing practice in insurance?\*\* \- a. Offering reduced premiums for large groups \- \*b. Boycott, coercion, or intimidation \- c. Group term life insurance \- d. Allowing flexible premium payments 20\. \*\*What does commingling refer to in insurance practices?\*\* \- a. Collecting premiums and commissions at the same time \- \*b. Mixing personal funds with insurance premium funds \- c. Issuing policies to related parties \- d. Combining two policies into one \#\#\# E. Agent Duties/Responsibilities 21\. \*\*What is commission sharing in insurance?\*\* \- a. Splitting profits with policyholders \- \*b. Dividing commissions between agents when a sale is made by more than one agent \- c. Sharing commission with clients \- d. Using commissions to pay premium costs 22\. \*\*In what capacity do agents handle client premiums and funds?\*\* \- a. Legal capacity \- b. Advisory capacity \- \*c. Fiduciary capacity \- d. Contractual capacity \#\#\# F. Texas Life and Health Guaranty Association 23\. \*\*What is the purpose of the Texas Life and Health Guaranty Association?\*\* \- a. To issue new life insurance policies \- b. To regulate the insurance industry in Texas \- \*c. To protect policyholders in case an insurer becomes insolvent \- d. To set premium rates for life and health policies \#\#\# A. Marketing and Solicitation 1\. \*\*What is required for life insurance advertisements to comply with Texas law?\*\* \- a. They must only include the policy\'s benefits \- \*b. They must be truthful, not misleading, and provide clear illustrations of policy values \- c. They can include hypothetical policy scenarios \- d. They only need to be approved by the insurance agent 2\. \*\*What is the purpose of life insurance illustrations in Texas?\*\* \- \*a. To show how a policy may perform, including projected premiums, death benefits, and cash values \- b. To serve as part of the contract between the insured and insurer \- c. To guarantee a policy\'s performance \- d. To provide a refund of premiums \#\#\# B. Policy Provisions 3\. \*\*What is the free look provision in a life insurance policy?\*\* \- a. The ability to view the policy online \- \*b. The right to return a policy for a full refund within a specified period, typically 10-30 days \- c. A one-time consultation with an agent \- d. A guarantee of policy renewal 4\. \*\*What is the grace period provision in a life insurance policy?\*\* \- \*a. A period after the premium due date during which the policyholder can pay the premium without the policy lapsing \- b. A window of time to change the policy's beneficiaries \- c. A period where the policyholder can increase coverage without proof of insurability \- d. A penalty-free period to withdraw from the policy's cash value 5\. \*\*What allows policyholders to borrow money against the cash value of their life insurance policy?\*\* \- a. Surrender charge \- \*b. Policy loans provision \- c. Grace period \- d. Free look period 6\. \*\*Which of the following is a prohibited provision in life insurance policies?\*\* \- a. Grace periods \- \*b. Provisions that allow for forfeiture of the policy if a loan is not repaid \- c. Beneficiary designations \- d. Free look provisions \#\#\# C. Individual Life and Annuity 7\. \*\*What is the purpose of the \"free look\" provision in an individual life insurance policy?\*\* \- \*a. To allow policyholders to cancel the policy within a set period and receive a full refund \- b. To provide an option for increasing the death benefit without evidence of insurability \- c. To guarantee the payout of dividends \- d. To extend coverage without extra premium payments 8\. \*\*How long is the typical grace period in individual life insurance policies in Texas?\*\* \- a. 5 days \- b. 10 days \- \*c. 31 days \- d. 45 days \#\#\# D. Group Life 9\. \*\*Which of the following is required for group life insurance eligibility in Texas?\*\* \- \*a. A minimum number of participants or members in the group \- b. Proof of each participant\'s insurability \- c. A government-issued certificate of authority \- d. Full payment of the premium by the employer 10\. \*\*What is the conversion privilege in group life insurance?\*\* \- a. The ability to change beneficiaries at any time \- \*b. The right to convert group coverage to an individual policy without proof of insurability upon leaving the group \- c. The option to increase coverage upon renewal \- d. The ability to change premium payment modes 11\. \*\*What does dependent coverage refer to in a group life policy?\*\* \- \*a. Coverage for the employee's spouse and children \- b. A separate policy for dependents \- c. Coverage for parents of the employee \- d. Additional coverage provided at no cost 12\. \*\*What is an assignment in life insurance?\*\* \- a. A contract amendment to increase coverage \- \*b. A transfer of the policyholder\'s rights to another person or entity \- c. A review of the insurance company\'s financial health \- d. A new underwriting review for the insured \#\#\# E. Credit Life 13\. \*\*What is the purpose of credit life insurance?\*\* \- a. To cover lost wages in case of disability \- \*b. To pay off a debtor\'s loan if they die before the loan is repaid \- c. To provide death benefits to a debtor's family \- d. To insure against property loss in case of default 14\. \*\*How are premiums for credit life insurance typically paid?\*\* \- a. Monthly by the insured \- b. Quarterly by the debtor \- \*c. As a lump sum included in the loan amount \- d. Annually by the creditor \#\#\# F. Replacement 15\. \*\*What is the purpose of the Texas replacement laws in life insurance?\*\* \- a. To limit the number of policies a person can own \- \*b. To protect consumers from misleading or harmful practices when replacing existing life insurance policies \- c. To prevent agents from selling multiple policies \- d. To regulate the premium rates for replacement policies 16\. \*\*What are the duties of an agent in a replacement transaction?\*\* \- a. To inform the insured about all premium options \- \*b. To provide the insured with a notice regarding the replacement and compare the new policy to the existing one \- c. To change the beneficiaries on the new policy \- d. To pay a portion of the new premium for the insured 17\. \*\*What must the replacing insurance company do in a replacement transaction?\*\* \- a. Automatically approve the replacement \- b. Provide a refund to the policyholder \- \*c. Notify the existing insurer of the replacement and ensure that all proper disclosures have been made \- d. Charge a fee for policy changes \#\#\# G. Nonforfeiture Law 18\. \*\*What does the nonforfeiture law in Texas ensure for policyholders?\*\* \- a. That all policy loans are repaid with interest \- \*b. That policyholders do not lose the cash value of their policy if they stop paying premiums \- c. That the insured receives a full refund of all premiums paid \- d. That the insurer cannot raise premium rates during the term of the policy **\-\-- LIFE AND HEALTH-GENERAL KNOWLEDGE** **CONTENT OUTLINE** **Product Knowledge, Terms and Concepts** **(100 scoreable questions plus 10 pretest** **questions)** \#\#\# A. Traditional Whole Life Products 1\. \*\*What is the defining feature of an ordinary whole life insurance policy?\*\* \- a. It provides flexible premiums \- b. It has no cash value accumulation \- \*c. It provides lifetime coverage with fixed premiums and a guaranteed cash value \- d. It only covers the insured until age 65 2\. \*\*Which type of life insurance requires premiums to be paid for a limited time, but provides coverage for life?\*\* \- a. Universal life \- \*b. Limited-pay life insurance \- c. Annually renewable term \- d. Indexed life 3\. \*\*Which whole life policy requires a single lump sum premium payment for lifetime coverage?\*\* \- a. Variable whole life \- \*b. Single-premium life insurance \- c. Return of premium term \- d. Convertible life \#\#\# B. Interest/Market-Sensitive/Adjustable Life Products 4\. \*\*Which type of life insurance allows the policyholder to adjust premiums and death benefits as their financial situation changes?\*\* \- \*a. Universal life \- b. Ordinary whole life \- c. Term life \- d. Joint life 5\. \*\*Which type of life insurance allows policyholders to invest the cash value in sub-accounts, like mutual funds?\*\* \- \*a. Variable whole life \- b. Indexed life \- c. Universal life \- d. Term life 6\. \*\*What is the main feature of variable universal life insurance?\*\* \- a. Guaranteed fixed premiums \- \*b. Combines investment options of variable life with the flexibility of universal life \- c. Fixed death benefit and no cash value \- d. Guaranteed interest rate 7\. \*\*Which life insurance product has cash values that grow based on a minimum guaranteed interest rate and the performance of a specified stock index?\*\* \- a. Universal life \- b. Variable life \- \*c. Indexed life \- d. Joint life \#\#\# C. Term Life 8\. \*\*Which type of term life insurance policy provides a constant death benefit throughout the term?\*\* \- \*a. Level term \- b. Decreasing term \- c. Annually renewable term \- d. Universal life 9\. \*\*What type of term life insurance decreases in death benefit over time, often used for mortgage protection?\*\* \- a. Level term \- \*b. Decreasing term \- c. Return of premium term \- d. Universal life 10\. \*\*What type of term life policy returns the premiums paid if the insured survives the term period?\*\* \- a. Decreasing term \- \*b. Return of premium term \- c. Annually renewable term \- d. Indexed life 11\. \*\*What is the feature of an annually renewable term life policy?\*\* \- a. Decreasing death benefit with level premiums \- \*b. The death benefit remains level, but premiums increase each year \- c. Premiums and death benefits both increase each year \- d. It is convertible into a whole life policy after the first year 12\. \*\*Which feature allows a term life insurance policyholder to renew the policy without proof of insurability?\*\* \- \*a. Renewable \- b. Convertible \- c. Level \- d. Decreasing 13\. \*\*Which feature allows a term life insurance policy to be converted into a permanent life insurance policy without the insured providing evidence of insurability?\*\* \- a. Renewable \- \*b. Convertible \- c. Return of premium \- d. Annually renewable \#\#\# D. Annuities 14\. \*\*Which type of annuity allows the policyholder to make a single lump sum payment or multiple flexible premium payments?\*\* \- \*a. Single and flexible premium annuities \- b. Immediate annuities \- c. Indexed annuities \- d. Deferred annuities 15\. \*\*What type of annuity begins payments immediately after the lump sum premium is paid?\*\* \- \*a. Immediate annuity \- b. Deferred annuity \- c. Indexed annuity \- d. Variable annuity 16\. \*\*Which type of annuity allows for income payments to be delayed until a future date?\*\* \- a. Immediate annuity \- \*b. Deferred annuity \- c. Indexed annuity \- d. Fixed annuity 17\. \*\*What is the main feature of a fixed annuity?\*\* \- a. Income payments vary based on investment performance \- \*b. Guaranteed interest rate and stable payments \- c. Payments are linked to the stock market index \- d. Premiums are flexible 18\. \*\*Which type of annuity is tied to the performance of a specific stock index, such as the S&P 500?\*\* \- a. Variable annuity \- b. Fixed annuity \- \*c. Indexed annuity \- d. Immediate annuity 19\. \*\*What are the two phases of an annuity?\*\* \- a. Annuity and Payment phases \- b. Accumulation and Distribution phases \- \*c. Accumulation and Annuity periods \- d. Premium and Payout phases 20\. \*\*Which annuity payout option guarantees income for life, regardless of how long the annuitant lives?\*\* \- \*a. Life income option \- b. Fixed period option \- c. Joint and survivor option \- d. Life with period certain \#\#\# E. Combination Plans and Variations 21\. \*\*Which type of life insurance policy covers two people and pays the death benefit upon the death of the first insured?\*\* \- a. Survivorship life \- \*b. Joint life (first to die) \- c. Variable life \- d. Whole life 22\. \*\*Which type of life insurance policy pays the death benefit after both insured individuals have passed away?\*\* \- \*a. Survivorship life (second to die) \- b. Joint life (first to die) \- c. Term life \- d. Universal life \#\#\# A. Policy Riders 1\. \*\*What does the waiver of premium rider provide?\*\* \- a. Pays a death benefit if the insured dies accidentally \- \*b. Waives the policyholder\'s premium payments if they become disabled \- c. Provides an additional death benefit for accidental death \- d. Allows for the return of premiums if the insured survives the term 2\. \*\*Which rider allows the insured to purchase additional coverage at specific intervals without proof of insurability?\*\* \- a. Payor benefit \- b. Waiver of premium \- \*c. Guaranteed insurability \- d. Cost of Living 3\. \*\*What is the purpose of the payor benefit rider?\*\* \- a. Waives the premium payments if the insured becomes disabled \- b. Provides an additional death benefit for accidental death \- \*c. Waives the premium if the policy owner dies or becomes disabled (for juvenile policies) \- d. Pays out the face amount in monthly installments 4\. \*\*Which rider pays an additional death benefit if the insured dies as a result of an accident?\*\* \- a. Disability rider \- b. Long term care rider \- \*c. Accidental death rider \- d. Term rider 5\. \*\*What does a term rider allow in a life insurance policy?\*\* \- a. Allows the policyholder to skip premium payments \- \*b. Adds additional temporary coverage to an existing policy \- c. Converts a term policy to permanent insurance \- d. Increases the policy\'s cash value 6\. \*\*Which rider allows other family members, such as a spouse or children, to be covered under the primary insured\'s policy?\*\* \- \*a. Other insureds rider \- b. Disability rider \- c. Return of premium rider \- d. Term rider 7\. \*\*Which rider provides benefits for long-term care expenses if the insured becomes chronically ill?\*\* \- a. Waiver of premium rider \- \*b. Long term care rider \- c. Disability rider \- d. Term rider 8\. \*\*What is the purpose of the return of premium rider?\*\* \- a. Refunds a portion of the premium at policy surrender \- \*b. Returns all or a portion of the premiums paid if the insured survives the term of the policy \- c. Allows for policy loans without penalties \- d. Increases the death benefit amount 9\. \*\*What does the cost of living rider do?\*\* \- \*a. Increases the policy\'s death benefit to keep up with inflation \- b. Lowers the premium if the insured\'s income decreases \- c. Provides additional coverage for accidental death \- d. Converts the policy into an annuity \#\#\# B. Policy Provisions and Options 10\. \*\*Which provision states that the insurance policy and the application together form the entire contract?\*\* \- \*a. Entire contract clause \- b. Insuring clause \- c. Free look provision \- d. Consideration clause 11\. \*\*What does the insuring clause in a life insurance policy outline?\*\* \- \*a. The insurer\'s promise to pay the death benefit upon the insured\'s death \- b. The method of premium payment \- c. The rights of the policyholder \- d. The grace period allowed for late payments 12\. \*\*What is the \"free look\" period in a life insurance policy?\*\* \- a. The time allowed to increase coverage without proof of insurability \- \*b. The period during which the policyholder can cancel the policy and receive a full refund \- c. The period when a beneficiary can be changed \- d. The time when the insurer cannot contest a claim 13\. \*\*What is consideration in a life insurance policy?\*\* \- a. The process of reinstating a policy after it lapses \- \*b. The exchange of value between the policyholder\'s premium and the insurer\'s promise to pay the death benefit \- c. The process of changing beneficiaries \- d. The evaluation of the insured\'s health status 14\. \*\*Who has the right to change beneficiaries in a life insurance policy?\*\* \- \*a. The policyowner \- b. The insurer \- c. The insured \- d. The primary beneficiary 15\. \*\*What is the difference between revocable and irrevocable beneficiaries?\*\* \- \*a. Revocable beneficiaries can be changed by the policyowner, while irrevocable beneficiaries cannot be changed without their consent \- b. Revocable beneficiaries receive the death benefit first \- c. Irrevocable beneficiaries only receive a portion of the death benefit \- d. Revocable beneficiaries must be minors 16\. \*\*What provision allows for premium payments to be made at different intervals (e.g., monthly, quarterly, annually)?\*\* \- a. Grace period provision \- b. Automatic premium loan provision \- \*c. Modes of premium payment provision \- d. Insuring clause 17\. \*\*What is the grace period in a life insurance policy?\*\* \- a. The time during which the insurer can contest a claim \- \*b. A period (typically 30 or 31 days) after the premium due date during which the policyholder can pay the premium without the policy lapsing \- c. The time after the policyholder dies when the beneficiary can claim the death benefit \- d. The period during which dividends are paid 18\. \*\*What is the reinstatement provision in life insurance?\*\* \- a. The process of changing beneficiaries \- \*b. The option to reinstate a lapsed policy if certain conditions are met \- c. The process of refunding premiums \- d. A guarantee of policy dividends 19\. \*\*Which provision allows the policyholder to borrow money against the cash value of their life insurance policy?\*\* \- \*a. Policy loans provision \- b. Non-forfeiture option \- c. Reinstatement clause \- d. Incontestability clause 20\. \*\*What are non-forfeiture options in life insurance?\*\* \- a. Methods for paying premiums \- b. Options for increasing the death benefit \- \*c. Options to preserve the policy\'s cash value if the policyholder stops paying premiums \- d. Rules for contesting claims 21\. \*\*What does the incontestability clause ensure?\*\* \- a. The right to borrow against the policy\'s cash value \- b. The ability to change beneficiaries \- \*c. The insurer cannot contest the policy after it has been in force for two years, except for fraud \- d. The insurer must refund all premiums if the policy lapses 22\. \*\*Which provision limits the insurer\'s liability if the insured commits suicide within a specified period after the policy is issued?\*\* \- \*a. Suicide clause \- b. Incontestability clause \- c. Policy loan clause \- d. Non-forfeiture clause 23\. \*\*What happens if the insured\'s age or gender was misstated on the insurance application?\*\* \- a. The policy is automatically canceled \- b. The premium is refunded \- \*c. The death benefit or premiums are adjusted to reflect the correct age or gender \- d. The policy becomes void \#\#\# D. Policy Exclusions 24\. \*\*Which of the following is a common life insurance policy exclusion?\*\* \- \*a. War exclusion \- b. Death by natural causes \- c. Death during a vacation \- d. Death by illness 25\. \*\*What does the aviation exclusion in life insurance typically exclude?\*\* \- a. Death caused by air pollution \- \*b. Deaths occurring while the insured is a pilot or crew member on an aircraft \- c. Deaths caused by a plane crash while the insured is a passenger \- d. All deaths related to flying 26\. \*\*Which exclusion might apply if the insured dies while engaged in a dangerous occupation such as stunt work or skydiving?\*\* \- a. War exclusion \- \*b. Dangerous occupation exclusion \- c. Aviation exclusion \- d. Suicide exclusion \#\#\# A. Completing the Application 1\. \*\*Who must sign the life insurance application?\*\* \- a. Policyholder only \- b. Insurer and policyholder \- \*c. Policyholder, insured (if different), and agent \- d. Insured and beneficiary 2\. \*\*What must be done if a change is made on a life insurance application?\*\* \- \*a. The applicant and agent must initial the change \- b. A new application must be completed \- c. The insurer must approve the change \- d. The application is voided 3\. \*\*What is a possible consequence of submitting an incomplete life insurance application?\*\* \- \*a. The insurer may delay processing or deny a claim \- b. The agent can fill in missing information without notifying the insured \- c. The policy is issued immediately without a problem \- d. The policyholder will receive reduced coverage 4\. \*\*What is the difference between warranties and representations on an insurance application?\*\* \- a. Warranties are statements made under oath, while representations are not \- \*b. Warranties are guaranteed to be true, while representations are statements believed to be true to the best of the applicant\'s knowledge \- c. Representations are always more accurate than warranties \- d. Representations cannot be used in underwriting 5\. \*\*What is typically issued when the initial premium is collected at the time of the application?\*\* \- a. Provisional receipt \- b. Binding receipt \- \*c. Conditional receipt \- d. Final policy 6\. \*\*What is the process of replacing an existing life insurance policy with a new one called?\*\* \- \*a. Replacement \- b. Conversion \- c. Termination \- d. Policy loan 7\. \*\*What disclosure is required at the point of sale to protect the privacy of medical information?\*\* \- a. USA PATRIOT Act disclosure \- \*b. HIPAA disclosure \- c. Gramm-Leach-Bliley Act disclosure \- d. Risk classification disclosure 8\. \*\*Which act requires insurance companies to establish procedures to detect and prevent money laundering?\*\* \- a. HIPAA \- b. Fair Credit Reporting Act \- \*c. USA PATRIOT Act \- d. Gramm-Leach-Bliley Act 9\. \*\*Which law focuses on protecting consumers\' personal financial information held by financial institutions?\*\* \- a. USA PATRIOT Act \- \*b. Gramm-Leach-Bliley Act (GLBA) \- c. Fair Credit Reporting Act (FCRA) \- d. HIPAA \#\#\# B. Underwriting 10\. \*\*What does insurable interest mean in life insurance?\*\* \- a. The insured must be related to the policyholder \- \*b. The policyholder must suffer a financial or emotional loss if the insured dies \- c. The insured must be in good health \- d. The policyholder must be a beneficiary 11\. \*\*What type of report may the insurer require to assess the applicant\'s medical history during underwriting?\*\* \- \*a. Medical information and consumer reports \- b. Legal documents \- c. Employment history reports \- d. Credit report 12\. \*\*What does the Fair Credit Reporting Act (FCRA) regulate in the underwriting process?\*\* \- a. Collection of medical information \- b. How insurance premiums are calculated \- \*c. Use of consumer credit information and reporting \- d. Provisions for accidental death riders 13\. \*\*What is risk classification in life insurance underwriting?\*\* \- a. The process of determining insurable interest \- b. The rating of the insurance company \- \*c. The process of categorizing applicants based on their likelihood of risk \- d. Determining how much insurance an individual can purchase 14\. \*\*What is Stranger/Investor-Owned Life Insurance (STOLI/IOLI)?\*\* \- a. A type of insurance owned by family members \- b. Insurance for individuals with high-risk occupations \- \*c. A policy purchased by a third-party investor with no insurable interest in the insured \- d. A life insurance policy with a guaranteed cash value \#\#\# C. Delivering the Policy 15\. \*\*When does life insurance coverage typically begin if a conditional receipt is issued?\*\* \- a. When the policy is delivered \- b. When the insured signs the application \- \*c. When the insurer approves the application and any required medical exam is completed \- d. When the first premium is paid 16\. \*\*What must the agent explain to the client when delivering the life insurance policy?\*\* \- a. The payment plan \- \*b. The policy's provisions, riders, exclusions, and ratings \- c. The claims process only \- d. The cash surrender value \#\#\# D. Contract Law 17\. \*\*What are the elements required for a legally binding contract?\*\* \- \*a. Offer and Acceptance, Consideration, Competent parties, Legal purpose \- b. Premium payment, Signature, Insurable interest \- c. Beneficiary, Policyholder, Offer and Acceptance \- d. Application, Premium, Conditional receipt 18\. \*\*In a life insurance contract, what is consideration?\*\* \- a. A type of premium payment \- \*b. The exchange of value, such as premiums paid by the policyholder and the promise to pay a death benefit by the insurer \- c. A guaranteed provision in the policy \- d. The amount of coverage provided by the insurer 19\. \*\*Which of the following makes an insurance contract a unilateral contract?\*\* \- a. Both parties are bound by legally enforceable promises \- b. Only the policyholder must fulfill obligations \- \*c. Only the insurer makes a legally enforceable promise \- d. Both parties must provide consideration 20\. \*\*What is a conditional contract in life insurance?\*\* \- a. A contract that allows only for periodic premium payments \- b. A contract with flexible terms \- \*c. A contract that requires certain conditions to be met for the insurer to pay a claim \- d. A contract that can be canceled at any time by the insurer 21\. \*\*What is meant by a contract of adhesion in life insurance?\*\* \- a. A contract that allows negotiation between the insurer and the policyholder \- \*b. A contract prepared by one party (insurer) and accepted by the other (policyholder) without negotiation \- c. A contract that requires both parties to share risk equally \- d. A contract that includes both whole life and term life coverage 22\. \*\*What is an aleatory contract?\*\* \- a. A contract where each party must perform an equal number of obligations \- \*b. A contract where the exchange of value is unequal, such as a small premium in exchange for a large benefit \- c. A contract that can be altered at any time by either party \- d. A contract that covers multiple parties equally \#\#\# IV. Retirement and Other Insurance Concepts 1\. \*\*What is third-party ownership in a life insurance policy?\*\* \- a. The policyholder is the insured \- \*b. The policyholder is different from the insured \- c. The beneficiary is the policyholder \- d. The policyholder is the beneficiary 2\. \*\*What is a life settlement?\*\* \- a. Annuity conversion \- \*b. Selling an existing life insurance policy to a third party for more than its cash surrender value \- c. Purchasing life insurance for an estate \- d. Replacing an old policy with a new one 3\. \*\*What does the conversion privilege in group life insurance allow?\*\* \- \*a. Conversion of group life coverage into an individual policy without proof of insurability \- b. Increase in the death benefit of group policies \- c. Waiver of premiums during disability \- d. Replacement of existing policies with newer policies 4\. \*\*What is the difference between contributory and noncontributory group life insurance?\*\* \- a. Employers pay all premiums in a contributory plan \- \*b. In a contributory plan, employees share premium costs; in a noncontributory plan, the employer pays all premiums \- c. Only high-risk individuals are eligible for noncontributory plans \- d. Contributory plans have lower premiums than noncontributory plans 5\. \*\*What is a key feature of qualified retirement plans?\*\* \- \*a. They meet IRS requirements and offer tax advantages \- b. They provide guaranteed income for life \- c. Contributions are taxed before deposit \- d. They require no employer contribution 6\. \*\*What distinguishes a nonqualified retirement plan from a qualified one?\*\* \- a. They are employer-sponsored only \- b. Contributions are tax-deductible \- \*c. Nonqualified plans do not meet IRS guidelines for tax advantages \- d. They provide immediate access to funds 7\. \*\*What is the purpose of key person insurance?\*\* \- \*a. To protect a business from financial loss if a key employee dies \- b. To provide benefits for an employee's family \- c. To insure the life of the business owner only \- d. To cover employees during a business buyout 8\. \*\*What is the main purpose of a buy-sell agreement?\*\* \- a. To transfer a life insurance policy \- \*b. To ensure a business transfer if an owner dies or becomes disabled \- c. To provide death benefits to the owner\'s family \- d. To increase the value of company shares 9\. \*\*What type of benefits does Social Security provide to the surviving spouse and children of a deceased worker?\*\* \- a. Retirement benefits \- b. Disability benefits \- \*c. Survivor benefits \- d. Medicare benefits 10\. \*\*How are life insurance proceeds treated for tax purposes when paid to a beneficiary?\*\* \- a. They are subject to estate tax \- b. They are taxed as capital gains \- \*c. They are generally received income tax-free \- d. They are always taxed at the highest bracket 11\. \*\*What is a Modified Endowment Contract (MEC)?\*\* \- \*a. A life insurance policy that exceeds IRS premium limits, causing it to be subject to different tax treatment \- b. A policy that guarantees tax-free withdrawals \- c. A whole life policy with extended coverage options \- d. A policy with guaranteed death benefits only \#\#\# V. Types of Policies 12\. \*\*What is the main purpose of an individual disability income policy?\*\* \- a. To pay for medical expenses \- \*b. To replace a portion of income if the insured becomes disabled \- c. To pay a death benefit to beneficiaries \- d. To cover funeral expenses 13\. \*\*What does a business overhead expense (BOE) policy cover?\*\* \- a. Employees' salaries \- \*b. Ongoing business expenses if the owner becomes disabled \- c. The cost of a key employee\'s salary \- d. Retirement benefits for the business owner 14\. \*\*What is a business disability buyout policy?\*\* \- \*a. A policy that provides funds for buying out a disabled partner's share of the business \- b. A policy that covers ongoing expenses during a disability \- c. A policy that provides disability benefits for employees \- d. A policy that pays out after the owner's death 15\. \*\*What is the key feature of a group disability income policy?\*\* \- \*a. Provides income replacement for employees in case of disability \- b. Provides a death benefit to the employer \- c. Provides immediate coverage after injury \- d. Provides coverage for long-term care 16\. \*\*What is the purpose of key employee insurance?\*\* \- a. To provide retirement benefits \- \*b. To protect the company from financial loss if a key employee dies or becomes disabled \- c. To cover business overhead expenses \- d. To provide death benefits for family members 17\. \*\*What does an accidental death and dismemberment (AD&D) policy cover?\*\* \- \*a. Pays benefits for accidental death or loss of limbs/sight/hearing due to an accident \- b. Covers medical expenses after an accident \- c. Provides long-term care coverage \- d. Covers funeral costs 18\. \*\*Which type of health insurance provides coverage for routine medical, hospital, and surgical expenses?\*\* \- \*a. Basic hospital, medical, and surgical policies \- b. Health Maintenance Organization (HMO) plans \- c. Major medical policies \- d. High Deductible Health Plans (HDHPs) 19\. \*\*What is the primary feature of a Health Maintenance Organization (HMO) plan?\*\* \- a. Coverage for out-of-network providers \- \*b. Managed care with a focus on preventive services within a network \- c. High deductibles and low premiums \- d. No restrictions on choosing providers 20\. \*\*Which type of health insurance plan allows members to choose between HMO and out-of-network services at the time of service?\*\* \- a. Flexible Spending Account (FSA) \- \*b. Point of Service (POS) plan \- c. Health Reimbursement Account (HRA) \- d. Preferred Provider Organization (PPO) 21\. \*\*What is a Health Savings Account (HSA)?\*\* \- \*a. A tax-advantaged account paired with a high-deductible health plan for paying medical expenses \- b. A fund provided by employers for healthcare expenses \- c. A low-premium health insurance plan \- d. A flexible spending account for medical costs 22\. \*\*What does COBRA allow in terms of group health insurance?\*\* \- a. Increase in benefits after a claim is filed \- \*b. Continuation of group health coverage after an employee leaves the job \- c. Reduced premiums for high-risk individuals \- d. Conversion of group coverage to individual coverage 23\. \*\*What does long-term care (LTC) insurance provide coverage for?\*\* \- \*a. Care for individuals who cannot perform daily activities due to chronic illness or disability \- b. Short-term disability income \- c. Medical expenses related to surgeries \- d. Outpatient medical care only 24\. \*\*Which type of policy covers specific types of diseases, like cancer or critical illness?\*\* \- a. Major medical policies \- \*b. Critical illness or specified disease policies \- c. Hospital indemnity policies \- d. Group disability policies \#\#\# VI. Policy Provisions, Clauses, and Riders \#\#\#\# A. Mandatory and Optional Provisions 1\. \*\*What is included in the entire contract provision of a life insurance policy?\*\* \- \*a. The insurance policy and the application \- b. The insurance policy only \- c. The insurance policy, application, and rider options \- d. The application only 2\. \*\*What does the time limit on certain defenses (incontestability) provision state?\*\* \- \*a. The insured can change the policy terms within two years \- \*b. After two years, the insurer cannot contest claims based on misstatements, except for fraud \- c. The insurer can cancel the policy anytime \- d. The insured must submit a claim within two years of a policyholder\'s death 3\. \*\*What is the grace period in an insurance policy?\*\* \- \*a. The period in which an insurer can deny claims \- \*b. The period after a premium due date in which a policyholder can make payment without the policy lapsing \- c. The time when beneficiaries can make claims \- d. A period during which the policyholder can change coverage 4\. \*\*What is the reinstatement provision in life insurance?\*\* \- \*a. The option to increase policy coverage \- \*b. The ability to reinstate a lapsed policy if certain conditions are met \- c. An option to renew the policy without underwriting \- d. The right to transfer policy ownership 5\. \*\*What must a policyholder do to provide notice of claim in a health insurance policy?\*\* \- \*a. Pay the premium immediately \- \*b. Notify the insurer within a specific time after the loss, typically 20 days \- c. File legal actions within 60 days \- d. Contact the state insurance department 6\. \*\*What is required under the proof of loss provision?\*\* \- \*a. A verbal explanation of the loss \- \*b. Submission of written proof of loss within a specified time, usually 90 days \- c. A court affidavit of the loss \- d. Payment of additional premiums 7\. \*\*When are claims typically required to be paid under the time of payment of claims provision?\*\* \- a. Within 60 days of the claim submission \- \*b. Immediately upon proof of loss \- c. Within one year of policy issuance \- d. At the discretion of the insurer 8\. \*\*Who receives the benefits according to the payment of claims provision in health insurance?\*\* \- \*a. The employer \- \*b. The policyholder\'s estate \- \*c. The insured or beneficiary \- d. The insured\'s dependents 9\. \*\*What does the physical examination and autopsy provision allow the insurer to do?\*\* \- a. Deny claims after policyholder\'s death \- \*b. Require a physical examination or autopsy (where permitted by law) to verify claims \- c. Delay payment of benefits for up to a year \- d. Modify policy benefits after death 10\. \*\*When can legal actions be taken according to the legal actions provision?\*\* \- a. Immediately after submitting a claim \- \*b. No earlier than 60 days after proof of loss and within 2 years \- c. At any time after the policy issuance \- d. Within 30 days of policyholder's death 11\. \*\*What does the misstatement of age or gender provision do?\*\* \- \*a. Adjusts the death benefit or premium to reflect the correct age or gender of the insured \- b. Terminates the policy \- c. Reduces the death benefit \- d. Denies claims 12\. \*\*What is the purpose of the change of occupation provision in health insurance?\*\* \- \*a. Allows a change in occupation without notifying the insurer \- \*b. Adjusts benefits or premiums if the insured changes to a more or less hazardous occupation \- c. Cancels the policy if the insured changes jobs \- d. Guarantees premium refunds after job changes 13\. \*\*What does the illegal occupation provision exclude?\*\* \- a. Coverage for policyholders who change careers \- \*b. Coverage for losses resulting from the insured\'s involvement in illegal activities \- c. Losses due to occupational hazards \- d. Claims related to illegal investments \#\#\#\# B. Other Provisions and Clauses 14\. \*\*What is the insuring clause?\*\* \- \*a. The insurer\'s promise to pay benefits in the event of a loss \- b. A clause defining exclusions \- c. The section detailing policy premiums \- d. A clause allowing policy modification 15\. \*\*What does the free look provision allow?\*\* \- \*a. Allows the policyholder to return the policy for a full refund within a specified period, usually 10 to 30 days \- b. Allows the insurer to deny claims within the first 30 days \- c. Guarantees the policyholder premium reduction within the first year \- d. Extends the grace period 16\. \*\*What is consideration in a life insurance contract?\*\* \- a. An agreement between two parties to share risk \- \*b. The exchange of value (premium payment and the insurer\'s promise to pay claims) \- c. A negotiation clause between the insurer and insured \- d. The amount paid to beneficiaries 17\. \*\*What is the purpose of a probationary period in a health insurance policy?\*\* \- a. To limit policy coverage to specific claims \- \*b. To limit claims within a certain period after the policy is issued, typically to prevent preexisting condition claims \- c. To restrict coverage to high-risk individuals \- d. To waive premium payments 18\. \*\*What is the elimination period in disability income policies?\*\* \- a. The time before policy renewal \- \*b. The waiting period before benefits begin after a disability occurs \- c. The time when no premiums are due \- d. The first 30 days of premium payments 19\. \*\*What does the waiver of premium provision do?\*\* \- a. Lowers the premium for the first year \- \*b. Waives premium payments if the insured becomes totally disabled \- c. Eliminates premium payments after the policyholder reaches a certain age \- d. Provides refunds for unused coverage \#\#\#\# C. Riders 20\. \*\*What is the purpose of the impairment/exclusion rider?\*\* \- a. To increase policy coverage \- b. To add additional insured individuals \- \*c. To exclude coverage for specific conditions or risks \- d. To cover pre-existing conditions 21\. \*\*What does the guaranteed insurability rider allow?\*\* \- \*a. Allows the insured to purchase additional insurance at specified intervals without proving insurability \- b. Allows for automatic policy renewal \- c. Guarantees payout in case of death \- d. Guarantees lower premiums 22\. \*\*What is the future increase option rider?\*\* \- \*a. Allows for future increases in coverage without proving insurability \- b. Guarantees annual dividends \- c. Provides higher benefits during inflation \- d. Offers coverage for dependents \#\#\#\# D. Rights of Renewability 23\. \*\*What is a noncancelable insurance policy?\*\* \- \*a. The insurer cannot cancel or raise premiums as long as premiums are paid on time \- b. The insurer can cancel coverage at any time \- c. The policyholder can cancel the policy at any time \- d. The insurer can only raise premiums after 10 years 24\. \*\*What is a cancelable policy?\*\* \- \*a. A policy that the insurer can cancel at any time, with proper notice \- b. A policy that can never be canceled by the insurer \- c. A policy with a guaranteed premium reduction \- d. A policy that provides full refund of premiums 25\. \*\*What does a guaranteed renewable policy ensure?\*\* \- \*a. The insurer must renew the policy as long as premiums are paid, but can raise premiums on a class basis \- b. The insurer cannot change premiums \- c. The policy is nonrenewable after 10 years \- d. The insurer can deny claims for any reason \#\#\# VII. Social Insurance 1\. \*\*What is Medicare Part A designed to cover?\*\* \- a. Prescription drugs \- b. Doctor visits and outpatient services \- \*c. Hospital stays, skilled nursing care, and hospice services \- d. Preventive services and immunizations 2\. \*\*What does Medicare Part B cover?\*\* \- a. Hospital stays and inpatient care \- \*b. Physician services, outpatient care, and preventive services \- c. Prescription drugs \- d. Long-term nursing home care 3\. \*\*Which part of Medicare provides prescription drug coverage?\*\* \- a. Part A \- b. Part B \- c. Part C \- \*d. Part D 4\. \*\*What is the primary eligibility requirement for Medicaid?\*\* \- \*a. Financial need based on low income and asset levels \- b. Age 65 or older \- c. Disability status only \- d. Enrollment in Medicare Part A and B 5\. \*\*What does Social Security disability insurance (SSDI) provide?\*\* \- a. Health insurance for disabled workers \- \*b. Income benefits for workers who become disabled and meet Social Security\'s requirements \- c. Prescription drug coverage for disabled workers \- d. Death benefits to surviving family members \#\#\# VIII. Other Insurance Concepts 6\. \*\*What is total disability as defined in most disability income policies?\*\* \- a. A partial disability preventing the insured from performing some work tasks \- \*b. A condition that prevents the insured from performing the duties of their occupation \- c. A condition requiring hospitalization for 30 days or more \- d. A temporary condition caused by illness or injury 7\. \*\*What does the owner's rights provision allow the policyholder to do?\*\* \- \*a. Make changes to the policy, such as changing beneficiaries, borrowing against the policy, or assigning ownership \- b. Require the insurer to lower premiums \- c. Transfer the policy to a new insurer at any time \- d. Demand an increase in death benefits 8\. \*\*Who is the primary beneficiary in a life insurance policy?\*\* \- \*a. The first person in line to receive the death benefit upon the insured's death \- b. The individual who receives benefits if the primary beneficiary cannot \- c. The insurance agent \- d. The insurer's representative 9\. \*\*What does the contingent beneficiary receive in a life insurance policy?\*\* \- a. The death benefit in all cases \- \*b. The death benefit if the primary beneficiary predeceases the insured or is otherwise unable to claim the benefit \- c. Only a portion of the death benefit \- d. Benefits after a legal dispute 10\. \*\*Which of the following is a mode of premium payment in insurance?\*\* \- a. Coinsurance \- \*b. Monthly, quarterly, semi-annually, or annually \- c. Deductible \- d. Copayment 11\. \*\*What is the purpose of coordination of benefits (COB)?\*\* \- a. To raise premiums for insured individuals \- \*b. To prevent duplication of benefits when a person is covered by more than one insurance plan \- c. To pay out a double benefit if a claim is filed \- d. To lower out-of-pocket costs 12\. \*\*What is the key difference between occupational and non-occupational insurance policies?\*\* \- a. Occupational policies only cover injuries or illnesses at home \- \*b. Occupational policies cover work-related injuries, while non-occupational policies cover injuries outside of work \- c. Non-occupational policies cover only family members \- d. Occupational policies provide benefits for dependents 13\. \*\*How are premiums for disability income insurance treated for tax purposes if paid by an individual?\*\* \- \*a. Premiums are not tax-deductible, and benefits are tax-free \- b. Premiums are tax-deductible, and benefits are taxable \- c. Premiums are partially deductible, and benefits are partially taxable \- d. Premiums are always tax-deductible 14\. \*\*What is managed care in health insurance?\*\* \- \*a. A system that allows policyholders to see any doctor without restrictions \- \*b. A healthcare system that controls costs by requiring policyholders to use a network of providers and receive pre-approval for services \- c. A plan that increases coverage limits for catastrophic illnesses \- d. A coverage plan designed for high-risk patients only 15\. \*\*What is the purpose of workers\' compensation insurance?\*\* \- \*a. To provide life insurance benefits to employees \- b. To protect the employer from legal action \- \*c. To provide medical and income benefits to employees injured or disabled at work \- d. To provide retirement benefits 16\. \*\*What is subrogation in insurance?\*\* \- a. The process of increasing the death benefit after a claim \- \*b. The insurer\'s right to recover a paid loss from a third party responsible for the loss \- c. A clause that increases premiums \- d. A process for lowering premiums after an accident \#\#\# IX. Field Underwriting Procedures 1\. \*\*What is the purpose of field underwriting in the insurance process?\*\* \- a. To market policies to potential clients \- \*b. To gather information and assess an applicant\'s insurability before submitting the application to the insurer \- c. To issue insurance policies \- d. To cancel policies 2\. \*\*What information is required when completing the application for life insurance?\*\* \- a. Beneficiary's personal financial history \- \*b. Applicant's medical history, occupation, and financial status \- c. Only the applicant's financial history \- d. The agent's employment history 3\. \*\*Which law governs the use of consumer reports in the insurance application process?\*\* \- \*a. Fair Credit Reporting Act (FCRA) \- b. Gramm-Leach-Bliley Act (GLBA) \- c. USA PATRIOT Act \- d. HIPAA 4\. \*\*What is the purpose of the MIB (Medical Information Bureau) report in the underwriting process?\*\* \- a. To verify income levels \- b. To disclose criminal records \- \*c. To provide medical history information for underwriting purposes \- d. To assess financial credit history 5\. \*\*What is the significance of collecting the initial premium at the time of the insurance application?\*\* \- a. It guarantees policy approval \- b. It lowers the policyholder's premium \- \*c. It ensures that coverage may begin immediately if a conditional receipt is issued \- d. It makes the policy non-cancelable 6\. \*\*What is typically issued when the initial premium is collected with the application?\*\* \- \*a. A conditional receipt \- b. A binding receipt \- c. The final policy \- d. A medical examination certificate 7\. \*\*What happens if an insurance application is submitted without the initial premium?\*\* \- a. Coverage begins immediately \- \*b. Coverage will not begin until the premium is paid \- c. The policy is denied \- d. The agent pays the first premium 8\. \*\*What is the role of policy delivery in the insurance process?\*\* \- a. To automatically renew the policy \- \*b. To explain the policy's provisions, exclusions, riders, and ratings to the client \- c. To provide a refund of premiums \- d. To issue a new policy 9\. \*\*Which of the following should the agent explain during policy delivery?\*\* \- \*a. Policy provisions, exclusions, riders, and premium rates \- b. Claims history of the insurer \- c. The agent's commission \- d. The insurance company\'s profit margins 10\. \*\*What is a key consideration in replacing an existing insurance policy?\*\* \- \*a. The agent must provide a comparison of the existing and new policy to the applicant and notify the current insurer \- b. The new policy automatically cancels the old one \- c. The agent must pay the remaining premiums of the old policy \- d. The new policy must provide a higher death benefit \#\#\# Contract Law in Insurance 11\. \*\*Which of the following are elements required for a legally enforceable insurance contract?\*\* \- a. Application, Offer, Acceptance, Consideration \- b. Legal Purpose, Premium Payment, Offer \- \*c. Offer and Acceptance, Consideration, Competent Parties, Legal Purpose \- d. Offer and Acceptance, Insurable Interest, Grace Period 12\. \*\*What does insurable interest refer to in an insurance contract?\*\* \- a. The insured must be related to the policyholder \- b. The insured must prove their financial worth \- \*c. The policyholder must have a financial or emotional interest in the insured's life \- d. The policyholder must be a beneficiary 13\. \*\*What is the difference between warranties and representations in insurance contracts?\*\* \- \*a. Warranties are guaranteed to be true, while representations are statements believed to be true to the best of the applicant's knowledge \- b. Representations are always true, while warranties are not \- c. Warranties cannot be used to contest claims \- d. Representations guarantee contract renewal 14\. \*\*What is a conditional contract in insurance?\*\* \- a. A contract where the policyholder has no obligations \- \*b. A contract where certain conditions must be met for the insurer to pay claims \- c. A contract where the insurer can cancel at any time \- d. A contract that does not require a premium 15\. \*\*What does it mean that insurance contracts are unilateral?\*\* \- a. Both parties must perform equally \- \*b. Only the insurer makes a legally enforceable promise \- c. Both the policyholder and insurer make enforceable promises \- d. The insurer must make multiple promises 16\. \*\*What does it mean for an insurance contract to be a contract of adhesion?\*\* \- \*a. The policyholder must accept the contract as written, without negotiation \- b. Both parties must agree on the terms \- c. The contract can be changed by the policyholder \- d. The policyholder can adjust premiums after signing 17\. \*\*What is an aleatory contract in insurance?\*\* \- \*a. A contract where the exchange of value is unequal, such as a small premium in exchange for a large benefit \- b. A contract that provides equal value to both parties \- c. A contract that pays out dividends \- d. A contract that changes automatically with market fluctuations \#\#\# VII. Social Insurance 1\. \*\*What is Medicare Part A primarily designed to cover?\*\* \- \*a. Hospital stays, skilled nursing care, and hospice care \- b. Prescription drugs \- c. Doctor visits and outpatient care \- d. Preventive services only 2\. \*\*What does Medicare Part B cover?\*\* \- a. Hospital stays and inpatient care \- \*b. Physician services, outpatient care, and preventive services \- c. Prescription drugs \- d. Long-term care 3\. \*\*What does Medicare Part D provide?\*\* \- \*a. Prescription drug coverage \- b. Hospital coverage \- c. Outpatient medical care \- d. Skilled nursing care 4\. \*\*Which program provides health insurance coverage to low-income individuals and families?\*\* \- a. Medicare \- \*b. Medicaid \- c. Social Security \- d. Workers\' compensation 5\. \*\*What is the primary function of Social Security disability benefits?\*\* \- \*a. To provide income to individuals who are unable to work due to a qualifying disability \- b. To cover long-term medical care \- c. To provide short-term medical coverage \- d. To fund retirement plans \#\#\# VIII. Other Insurance Concepts 6\. \*\*What is total disability as defined by most disability income policies?\*\* \- a. The inability to perform some tasks at work \- \*b. The inability to perform the duties of one's own occupation \- c. A temporary condition that requires hospitalization \- d. A partial disability caused by illness 7\. \*\*What are the owner\'s rights in a life insurance policy?\*\* \- a. To receive benefits directly \- \*b. To make changes to the policy, such as changing the beneficiary, taking policy loans, or surrendering the policy \- c. To transfer the policy to the insurance company \- d. To demand premium reductions 8\. \*\*What is the role of a primary beneficiary in a life insurance policy?\*\* \- \*a. The person designated to receive the death benefit upon the insured's death \- b. The person who receives benefits only if the contingent beneficiary predeceases the insured \- c. The policyholder who owns the policy \- d. The insurance company representative 9\. \*\*What is a contingent beneficiary?\*\* \- \*a. The person who receives the death benefit if the primary beneficiary predeceases the insured \- b. The policyholder's spouse \- c. The person who receives benefits first \- d. The insurance agent 10\. \*\*What are the modes of premium payment in life insurance?\*\* \- a. Deductibles \- \*b. Monthly, quarterly, semi-annually, or annually \- c. Lump-sum payments only \- d. Copayments 11\. \*\*What is the purpose of coordination of benefits in insurance policies?\*\* \- a. To increase the benefits for the insured \- \*b. To prevent the duplication of benefits when a person is covered by more than one insurance policy \- c. To extend policy benefits to family members \- d. To lower premiums 12\. \*\*What is the difference between occupational and non-occupational policies?\*\* \- \*a. Occupational policies cover work-related injuries, while non-occupational policies cover injuries outside of work \- b. Non-occupational policies cover only family members \- c. Occupational policies cover only job-related tasks \- d. Occupational policies cover injuries at home 13\. \*\*How are disability income insurance premiums treated for tax purposes if paid by the individual?\*\* \- \*a. Premiums are not tax-deductible, and benefits are tax-free \- b. Premiums are tax-deductible, and benefits are taxable \- c. Premiums and benefits are tax-free \- d. Premiums are always tax-deductible 14\. \*\*What is managed care in health insurance?\*\* \- a. A system where the insured can choose any doctor without restrictions \- \*b. A healthcare system that controls costs by requiring the insured to use a network of providers and obtain pre-approval for services \- c. A plan that provides catastrophic illness coverage \- d. A policy that covers high-risk individuals only 15\. \*\*What is the main purpose of workers\' compensation insurance?\*\* \- \*a. To provide medical and income benefits to employees who are injured or disabled at work \- b. To provide life insurance for employees \- c. To offer retirement benefits for workers \- d. To provide health insurance for all employees 16\. \*\*What does subrogation in insurance mean?\*\* \- \*a. The insurer\'s right to recover a paid loss from a third party responsible for the loss \- b. The insured's right to file multiple claims for one loss \- c. The insurer's obligation to provide refunds \- d. A clause that increases coverage after a claim \#\#\# IX. Field Underwriting Procedures 1\. \*\*What is the primary purpose of field underwriting?\*\* \- a. To issue policies \- \*b. To gather information and assess an applicant\'s risk before submitting the application to the insurer \- c. To collect premium payments \- d. To market policies to potential clients 2\. \*\*When completing an insurance application, what is required?\*\* \- a. The insured's beneficiary history \- \*b. Applicant's medical history, occupation, and financial information \- c. Only the applicant's credit score \- d. A copy of the applicant's will 3\. \*\*Which law regulates the use of consumer reports during the insurance application process?\*\* \- a. USA PATRIOT Act \- b. Gramm-Leach-Bliley Act \- \*c. Fair Credit Reporting Act (FCRA) \- d. HIPAA 4\. \*\*What is the purpose of the Medical Information Bureau (MIB) report in the underwriting process?\*\* \- a. To provide the applicant's credit score \- \*b. To provide medical history information for underwriting purposes \- c. To report the applicant's criminal record \- d. To estimate the applicant's income 5\. \*\*What is a conditional receipt in life insurance?\*\* \- \*a. A receipt issued when the initial premium is collected, which provides conditional coverage while the application is being underwritten \- b. A document that guarantees the policy will be issued \- c. A receipt that is issued after the policy is delivered \- d. A certificate of insurability 6\. \*\*When does coverage typically begin if a conditional receipt is issued?\*\* \- a. As soon as the application is signed \- \*b. When the insurer approves the application and any required medical exam is completed \- c. When the policyholder pays the first premium \- d. After the insured completes a year of service with the employer 7\. \*\*What happens if an application is submitted without an initial premium?\*\* \- a. Coverage begins immediately \- b. The application is automatically denied \- \*c. Coverage does not begin until the premium is paid \- d. The agent must pay the premium 8\. \*\*What is the role of the agent during the policy delivery process?\*\* \- a. To collect additional premiums \- b. To modify the terms of the policy \- \*c. To explain the policy's provisions, exclusions, riders, and premium details to the client \- d. To cancel existing policies 9\. \*\*What is required when replacing an existing life insurance policy?\*\* \- \*a. The agent must provide a written comparison of the existing and new policy, and notify the current insurer \- b. The new policy must have a higher premium \- c. The agent must refund the previous premiums \- d. The insured can cancel the old policy at any time \#\#\# Contract Law in Insurance 10\. \*\*Which of the following is an element of a legally binding insurance contract?\*\* \- a. Application, Offer, Acceptance, and Premium \- b. Policyholder, Insurable Interest, and Consideration \- \*c. Offer and Acceptance, Consideration, Competent Parties, Legal Purpose \- d. Offer and Acceptance, Insurability, and Payment 11\. \*\*What does insurable interest mean in life insurance?\*\* \- a. The insured must have a physical exam \- \*b. The policyholder must suffer a financial or emotional loss if the insured dies \- c. The beneficiary must be related to the insured \- d. The policyholder must be a beneficiary 12\. \*\*What is the difference between a warranty and a representation in an insurance contract?\*\* \- \*a. A warranty is guaranteed to be true, while a representation is a statement believed to be true to the best of the applicant's knowledge \- b. Warranties are statements about policy premiums \- c. Representations cannot be used to contest claims \- d. Warranties are always more important than representations 13\. \*\*What is a conditional contract in life insurance?\*\* \- a. A contract where the policyholder is not required to pay premiums \- \*b. A contract where the insurer will only pay claims if certain conditions are met \- c. A contract where the policyholder can cancel at any time \- d. A contract that guarantees premium refunds 14\. \*\*What makes an insurance contract unilateral?\*\* \- a. The policyholder and insurer must fulfill equal obligations \- b. The policyholder makes legally binding promises \- \*c. Only the insurer makes a legally enforceable promise to pay claims \- d. Both the insurer and the policyholder are equally obligated to perform duties 15\. \*\*What does it mean that an insurance contract is a contract of adhesion?\*\* \- \*a. The policyholder must accept the terms as written by the insurer, without negotiation \- b. Both parties must agree on policy terms equally \- c. The policyholder can negotiate the terms of the policy \- d. The contract must be reviewed annually 16\. \*\*What is an aleatory contract in life insurance?\*\* \- \*a. A contract where the exchange of value is unequal, such as a small premium for a large death benefit \- b. A contract that provides equal value to both parties \- c. A contract that requires a beneficiary to pay premiums \- d. A contract that changes based on market conditions **\-\--LIFE and HEALTH AGENT** **STATE SPECIFIC CONTENT OUTLINE** **(30 scoreable questions plus 5 pretest questions)** \#\#\# I. Texas Statutes and Rules Common to Life and Health Insurance \#\#\#\# A. Commissioner of Insurance 1\. \*\*What are the general powers and duties of the Texas Commissioner of Insurance?\*\* \- a. Establishing premium rates for all insurers \- \*b. Regulating the insurance industry and enforcing state insurance laws \- c. Representing insurers in court \- d. Issuing policies on behalf of the state 2\. \*\*What authority does the Commissioner of Insurance have regarding the examination of insurance company records?\*\* \- a. Limited to annual audits only \- \*b. Can examine the records of any insurance company operating in Texas \- c. Only allowed to examine records with court approval \- d. Restricted to financial audits 3\. \*\*What must the Commissioner provide before holding a hearing on an insurance violation?\*\* \- a. Formal consent from the insurer \- b. A penalty statement \- \*c. Notice of hearing \- d. A request for clarification on policy terms 4\. \*\*What penalty can the Commissioner impose on an insurance company or agent for violations?\*\* \- a. Mandatory refund of premiums \- \*b. Fines and license suspension \- c. Revocation of all company policies \- d. Tax penalties 5\. \*\*What is a cease and desist order in the context of Texas insurance regulation?\*\* \- a. A request to refund premiums \- b. A demand to lower rates \- \*c. An order to stop a specific unlawful insurance practice \- d. A notice to change policy terms \#\#\#\# B. Insurance Definitions 6\. \*\*What is a certificate of authority in the insurance industry?\*\* \- a. A license for agents to sell insurance \- \*b. A document issued by the state allowing an insurer to conduct business \- c. Proof of insurance policy ownership \- d. A certificate verifying policyholder identity 7\. \*\*What does \"transacting insurance\" refer to in Texas insurance law?\*\* \- a. Only the sale of insurance policies \- \*b. The process of soliciting, negotiating, and executing insurance contracts \- c. Changing beneficiary designations \- d. Automatic renewal of policies 8\. \*\*What is a foreign insurance company under Texas law?\*\* \- a. An insurer that operates only in Texas \- \*b. An insurance company incorporated in another state but authorized to do business in Texas \- c. An insurance company from another country \- d. A company with no state license 9\. \*\*What type of insurer is owned by policyholders and distributes profits as dividends?\*\* \- a. Stock insurer \- \*b. Mutual insurer \- c. Foreign insurer \- d. Alien insurer \#\#\#\# C. Licensing Requirements 10\. \*\*What is a temporary insurance license?\*\* \- a. A license for foreign insurers \- \*b. A license issued for a limited time to allow someone to act as an agent while completing requirements \- c. A permanent license for part-time agents \- d. A license for non-resident agents 11\. \*\*Which of the following is an example of an exemption from insurance licensing requirements?\*\* \- \*a. Individuals who sell travel accident insurance only \- b. Full-time agents who sell multiple types of policies \- c. Non-resident agents with state certification \- d. Agents who sell policies through the internet 12\. \*\*How often must licensed insurance agents in Texas complete continuing education?\*\* \- a. Every year \- b. Every five years \- \*c. Every two years \- d. Every ten years 13\. \*\*Which of the following could result in license denial, suspension, or revocation?\*\* \- a. Failure to sell a minimum number of policies \- \*b. Conviction of a felony \- c. Non-payment of taxes \- d. Changing business addresses without notice 14\. \*\*What must an agent notify the Texas Department of Insurance about within 30 days?\*\* \- a. Change of marital status \- b. Purchase of new policies \- \*c. A felony conviction or any administrative action taken against their license \- d. Change of employer \#\#\#\# D. Marketing Practices 15\. \*\*What is considered false advertising in the insurance industry?\*\* \- \*a. Misrepresenting the benefits or terms of an insurance policy \- b. Offering a discount on premiums \- c. Failing to include exclusions in the advertising \- d. Selling policies through an unauthorized broker 16\. \*\*What is rebating in the context of insurance?\*\* \- \*a. Offering money or valuable incentives to induce a customer to purchase a policy \- b. Returning premium payments to the insurer \- c. Paying claims before an investigation \- d. Offering free insurance consultations 17\. \*\*What is considered an unfair practice in claims methods and practices?\*\* \- \*a. Denying a claim without conducting a reasonable investigation \- b. Offering a settlement after proof of loss \- c. Refusing to renew a policy \- d. Providing a lower premium to high-risk individuals 18\. \*\*What does commingling refer to in insurance practices?\*\* \- \*a. Mixing personal funds with insurance premium funds \- b. Combining two policies into one \- c. Reinvesting dividends into a new policy \- d. Using one policy for multiple insureds 19\. \*\*Which of the following is a prohibited marketing practice?\*\* \- \*a. Boycott, coercion, or intimidation \- b. Offering discounts to group policyholders \- c. Selling travel insurance without a license \- d. Allowing monthly premium payments \#\#\#\# E. Agent Duties/Responsibilities 20\. \*\*What is commission sharing in the insurance industry?\*\* \- a. Splitting profits with policyholders \- \*b. Dividing commissions between agents when a sale is made \- c. Sharing commission with clients \- d. Using commissions to pay premiums 21\. \*\*What does it mean for an insurance agent to act in a fiduciary capacity?\*\* \- \*a. The agent must act in the best financial interest of their client and handle premium funds responsibly \- b. The agent must refund premiums at the client's request \- c. The agent must accept only cash payments \- d. The agent must disclose all commissions \#\#\#\# F. Texas Life and Health Guaranty Association 22\. \*\*What is the purpose of the Texas Life and Health Guaranty Association?\*\* \- a. To regulate premiums for life insurance policies \- \*b. To protect policyholders if an insurance company becomes insolvent \- c. To provide insurance agents with legal representation \- d. To ensure all insurance companies are properly licensed