Texas Life & Health Insurance Exam — All Questions

In an executive bonus (Section 162) plan, the employer:

• a.Owns the life insurance policy outright and names itself as the beneficiary, while the executive simply agrees to be the insured person
• b.Pays a bonus, deductible to the employer and taxable to the executive, that the executive uses to pay premiums on a policy they own✓
• c.Provides no real benefit to the executive
• d.Cannot deduct any part of the arrangement

In a Section 162 executive bonus plan, the employer pays a deductible bonus (taxable to the executive) and the executive owns the policy and pays its premiums. The employer does not own the policy.

A split-dollar life insurance arrangement is:

• a.An agreement in which an employer and employee share the costs and benefits of a life policy, such as premiums, cash value, and death benefit✓
• b.A type of deferred annuity
• c.A term insurance rider that an employer attaches to the executive's personal life insurance policy in order to provide extra temporary death benefit at a low cost
• d.A government insurance program

Split-dollar is an arrangement between an employer and employee (or two parties) to split the premium costs and policy benefits of a life policy. It is not a government program, annuity, or rider.

Which state agency issues resident life and health insurance agent licenses in Texas?

• a.Texas Department of Financial Services
• b.Texas Department of Insurance (TDI)✓
• c.Texas Insurance Commission
• d.Texas Board of Insurance Agents

The Texas Department of Insurance (TDI) regulates the business of insurance in Texas and issues agent licenses. TDI is led by the Commissioner of Insurance. There is no separate 'Department of Financial Services' or 'Insurance Commission' handling agent licensing in Texas.

In Texas, an agent who wants to sell both life and health insurance products typically holds which license?

• a.A separate license for each product issued by different state agencies
• b.The General Lines - Life, Accident, Health and HMO license✓
• c.A property and casualty agent license
• d.A surplus lines license

Texas issues a General Lines - Life, Accident, Health and HMO license that authorizes the holder to sell life insurance, accident and health insurance, and HMO products. Property and casualty and surplus lines are separate license lines for different products.

How many hours of continuing education must a Texas resident life and health agent complete during each two-year license period?

• a.12 hours, none required in ethics
• b.24 hours, including at least 3 hours of ethics✓
• c.40 hours, including 5 hours of ethics
• d.No continuing education is required in Texas

Texas requires 24 hours of continuing education every two-year license period, and at least 3 of those hours must be in ethics (the ethics requirement increased from 2 to 3 hours for licenses expiring on or after September 30, 2022). At least half of the hours must be classroom or classroom-equivalent. Completing CE and paying the renewal fee keeps the license active.

Before a licensed Texas agent may transact business on behalf of a specific insurer, what must occur?

• a.Nothing beyond holding a valid license
• b.The insurer must file a notice of appointment for that agent with TDI✓
• c.The agent must post a surety bond with the state treasurer
• d.The agent must reside in the insurer's home state

A license alone lets a person act as an agent, but to represent a particular company the insurer must appoint the agent and file that appointment with TDI. An agent may hold appointments from more than one insurer.

The Texas Life and Health Insurance Guaranty Association protects policyholders if a member insurer becomes insolvent. What may a Texas agent do regarding this association when making a sale?

• a.Advertise the association's protection as a selling point
• b.Use the association as an inducement to buy the policy
• c.Not use the existence of the guaranty association in any advertising or sales inducement✓
• d.Guarantee the buyer that all losses are always fully covered

Texas law prohibits agents and insurers from using the existence of the Guaranty Association to induce a sale. The association is a safety net for insolvencies, not a marketing tool, and its coverage is subject to statutory dollar limits.

Texas requires individual life insurance policies to contain a 'free look' provision. What minimum right does this give the policyholder?

• a.To return the policy within at least 10 days of delivery for a full premium refund✓
• b.To cancel only within 3 days of delivery
• c.To cancel at any time during the first policy year with no cost
• d.No refund is available once the policy has been delivered

Texas requires a free-look (right-to-examine) period of at least 10 days on individual life policies. If the policyholder returns the policy during that window, the insurer must refund the premium. Replacement and certain senior policies can carry longer periods.

Texas Insurance Code Chapter 541 primarily addresses which subject?

• a.Licensing examination fees
• b.Unfair methods of competition and unfair or deceptive acts or practices in the business of insurance✓
• c.The minimum wage for insurance office staff
• d.Federal Medicare enrollment periods

Chapter 541 of the Texas Insurance Code is the state's unfair methods of competition and unfair or deceptive acts statute. It prohibits practices such as misrepresentation, false advertising, and unfair claim settlement.

A Texas agent offers a prospect part of the agent's commission as cash back if the prospect buys a life policy. Under Texas law this practice is:

• a.Permitted if the agent discloses it in writing
• b.Permitted for term life policies only
• c.Prohibited as unlawful rebating✓
• d.Required to be reported but otherwise legal

Rebating (giving a portion of the premium or commission, or any valuable consideration, as an inducement to buy) is prohibited in Texas. It is an unfair practice because it can lead to unfair discrimination between policyholders.

Which practice is defined as 'twisting' under Texas insurance regulation?

• a.Selling two policies to members of the same household
• b.Using misrepresentation to persuade a policyholder to drop an existing policy and buy a new one✓
• c.Failing to remit collected premiums to the insurer on time
• d.Backdating an application to obtain a lower age rate

Twisting is the use of misrepresentation or incomplete comparisons to induce a policyholder to lapse, surrender, or replace an existing policy in favor of a new one. It is a prohibited unfair practice in Texas.