Texas Life & Health Insurance License, Practice Exams

A Texas Medicare supplement plan may not impose a preexisting-condition exclusion on a loss incurred more than:

1. Three months after the effective date of coverage
2. Six months after the effective date of coverage ✓
3. Twelve months after the effective date of coverage
4. Twenty-four months after the effective date of coverage

Why: Sec. 1652.058 bars excluding coverage for a loss incurred more than six months after the effective date of coverage for a preexisting condition, and bars defining such a condition more restrictively than a 6-month look-back.

A Texas resident producer wants to sell in another state. They generally obtain a:

1. Nonresident license in that state, often via reciprocity ✓
2. Second resident license in Texas
3. Temporary license with no requirements under the policy's terms
4. Federal insurance license

Why: A nonresident license (commonly issued reciprocally to those holding a resident license) is required to transact in another state.

Nonoccupational disability coverage pays benefits for disabilities that occur:

1. Off the job (work-related injuries are covered by workers' compensation) ✓
2. Only while the insured is actively performing job duties at work
3. At any time, on or off the job, with no other coverage needed
4. Solely from illnesses, never from any type of accidental injury

Why: Nonoccupational coverage excludes on-the-job injuries (covered by workers' compensation); occupational/24-hour coverage applies both on and off the job.

An employee whose group life coverage ends because employment terminates must apply for an individual conversion policy and pay the first premium no later than when?

1. The 15th day after termination unless an exception clearly applies
2. The 31st day after the date employment or membership terminates ✓
3. The 60th day after termination
4. The end of the calendar year

Why: Sec. 1131.110(b) requires the individual to apply and pay the first premium not later than the 31st day after employment or membership terminates; the policy issues without evidence of insurability.

Insurers transacting business in Texas are generally required to pay the state a:

1. Premium tax on premiums collected ✓
2. Federal excise license fee
3. Per-policy sales tax collected from insureds
4. Flat annual fee unrelated to premium

Why: Texas levies a premium tax on insurers based on premiums written in the state.

To keep a producer license active, most states require the producer to:

1. Complete continuing education and renew the license periodically ✓
2. Sell a minimum dollar amount of policies each year in most situations
3. Re-take the original licensing exam every year
4. Maintain membership in a fraternal society

Why: License renewal generally requires periodic continuing education; specific hours and cycles are set by each state.

Nonforfeiture provisions in an annuity guarantee the owner:

1. A minimum surrender value if the contract is cashed in ✓
2. The full original premium back with no charges at any time
3. A doubling of the account value after ten years
4. Free withdrawals of the entire balance in the first year

Why: Annuity nonforfeiture laws guarantee a minimum cash surrender value, protecting the owner's accumulated funds.

Texas requires a specified minimum grace period in an individual accident and health policy. For a policy with premiums payable monthly, the grace period may not be less than:

1. 7 days
2. 10 days ✓
3. 31 days, the same as for any other premium frequency
4. 15 days

Why: Sec. 1201.209 sets minimum grace periods of 7 days for weekly-premium, 10 days for monthly-premium, and 31 days for any other policy. Monthly is 10 days.

When an entire group life policy terminates, an insured who wants an individual conversion policy must generally have been insured under the group policy for at least how long?

1. Six months before the date the group policy terminates or is amended for any reason
2. One year
3. Five years before the date of termination or amendment ✓
4. Ten years

Why: Sec. 1131.111(a) grants conversion on termination of the group policy only to an insured who has been covered under the policy for at least five years before the termination or amendment.

Which beneficiary designation can the policyowner change at any time without the beneficiary's consent?

1. Irrevocable
2. Revocable ✓
3. Irrevocable contingent
4. Creditor

Why: A revocable beneficiary can be changed at the owner's discretion; an irrevocable beneficiary must consent to changes.

An insurer that obtains approval for a long-term care premium rate increase in Texas must notify policyholders of the scheduled increase at least:

1. 30 days before the premium payment at the increased rate is due
2. 45 days before the premium payment at the increased rate is due ✓
3. 60 days before the premium payment at the increased rate is due
4. 90 days before the premium payment at the increased rate is due

Why: Sec. 1651.056 requires at least 45 days' advance notice of a scheduled LTC rate increase and the provision of contingent nonforfeiture benefits.

Annuitization differs from a systematic withdrawal because annuitization:

1. Converts the account into a guaranteed stream of income payments ✓
2. Lets the owner take any amount at any time with no schedule at all
3. Always returns the full account value in one immediate lump sum
4. Permanently freezes the account so no further access is possible

Why: Annuitization exchanges the accumulated value for a guaranteed income stream; systematic withdrawal keeps the account and takes flexible amounts.

Under a 'noncancelable' health insurance policy, the insurer:

1. Cannot cancel the policy or raise the premium before a stated age ✓
2. May raise the premium for the whole class but must always renew
3. Can cancel the coverage at any time by giving advance written notice
4. Renews the policy only if certain stated conditions are met each year

Why: Noncancelable means premiums are fixed and the policy cannot be cancelled (renewable to a stated age); guaranteed renewable allows class-wide premium increases.

An insurer holding a certificate of authority to transact business in a state is said to be:

1. Admitted (authorized) ✓
2. Nonadmitted (unauthorized)
3. Alien
4. Reciprocal

Why: An admitted/authorized insurer holds a certificate of authority; a nonadmitted insurer does not.

A Texas long-term care benefit plan may not deny coverage for a loss incurred for a preexisting condition more than:

1. Three months after the effective date of coverage
2. Six months after the effective date of coverage ✓
3. Twelve months after the effective date of coverage
4. Twenty-four months after the effective date of coverage

Why: Sec. 1651.052 prohibits denying a preexisting-condition claim for losses incurred more than six months after the effective date of coverage, with a matching 6-month look-back definition limit.

An inflation protection feature in a long-term care policy:

1. Raises the benefit over time to offset rising costs ✓
2. Gradually shortens the policy's elimination period after each year in force
3. Refunds a part of the premium if long-term care services are never needed
4. Guarantees that the insurer can never increase the policy's premium rate

Why: Inflation protection increases the daily/monthly benefit over time so coverage keeps pace with rising long-term care costs.

'Misrepresentation' as an unfair trade practice means:

1. Making false statements about a policy's terms or benefits to induce action ✓
2. Charging a higher premium to an applicant in poor health
3. Returning unearned premium when a policy is cancelled early
4. Recommending the lowest-cost policy an applicant qualifies for

Why: Misrepresentation is issuing or circulating untrue statements about the terms, benefits, or nature of a policy.

Under Section 843.315, if an HMO assigns a primary care physician to an enrollee who did not select one, the assigned physician must be located:

1. Within the zip code nearest the enrollee's residence or place of employment ✓
2. Anywhere within the HMO's statewide service area in that particular circumstance
3. In the same county as the HMO's home office
4. Within 50 miles of the enrollee's residence

Why: Tex. Ins. Code § 843.315(e) requires that a primary care physician or provider assigned under subsection (d) be located within the zip code nearest the enrollee's residence or place of employment.

Under the required Payment of Claims provision of an individual A&H policy, if no valid beneficiary designation is in effect at the time of payment, the indemnity for loss of life is payable to whom?

1. The insurer's reserve account
2. The insured's estate ✓
3. The state guaranty association
4. The insured's employer

Why: Sec. 1201.215(a) provides that if no beneficiary designation is effective, indemnity for loss of life is payable to the insured's estate.

Under the interest-only settlement option, the insurer:

1. Holds the proceeds and pays only the interest earned to the payee ✓
2. Pays a fixed dollar amount each period until the funds are fully exhausted
3. Distributes equal payments over a stated number of years and then stops
4. Guarantees income payments for the entire remaining life of the payee

Why: Interest-only leaves the principal with the insurer and pays out just the interest; the principal is paid later.

A Texas employee electing state continuation (not COBRA-eligible) must typically:

1. Elect within the required time and pay the premium ✓
2. Receive the coverage free from the employer
3. Prove insurability with a medical exam
4. Wait one year before coverage resumes

Why: State continuation requires a timely election and payment of premium by the individual for up to 9 months.

An insurer incorporated in another U.S. state but doing business in this state is a(n) ____ insurer.

1. Foreign ✓
2. Domestic
3. Alien
4. Admitted

Why: Domestic = incorporated in this state; foreign = another state; alien = another country.

A business wants to insure a key executive. Under Texas law, which entity may be designated as a beneficiary on a policy insuring the life of one of its officers or stockholders?

1. A corporation engaged in business for profit ✓
2. A funeral home seeking to insure unrelated decedents
3. A creditor with no underlying loan to the insured
4. A stranger who pays the first premium

Why: Sec. 1103.003 permits a corporation, joint stock association, or trust estate engaging in business for profit to be a beneficiary on a policy insuring an officer or stockholder.

A Texas insurer that violates the prompt-payment deadlines is liable for the claim plus:

1. 18% per annum and reasonable attorney's fees ✓
2. A flat $500 fine only
3. Triple the policy's face amount in most situations
4. Nothing, if it eventually pays

Why: Violation makes the insurer liable for the claim amount plus 18% annual interest and reasonable attorney's fees.

A premium is still unpaid at the end of the grace period, but the policy has sufficient cash value. The automatic premium loan provision:

1. Pays the overdue premium from the cash value to prevent a lapse ✓
2. Cancels the policy and refunds the cash value under the policy's terms
3. Doubles the next premium as a penalty
4. Converts the policy into term insurance

Why: APL borrows from the cash value to pay the overdue premium, keeping the policy in force.

A temporary insurance license is most commonly issued to:

1. Continue the business of a producer who died or became disabled ✓
2. Anyone who has not yet taken the licensing exam in most situations
3. Replace continuing-education requirements
4. Allow unlimited sales for one year

Why: Temporary licenses (no exam) let someone service an existing book when a producer dies, becomes disabled, or enters military service.

The principle of indemnity, which applies to medical expense insurance, means the insured is:

1. Restored to their pre-loss condition, but not allowed to profit ✓
2. Paid a fixed sum regardless of the actual expense in most situations
3. Guaranteed a profit on every covered claim
4. Reimbursed only after suing the provider

Why: Indemnity restores the insured to their prior financial position without gain; reimbursement-type medical plans follow this principle.