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. Twenty-four months after the effective date of coverage
2. Six months after the effective date of coverage ✓
3. Three months after the effective date of coverage
4. Twelve 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. A second resident license issued by TDI for the other state
2. Nonresident license in that state, often via reciprocity ✓
3. A temporary license from that state, with no exam
4. A federal producer license from the NAIC

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. Only from sickness, since accidental injuries fall to the workers' compensation system
2. At any time, on or off the job, exactly as 24-hour occupational coverage does
3. Off the job (work-related injuries are covered by workers' compensation) ✓
4. Only while the insured is performing assigned duties during scheduled work hours

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 end of the calendar year in which employment terminates
2. The 15th day after the employer delivers written notice of the conversion right
3. The 31st day after the group policy's next anniversary date
4. The 31st day after the date employment or membership terminates ✓

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

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. Maintain membership in a fraternal benefit society or trade association
2. Re-take and pass the original state licensing examination every two years
3. Sell a minimum of $250,000 in new annual premium each calendar year
4. Complete continuing education and renew the license periodically ✓

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

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

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. 45 days before the premium payment at the increased rate is due ✓
2. 90 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. 30 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. Always returns the full account value in one immediate lump sum
2. Lets the owner take any amount at any time with no schedule at all
3. Permanently freezes the account so no further access is possible
4. Converts the account into a guaranteed stream of income payments ✓

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. Renews the policy only if certain stated conditions are met each year
3. May raise the premium for the whole class but must always renew
4. Can cancel the coverage at any time by giving advance written notice

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

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

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. Returning part of an unearned premium to a policyowner who cancels coverage before the end of the policy period
2. Making false statements about a policy's terms or benefits to induce action ✓
3. Recommending the lowest-cost policy an applicant qualifies for after comparing the rates of several insurers
4. Charging an applicant in poor health a higher premium that reflects the substandard rate class underwriting assigned

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. In the same county as the HMO's home office
3. At a facility the enrollee has previously visited for covered services
4. Anywhere within the HMO's approved statewide service area, at the HMO's discretion

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

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. Prove insurability with a medical exam
2. Receive the coverage free from the employer
3. Elect within the required time and pay the premium ✓
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. Alien
3. Admitted
4. Domestic

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 stranger who pays the first premium
4. A creditor with no underlying loan to the insured

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. A flat $500 administrative penalty payable to the state
2. Triple the policy's face amount as statutory damages
3. 18% per annum and reasonable attorney's fees ✓
4. Only 6 percent simple interest, with each side paying its own attorney's fees

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. Converts the coverage to extended term insurance
2. Doubles the next premium billed as a reinstatement penalty
3. Surrenders the policy and pays the net cash value to the owner as a refund
4. Pays the overdue premium from the cash value to prevent a lapse ✓

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. Anyone who has applied but has not yet passed the state licensing exam
2. Permit unlimited new sales for a full year without any supervision
3. Substitute for the continuing-education credits owed at each renewal
4. Continue the business of a producer who died or became disabled ✓

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 stated daily sum no matter what the medical care actually cost
3. Paid only after suing the provider who furnished the care
4. Entitled to keep a gain above the actual medical bills

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

A prescription drug plan formulary is:

1. A government registry of every drug approved nationwide for sale
2. A tiered list of the medications the plan covers ✓
3. The maximum the insured may spend on drugs in a lifetime
4. A required second opinion before any prescription is filled

Why: A formulary is the plan's list of covered drugs, usually arranged in cost-sharing tiers (generic, preferred brand, non-preferred, specialty).

Under Section 1153.004, the credit insurance chapter does NOT apply to insurance issued in connection with a credit transaction of more than:

1. 10 years' duration ✓
2. 3 years' duration
3. 20 years' duration
4. 5 years' duration

Why: Tex. Ins. Code § 1153.004(a)(1) excludes from the chapter insurance issued in connection with a credit transaction of more than 10 years' duration (along with certain first-mortgage commercial transactions and isolated transactions).

Under the stipulated-form (extended/paid-up) provision required for older cash value policies, a stipulated form of insurance must be secured upon default only after premiums have been paid for how long?

1. Three years ✓
2. Two years
3. Five years
4. One year

Why: Sec. 1101.152 requires the provision securing a stipulated form of insurance to apply upon a default occurring after premiums have been paid for three years.

An agent who is an active member of a state insurance association wants to claim continuing education credit for that participation. What limitation applies to such credit?

1. The credit is limited to not more than eight hours per renewal period and may be freely applied to either the classroom-setting category or the agent's self-study category of hours
2. The credit is unlimited but must be verified by an affidavit signed by an officer of the association each renewal period
3. The credit is limited to not more than four hours and may not be used to satisfy classroom-setting hours or the ethics requirement ✓
4. The credit may be used to satisfy up to half of the agent's ethics requirement but no other category of hours

Why: The commissioner may authorize up to four hours of CE credit for active association membership, but it cannot satisfy the classroom or ethics requirements.

An applicant wants coverage that pays an increasing death benefit to keep pace with inflation. The best choice is a policy or rider providing:

1. A return-of-premium rider refunding paid premiums
2. A cost-of-living (increasing) benefit ✓
3. A level face amount for life
4. Decreasing term matched to a mortgage balance

Why: A cost-of-living/increasing benefit raises the death benefit over time to offset inflation.

A cost-of-living (COLA) rider on a life insurance policy:

1. Lowers the premium automatically whenever consumer prices fall
2. Refunds a portion of premiums during years of high inflation rates
3. Converts the death benefit into an inflation-indexed annuity at death
4. Periodically increases the death benefit to keep pace with inflation ✓

Why: A life COLA rider raises the face amount at intervals (tied to an inflation index) so the death benefit retains its purchasing power; premiums rise with the added coverage.

A disability income policy with a benefit period 'to age 65' will:

1. Pay benefits for a qualifying disability until the insured turns 65 ✓
2. Stop all benefits exactly five years after the disability begins
3. Begin paying benefits only after the insured reaches age 65
4. Refund every premium paid once the insured turns age 65

Why: A 'to age 65' benefit period pays for a continuing disability until the insured reaches 65, a common long-term disability design.

Custodial care under a long-term care policy refers to:

1. Emergency treatment provided in a hospital intensive-care unit
2. Help with daily living activities, not requiring medical skill ✓
3. Around-the-clock care delivered only by registered nurses
4. Short-term rehabilitation following a hospital stay

Why: Custodial care assists with activities of daily living (bathing, dressing, eating) and does not require medical training; skilled care does.

When the commissioner directs restitution under the enforcement chapter, to whom must the holder of the authorization make complete restitution?

1. Each Texas resident, Texas insured, and entity operating in Texas harmed by the violation ✓
2. Only the holder's appointing insurer
3. Only those Texas insureds who filed a written complaint with the department before the enforcement order was entered
4. Only the Texas Department of Insurance, which then distributes the money to harmed consumers out of a state restitution account

Why: Sec. 82.053(a) directs complete restitution to each Texas resident, each Texas insured, and each entity operating in the state harmed by the violation or noncompliance.

Money left in a typical health flexible spending account (FSA) at year-end is:

1. Always rolled over indefinitely with no limit
2. Transferred automatically into the employee's HSA
3. Generally forfeited under the use-it-or-lose-it rule ✓
4. Paid out to the employee as taxable cash

Why: FSAs are generally use-it-or-lose-it, though plans may allow a limited carryover or grace period.

A person under age 65 generally qualifies for Medicare after:

1. Reaching the federal poverty level for two consecutive years
2. Enrolling in a private long-term care insurance policy
3. Receiving Social Security disability benefits for 24 months ✓
4. Working in any job for at least five continuous years

Why: Those under 65 become eligible after 24 months of Social Security disability benefits (or immediately with ESRD or ALS).

A person who holds a LIMITED property and casualty license may write what?

1. Any kind of property and casualty insurance
2. Life and annuity products in addition to the designated line
3. Only the kind of insurance designated on the license ✓
4. All lines once continuing education is completed

Why: Sec. 4051.102 restricts a limited property and casualty licensee to writing only the kind of insurance designated on the license.

A modified-premium whole life policy charges:

1. Lower premiums for an initial period, then higher level premiums ✓
2. The same premium every year for the entire life of the policy
3. A single large premium that makes the policy paid up at issue
4. Premiums that decline a little bit every single year until paid up

Why: Modified whole life has reduced premiums during the early years (often the first five) followed by higher level premiums for life.

An immediate annuity is characterized by income payments that begin:

1. On the contract anniversary after the annuitant turns 59 1/2
2. Within one payment interval of purchase (generally within a year) ✓
3. After a deferral period of at least ten accumulation years
4. Once the annuitant submits satisfactory proof of insurability

Why: A single-premium immediate annuity (SPIA) starts payments within one payment period — usually within 12 months — of the lump-sum purchase.

Under Texas law, replacing a policy at the SAME insurer through misrepresentation is best described as:

1. Churning ✓
2. Rebating
3. Coercion
4. Twisting

Why: Churning is using misrepresentation to replace a policy within the same insurer; twisting involves a different insurer.

A person who in good faith reports suspected insurance fraud to TDI is generally:

1. Required to also notify the insurer's competitors
2. Personally liable if the report is mistaken
3. Subject to a fine for interfering
4. Granted immunity from civil liability for the report ✓

Why: Texas grants immunity for good-faith reports of suspected fraud to encourage reporting.

Medicare Part A would help pay for which of the following?

1. A routine outpatient physician office visit
2. A covered inpatient hospital stay ✓
3. Long-term custodial care in a nursing home
4. A self-administered prescription filled at a pharmacy

Why: Part A covers inpatient hospital, skilled nursing, hospice, and some home health; physician visits are Part B and drugs are Part D.

Texas's statute regulating the sale of in-force life insurance policies by their owners to third parties is officially cited by what short title?

1. The Life Settlements Act ✓
2. The Secondary Market Insurance Act
3. The Policyholder Liquidation Act
4. The Viatical Transfer Act

Why: Sec. 1111A.001 provides that the chapter may be cited as the Life Settlements Act.

Under the Texas small-employer law, an 'eligible employee' is generally one who works on a full-time basis and usually works at least:

1. 20 hours per week
2. 25 hours per week
3. 40 hours per week
4. 30 hours per week ✓

Why: Sec. 1501.002 defines an eligible employee as one working full-time who usually works at least 30 hours a week (excluding part-time, temporary, seasonal, and substitute workers).

A Texas insured dies in the third policy year; the insurer finds a non-fraudulent misstatement. The insurer:

1. Must pay the claim, since the policy is incontestable after 2 years ✓
2. May deny the claim and keep the premiums paid
3. May rescind the policy and return the premiums paid to date
4. May reduce the benefit by half as a claim penalty

Why: After two years in force, the contestability clause bars the insurer from contesting non-fraudulent misstatements.

A family deductible provision in a health plan provides that:

1. The individual deductible is doubled for each additional dependent added to the contract
2. Only the named policyholder's own expenses count toward it, never a covered dependent's bills
3. Once a set aggregate amount is met, the deductible is satisfied for the whole family ✓
4. Each covered family member must satisfy the full individual deductible over again every month

Why: A family deductible caps total deductible exposure: when the combined family expenses reach the stated aggregate, the deductible is met for all members.

A producer offers to give a prospect part of the first-year commission if they buy the policy. This is:

1. Defamation
2. Twisting
3. Rebating ✓
4. Coercion

Why: Offering an inducement not stated in the policy (such as sharing commission) to persuade a purchase is rebating, illegal in most states.

An agent holds the small-employer-health-plan specialty certification. To renew that certification, what continuing education must the agent complete?

1. Eight hours of continuing education specifically relating to annuities, not small employer plans, during the certification period
2. Three hours of continuing education in the Health Insurance Portability and Availability Act every license year
3. Twenty-four hours of general continuing education, of which three must be in ethics, during the two-year certification period
4. Five hours of continuing education applicable to small employer health benefit plans during the two-year certification period ✓

Why: To renew the specialty certification, the individual must complete five hours of CE applicable to small employer health benefit plans during the two-year certification period.

Medicare Supplement (Medigap) policies sold in most states are:

1. Custom-designed individually for each applicant's medical history
2. Available only to people who also qualify for full Medicaid
3. Identical to Medicare Advantage plans in every meaningful respect
4. Standardized into plans identified by letters such as A through N ✓

Why: Medigap plans are standardized (lettered A–N in most states), so the same lettered plan offers the same core benefits regardless of insurer.

Under a 'recurrent disability' provision, if the insured becomes disabled again from the same cause within the stated time, the insurer treats it as:

1. Grounds to cancel the policy and refund the premiums paid since the first disability
2. A continuation of the prior claim, with no new elimination period ✓
3. An automatic doubling of the monthly benefit for the second period of disability
4. A new claim with a new elimination period

Why: A recurrence of the same disability within the stated period (e.g., six months) is a continuation, so the insured need not satisfy a new elimination period.

The 'reduced paid-up' nonforfeiture option uses the policy's cash value to:

1. Pay the entire surrender value to the owner in one lump sum
2. Buy a smaller, fully paid-up permanent policy ✓
3. Convert the coverage into an immediate lifetime income annuity
4. Keep the full face amount in force as term insurance for a limited time

Why: Reduced paid-up uses the net cash value as a single premium to purchase a smaller amount of fully paid-up permanent insurance; extended term instead keeps the full face for a limited period.

Under § 541.060, an insurer's duty to attempt a prompt, fair, and equitable settlement of a claim arises once:

1. Thirty days have passed since the claim was first reported
2. The insurer's liability has become reasonably clear ✓
3. A lawsuit is filed against the insurer by the claimant
4. The claimant retains an attorney to pursue the claim in court

Why: Section 541.060 ties the good-faith prompt-settlement duty to the point at which 'the insurer's liability has become reasonably clear.'

An agent tells a prospect that a policy includes a benefit it does not actually provide. Under the Texas Insurance Code this is best described as:

1. Misrepresentation of an insurance policy's benefits or terms ✓
2. Lawful comparative advertising of two competing insurers
3. A permitted rebate authorized by the home office
4. Coordination of benefits between two health plans

Why: Making an untrue statement of material fact about a policy's benefits is misrepresentation of an insurance policy under § 541.061(1).

A survivorship (second-to-die) life policy pays the death benefit when:

1. Either insured becomes disabled
2. The first insured dies
3. The policy is surrendered
4. The second insured dies ✓

Why: Survivorship pays at the second death; it is common in estate planning to fund estate taxes.

Credit life insurance is typically structured so that:

1. The face amount increases over the life of the underlying loan
2. Coverage continues at the same level long after the loan is repaid
3. The borrower's family receives the full original loan amount in cash
4. It is decreasing term with the creditor named as the beneficiary ✓

Why: Credit life is usually decreasing term equal to the outstanding debt, with the lender as beneficiary; it cannot exceed the loan balance.

To open and contribute to a Health Savings Account (HSA), an individual must be:

1. Over the age of sixty-five and fully retired from work
2. Enrolled in a qualified high-deductible health plan ✓
3. Enrolled in a low-deductible managed-care HMO plan
4. Covered by Medicare Part A and Part B already

Why: HSA eligibility requires coverage under a qualified high-deductible health plan and no disqualifying coverage; HSAs offer a triple tax advantage.

Under Texas small employer health insurance rules, a small employer carrier generally must:

1. Cover only employers with more than 100 eligible employees
2. Decline employers whose employees have chronic conditions that raise expected claims
3. Charge every small employer the large-group community rate
4. Accept any eligible small employer that applies (guaranteed issue) ✓

Why: Texas small employer carriers must guarantee-issue coverage to eligible small employers, within rating rules.

A 50-year-old withdraws $10,000 of gain from a nonqualified deferred annuity. Besides ordinary income tax, the IRS penalty is:

1. $1,000 ✓
2. $2,000
3. $500
4. $0

Why: A premature distribution before 59½ incurs a 10% penalty: 10% × $10,000 = $1,000, on top of ordinary income tax on the gain.

Which of the following is a permissible reason for a small employer health benefit plan issuer to refuse to renew an employer's coverage?

1. An employee developed a chronic illness during the year
2. Premium has not been paid as required by the terms of the plan ✓
3. The employer's claims experience was worse than projected
4. The employer requested a different network of providers

Why: Sec. 1501.108(a) permits nonrenewal only for limited reasons such as nonpayment of premium, fraud, noncompliance, no enrollee in the service area, or termination of association membership.

Under Subchapter M of Chapter 544, an insurer may not take adverse coverage action against an individual based solely on the individual's status as a living organ donor, and may not prevent an insured from donating an organ as a condition of continuing coverage. A rate differential is nonetheless allowed if it is based on:

1. sound actuarial principles or sound underwriting related to actual or anticipated loss experience for a particular risk ✓
2. the recommendation of the insurer's medical director following a post-donation health review of the insured
3. the insured's voluntary written waiver of the protection signed at the time of the organ donation
4. a uniform surcharge schedule the insurer applies to all insureds who have undergone any major surgical procedure

Why: Sec. 544.653(a)(5) permits a rate differential only if based on sound actuarial principles or sound underwriting related to actual or anticipated loss experience.

Under Section 544.401, a listed insurance entity (or its officer or director) that recklessly offers or collects a premium based on a rate that differs because of race, color, religion, ethnicity, or national origin commits an offense classified as:

1. a third-degree felony with a mandatory minimum term of imprisonment of two years
2. a civil violation punishable only by administrative penalties under Chapter 84
3. a state jail felony ✓
4. a Class A misdemeanor punishable by confinement in county jail and an administrative fine

Why: Sec. 544.401(c) provides that an offense under that section is a state jail felony.

In Texas, paying a commission to an individual who is not licensed is:

1. Prohibited ✓
2. Permitted for any referral
3. Allowed up to 50% of the commission
4. Required by TDI

Why: Commissions may be paid only to properly licensed persons; paying an unlicensed individual is prohibited.

After receiving notice of a claim, a Texas insurer must acknowledge receipt, begin investigating, and request any items it needs within:

1. 5 business days
2. 15 days ✓
3. 30 days
4. 60 days

Why: Section 542.055 requires the insurer, within 15 days of receiving notice of a claim, to acknowledge receipt, commence investigation, and request the items it reasonably requires.

Under Section 4001.157, a temporary license holder is prohibited from obtaining a commission on a sale made to:

1. Any applicant for group accident and health insurance covering the employees of a single Texas employer
2. Any customer who was referred to the temporary license holder by another agent licensed by the department
3. A person who has a family, employment, or business relationship with the temporary license holder ✓
4. Any resident of this state who bought a policy from the agent whose business the temporary holder is continuing

Why: Tex. Ins. Code § 4001.157(a) prohibits a temporary license holder from obtaining a commission on a sale to a person who has a family, employment, or business relationship with the temporary license holder, and (b) bars commissions on sales covering the holder, relatives, or recent employers/employees.

An insured and the sole primary beneficiary die in the same crash, order of death unknown. Under the Uniform Simultaneous Death Act, proceeds go to:

1. The contingent beneficiary or the insured's estate ✓
2. Whoever was pronounced dead first at the scene
3. The insurer, as unclaimed property
4. The primary beneficiary's own heirs, through that beneficiary's estate

Why: The Act presumes the insured survived the beneficiary, so the proceeds pass to the contingent beneficiary or the insured's estate.

Before a county mutual insurance company agent applicant may be licensed, the required course of study and instruction must be at least how long?

1. Twenty hours of study
2. Forty hours of motor vehicle and dwelling instruction
3. Two hours of ethics
4. Five hours in duration ✓

Why: Sec. 4051.202(b) requires the course of study on motor vehicle and dwelling insurance to be at least five hours and to cover the policies sold and Texas insurance regulation.

Life insurance is generally a 'valued' (not indemnity) contract because it pays:

1. A benefit reduced by other coverage in force
2. Nothing unless the beneficiary documents expenses
3. Only the actual financial loss the family proves
4. A stated face amount, not the measured economic loss ✓

Why: Life insurance pays the agreed face amount regardless of proven loss; medical expense insurance instead indemnifies actual costs.

What grace period must a group life insurance policy provide for payment of any premium other than the first?

1. 7 days
2. 10 days
3. 31 days ✓
4. 60 days

Why: Sec. 1131.103 requires a 31-day grace period during which death benefit coverage continues in force unless the policyholder gives written notice of discontinuance.

Under the entire contract provision, the contract consists of the policy and:

1. The attached copy of the application for the policy ✓
2. A separate buyer's guide kept on file by the agent
3. The insurer's internal underwriting guidelines manual
4. Any verbal promises the producer made at the sale

Why: The entire contract is the policy plus the attached application; no outside documents can be incorporated by reference.

A beneficiary receives a $250,000 life insurance death benefit as a lump sum. For federal income tax, the beneficiary:

1. Owes tax only on amounts over $100,000
2. Owes no income tax on the death benefit ✓
3. Owes capital-gains tax on the full amount
4. Owes ordinary income tax on the full death benefit

Why: Life insurance death benefits paid as a lump sum are generally received income-tax-free.

Coverage of a newborn child of a covered employee under a small employer health benefit plan ends on the 32nd day after birth unless the issuer receives notice and any required premium by when?

1. The 31st day after the date of birth ✓
2. The date the issuer finishes underwriting the newborn's health history
3. The plan's next anniversary date, when the child is added at renewal
4. The 60th day after the birth

Why: Sec. 1501.157(b) ends newborn coverage on the 32nd day after birth unless the issuer receives notice of the birth and any required additional premium not later than the 31st day after birth.

Under a group life policy that insures employees, what is the minimum number of employees the policy must cover on the date it is issued?

1. At least twenty-five employees
2. At least ten employees
3. At least five employees
4. At least two employees ✓

Why: Sec. 1131.204(a) requires the employer group life policy to cover at least two employees on the date the policy is issued.

A 68-year-old retiree wants income payments to begin next month from a lump sum. The suitable product is a(n):

1. 20-year level term policy
2. Variable universal life policy
3. Single-premium immediate annuity ✓
4. Flexible-premium deferred annuity

Why: A single-premium immediate annuity converts a lump sum into income beginning within one payment period.

'Defamation' in insurance regulation refers to:

1. Sharing part of a commission with another licensed producer
2. Making false or maligning statements about an insurer's financial condition ✓
3. Filing a consumer complaint with the state insurance department about an unreasonably delayed claim
4. Refusing to renew a policy after a single claim is filed

Why: Defamation is making, publishing, or circulating false statements that are maligning, especially about the financial condition of an insurer.

Under Section 843.209, an identification card issued by an HMO to an enrollee must indicate that the HMO is regulated under the Insurance Code and must display:

1. The HMO's total net worth as of its last annual statement
2. The enrollee's Social Security number
3. The enrollee's first date of enrollment or a toll-free number to obtain that date ✓
4. The monthly capitation amount the HMO pays the enrollee's designated primary care physician

Why: Tex. Ins. Code § 843.209 requires the ID card to indicate the HMO is regulated under the code and subject to Subchapter J, and to display the first date the enrollee became enrolled, or a toll-free number a physician or provider may use to obtain that date.