Texas Life & Health Insurance Exam — Study Guide

Everything before this chapter is national material: contract law, policy types, underwriting, riders, taxation, group benefits, health plan design. This chapter is the other half of your exam — the Texas-specific law tested on the General Lines Agent — Life, Accident, Health and HMO examination (and on the narrower Texas life-only and limited-line exams).

Two study rules before you start.

Rule one: learn the rule, then learn the number. Texas exam questions are overwhelmingly about whether a rule exists and what it requires, not about memorizing a fee schedule. The rules below are stable, and you should state them flatly: Texas has a Department of Insurance, an appointed Commissioner, an unfair-methods-of-competition statute, a separate Unfair Claim Settlement Practices Act, a replacement law for life insurance and annuities carrying a 30-day unconditional right to return, an annuity free-look rule, a life and health guaranty association, and a best-interest annuity suitability standard. None of that moves. The numbers attached to those rules — hours, days, dollars, limits, fees — do. Wherever you see (verify current with the Texas Department of Insurance (TDI)), treat the figure as a snapshot: learn the concept, confirm the digit at tdi.texas.gov.

Rule two: Texas has its own vocabulary. Texas statutes say "agent" where NAIC models say "producer," and Texas calls its core license the General Lines Agent license. Texas also splits conduct rules across two statutes (Chapters 541 and 542) where many states use one. When your national chapters and this chapter disagree, Texas controls on the Texas exam.

The primary authorities are the Texas Insurance Code and Title 28 of the Texas Administrative Code (28 TAC), administered by TDI.

12.1 The Texas Department of Insurance and the Commissioner

The office

Texas regulates insurance through the Texas Department of Insurance (TDI), headed by the Commissioner of Insurance. The most-tested Texas fact about this office: the Texas Commissioner of Insurance is appointed by the Governor with the advice and consent of the Senate — Texas does not elect its insurance commissioner. The Commissioner serves a two-year term expiring on February 1 of each odd-numbered year (Insurance Code Chapter 31). Trap: candidates who studied California or Georgia material answer "elected." In Texas the answer is appointed.

The Commissioner is TDI's chief executive and administrative officer, charged with administering and enforcing the Insurance Code and the state's other insurance laws.

Powers

State these affirmatively — every one is established in the Insurance Code:

• Rulemaking. The Commissioner adopts rules necessary to implement the Insurance Code (the general grant is Section 36.001). Those rules appear in 28 TAC and carry the force of law.
• Examination. TDI examines insurers organized under Texas law and insurers authorized to do business here — financial examinations on a recurring cycle, market-conduct examinations as needed — and may examine the books, records, and business practices of licensees. The examined company generally bears the cost. The examination cycle interval: verify current with the Texas Department of Insurance (TDI).
• Investigation, subpoenas, and hearings. Investigate suspected violations, issue subpoenas, administer oaths, take testimony, hold hearings. Contested cases are heard under the Administrative Procedure Act, in practice at the State Office of Administrative Hearings (SOAH); a licensee facing discipline is entitled to notice and a hearing (Section 4005.104).
• Licensing control. Deny, suspend, revoke, or refuse to renew a license; impose probation or conditions.
• Cease-and-desist orders against unfair methods of competition and unfair or deceptive acts (Section 541.108), plus a civil penalty for violating such an order (Section 541.111).
• Administrative penalties and sanctions under Insurance Code Chapters 82, 83, and 84. Penalty ceilings: verify current with TDI.
• Fraud enforcement. TDI operates a statutory Insurance Fraud Unit (Chapter 701) with commissioned peace officers who investigate fraudulent insurance acts and refer cases for prosecution. Insurance fraud is a crime under Texas Penal Code Section 35.02.
• Consumer assistance. TDI takes complaints and operates the Consumer Help Line, 800-252-3439.

Do not confuse TDI with the Office of Public Insurance Counsel (OPIC), a separate agency that represents consumers as a class in rate and rule proceedings; OPIC is not a licensing or complaint-adjudication body.

What the Commissioner does not do: decide private contract disputes, act as the policyholder's lawyer, or guarantee an insurer's solvency. A consumer's damages claim is a civil court matter — and Texas gives consumers a real one (see 12.4).

12.2 Producer licensing in Texas

The license you are testing for

For life and health work, the resident individual license is the General Lines Agent — Life, Accident, Health and HMO license (Insurance Code Chapter 4054 governs life, accident, and health agents; Chapter 4001 governs agent licensing in general). It authorizes life insurance, annuities, accident and health insurance, and HMO products.

Texas also issues narrower licenses that appear as exam distractors: the limited Life Agent license (historically tied to life insurance not exceeding $25,000 face amount — cap: verify current with TDI); the funeral prearrangement life insurance agent license (life policies and fixed annuities funding prepaid funeral contracts); and county mutual, other limited lines, and HMO-only authorities.

Variable products. A life license alone does not authorize variable life or variable annuity sales. Variable contracts are securities: you must also hold the appropriate FINRA registration and be appointed for that product line.

Resident license requirements

To obtain a resident General Lines — Life, Accident, Health and HMO license you must:

1. Meet the age and residency requirements and be trustworthy, competent, and of good character.
2. Pass the state licensing examination, administered by TDI's contracted vendor (currently Pearson VUE), whose candidate handbook publishes the content outline. Question count, time limit, passing score, and exam fee: verify current with TDI and the Pearson VUE Texas candidate handbook.
3. Complete the fingerprint-based background check through the state's fingerprint vendor (currently IdentoGO) for submission to the Texas Department of Public Safety and the FBI.
4. File the application and pay the fee through TDI's online licensing portal (or NIPR/Sircon). The application fee: verify current with the Texas Department of Insurance (TDI).

Prelicensing education. A genuine Texas distinctive, and heavily tested: Texas does not require classroom prelicensing education for the standard resident general lines life, accident and health license — you may study however you like and sit the exam. Prelicensing coursework is required in the temporary-license track below. Education requirements are exactly the kind of rule legislatures revisit; confirm the current prelicensing posture with TDI.

Sequencing trap. In Texas you pass the exam first, then apply. Apply before passing and you must submit a new application and pay the fee again afterward. You must also apply within one year of passing, or the exam result goes stale and you retake it. The one-year window: verify current with TDI. Passing the exam does not license you — the license issues only after the application is approved and the background check clears. The one exception is the temporary license below, which is issued without an examination and gives a sponsored applicant a fixed period in which to pass.

Term, renewal, and continuing education

A Texas agent license is issued for a two-year term. Major-lines licensees renew by the last day of the licensee's birth month every two years — a Texas-specific renewal anchor worth memorizing as a concept (your birth month, not a uniform statewide date).

Continuing education must be completed before the license expires, using TDI-certified courses from TDI-approved providers:

• Total CE per two-year license period, including an ethics component. The long-standing Texas figures are 24 hours total, of which 3 hours must be ethics, with a portion required to be classroom or "classroom-equivalent" instruction. All three figures: verify current with the Texas Department of Insurance (TDI).
• Limited-lines licensees owe a reduced total (historically 10 hours including the ethics hours). Verify current with TDI. Funeral prearrangement life insurance agents writing only prepaid-funeral-funding products are exempt, though the appointing insurer must educate them on new products.
• Association credit. An active member of a state or national insurance association may earn a limited number of CE hours for that membership (Chapter 4004). The hour cap: verify current with TDI.
• Annuity training. An agent who sells annuities must complete a one-time TDI-approved annuity training course before soliciting, plus annuity-specific CE hours within the license period. Both figures: verify current with TDI.
• Long-term care. Agents selling LTC and Partnership-qualified LTC policies face additional designated training. Hours: verify current with TDI.
• Extensions and exemptions. 28 TAC Chapter 19 provides CE exemptions and extensions of time in defined circumstances. Criteria: verify current with TDI.

Consequence of shortfall. Texas does not simply void the license the day it expires. A licensee who has not completed the required hours is given a limited period to cure the deficiency and pay a per-deficient-hour fine; the license is not in good standing in the meantime, and continued failure ends in non-renewal. The cure period and the per-hour fine: verify current with the Texas Department of Insurance (TDI).

Temporary licenses

Texas issues temporary licenses under Insurance Code Chapter 4001, Subchapter D, and this is a place where generic study material gets Texas backwards. The temporary license is available for the very license this book is about. TDI issues a temporary license to an applicant for the General Lines Agent — Life, Accident, Health and HMO license (and likewise for General Lines — Property and Casualty); it is not confined to funeral prearrangement, limited life, or county mutual authorities. Section 4001.151 lets the department issue a temporary agent's license to an applicant for a license under Section 4001.102 who is being considered for appointment by another agent, an insurer, or an HMO.

The mechanics, and they are heavily tested:

• No exam first. Under Section 4001.152, an applicant is not required to pass a written examination to obtain a temporary license. That is the point of the track — you work under sponsorship while you prepare — and it is the one Texas exception to the sequencing trap above.
• A sponsor must certify. The appointing agent, insurer, or HMO completes TDI's Appointment certification for a temporary license (Form FIN700), certifying that you are being considered for appointment as a full-time agent, requesting the license, and committing to supervise your training. TDI issues the temporary license on receipt of a properly completed application, the nonrefundable fee, and that certificate (Section 4001.153).
• A required course of study. Here Texas does impose prelicensing hours: a course of study given by the appointing company (TDI currently states at least 40 hours, completed within a short window after the application, fee, and certificate reach TDI). The hour count and the deadline: verify current with the Texas Department of Insurance (TDI).
• One issuance, fixed term, then the exam. A temporary license runs for a fixed statutory term (Section 4001.155), is issued only once, and may not be renewed; you must pass the state exam within that term to convert to a permanent license. The day count: verify current with TDI — and beware stale prep material, which still recites the older 90-day term where TDI and the current statute now state 180 days, and still recites a "not more than once in a consecutive six-month period" restriction from Section 4001.156(a) that the Legislature repealed in 2021. Confirm both points with TDI.
• Not a way to sell to your own circle. Section 4001.157 bars a temporary licensee from taking a commission on a sale to a person who is, or recently was, the licensee's employer or employee; and under Section 4001.156(b) a temporary license may not be issued to a person who does not intend to apply for a full license to sell to the general public.

Never answer "Texas temporary licenses are only for limited lines." A Texas temporary license is a sponsored, supervised on-ramp to the full general lines license — but a narrow one: one issuance, no renewal, company-supervised training, and no commissions harvested from your own household economy.

Nonresident licenses

Texas licenses nonresident agents on a reciprocity basis under Insurance Code Chapter 4056. A producer licensed and in good standing in his or her home state may obtain the corresponding Texas nonresident license without the Texas examination, provided the home state extends reciprocal treatment. The nonresident must keep the home-state license in force (losing it collapses the Texas license), submit to Texas jurisdiction and service of process, and comply with Texas conduct rules — including Texas annuity training, which may be satisfied by substantially similar home-state training Texas accepts. Nonresident fees and equivalency conditions: verify current with TDI.

Grounds for denial, suspension, and revocation

Insurance Code Section 4005.101 is the workhorse. TDI may deny an application or discipline a license holder for grounds including:

• Intentional material misstatement or fraud in the license application, or obtaining a license by fraud or misrepresentation.
• Misappropriation, conversion, or illegal withholding of money belonging to an insurer, an HMO, a beneficiary, or an insured. Premium money is held in a fiduciary capacity; premium theft is the classic Texas revocation case.
• Material misrepresentation of the terms of a policy or contract.
• Willfully violating an insurance law of this state or a rule or order of the Commissioner.
• Fraudulent or dishonest practices, or demonstrating incompetence or untrustworthiness to transact insurance.
• Conviction of a felony.
• Rebating, twisting, churning, misrepresentation, or the other unfair practices in 12.4.
• Acting for an unauthorized insurer.

Criminal overlay. Under Insurance Code Section 4005.151, acting as an agent after your license has been suspended or revoked is a felony offense in Texas. This is not merely an administrative problem.

Federal overlay. Under 18 U.S.C. 1033, a person convicted of a felony involving dishonesty or breach of trust may not engage in the business of insurance affecting interstate commerce without written consent (a 1033 waiver), which in Texas is sought through TDI.

Reporting duties. A Texas licensee must keep TDI current: report changes of name, mailing address, and email; report administrative actions taken by another state's insurance regulator; report criminal prosecutions and convictions. The reporting deadlines: verify current with the Texas Department of Insurance (TDI). The duty is self-executing — nobody prompts you.