General knowledge · Section III · On both exams
Completing the application, underwriting, and delivering the policies
How a life policy goes from application to delivery: completing and signing the application, underwriting and the information an insurer may use, delivering the policy, and the contract-law ideas behind it, such as offer, acceptance and insurable interest.
Questions on the exam
- Life, Accident and Health: 12 questions
- Life Agent: 12 questions
Life, Accident and Health exam · Life Agent exam
What the official outline lists
- Completing the application
- Underwriting
- Delivering the policy
- Contract law
Practice questions
Choose your answer, then open “Show the answer” to see why each option is right or wrong and the exact source text.
1. Under the Texas Insurance Code, a life insurance policy must provide that, in the absence of fraud, a statement made by an insured is considered what?
- A representation and not a warranty
- A warranty and not a representation
- A condition precedent to all coverage
- An admission that voids the policy
Show the answer
Correct answer: A. A representation and not a warranty
TIC §1101.007 requires a life insurance policy to provide that, in the absence of fraud, a statement made by an insured is considered a representation and not a warranty.
Why the other options are wrong
- B. Incorrect. This reverses the rule. TIC §1101.007 says the statement is a representation and not a warranty.
- C. Incorrect. TIC §1101.007 does not describe the statement as a condition precedent to coverage; it calls it a representation and not a warranty.
- D. Incorrect. Section 1101.007 does not treat the statement as an admission that voids the policy; it treats it as a representation and not a warranty.
A life insurance policy must provide that, in the absence of fraud, a statement made by an insured is considered a representation and not a warranty.
2. Under the federal anti-money laundering rule for insurance companies, who must approve the company's written anti-money laundering program?
- The company's senior management
- The state insurance commissioner
- The company's appointed agents
- The Department of the Treasury
Show the answer
Correct answer: A. The company's senior management
According to 31 CFR 1025.210(a), the anti-money laundering program must be approved by senior management.
Why the other options are wrong
- B. 31 CFR 1025.210(a) says the program must be approved by senior management; it gives no approval role to a state insurance commissioner.
- C. 31 CFR 1025.210(a) says the program must be approved by senior management; it does not name the company's agents as approvers.
- D. The Department of the Treasury may receive a copy of the program upon request under 31 CFR 1025.210(a), but the program must be approved by senior management, not by Treasury.
The program must be approved by senior management. An insurance company shall make a copy of its anti-money laundering program available to the Department of the Treasury, the Financial Crimes Enforcement Network, or their designee upon request.
3. Under TIC §1101.004, besides the home office of the issuing company, to whom may a life insurance premium be paid on delivery of a signed receipt?
- An agent of the company
- Any licensed agent of any insurer
- The beneficiary named in the policy
- A company officer, but never an agent
Show the answer
Correct answer: A. An agent of the company
According to TIC §1101.004, premiums are payable at the home office of the issuing company or to an agent of the company on delivery of a receipt signed by at least one of the designated company officers.
Why the other options are wrong
- B. The section refers to an agent of the company, not to any licensed agent of any insurer.
- C. The section does not mention the beneficiary as a person to whom premiums are paid.
- D. The section expressly allows payment to an agent of the company on delivery of a signed receipt.
all premiums are payable in advance at the home office of the company that issues the policy or to an agent of the company on delivery of a receipt signed by at least one of the company officers designated in the policy.
4. A funeral home is designated as beneficiary of a life insurance policy on a customer. Under Section 1103.053(b), when does the funeral home have an insurable interest in the customer's life?
- Only if other statutory law or common law establishes it
- Automatically, for the face amount of the policy as beneficiary
- Only if the customer signs a separate written consent form
- Only if the funeral home pays the policy premiums itself
Show the answer
Correct answer: A. Only if other statutory law or common law establishes it
Under TIC Section 1103.053(b), an entity that is directly or indirectly engaged in the business of burying the dead does not have an insurable interest in the life of an individual unless the interest is established under other applicable statutory law or common law.
Why the other options are wrong
- B. Subsection (b) says such an entity does not have an insurable interest unless it is established under other law, so it is not automatic.
- C. Subsection (b) makes no reference to a consent form; the exception is an interest established under other statutory or common law.
- D. Subsection (b) does not link the interest to paying premiums; the only exception is other statutory or common law.
An individual, partnership, association, corporation, or other legal entity that is directly or indirectly engaged in the business of burying the dead does not directly or indirectly have an insurable interest in the life of an individual unless the interest is established under other applicable statutory law or under common law.
5. Subject to the exceptions in the statute, a life insurance policy owner designated in accordance with the subchapter has an insurable interest in the life of the insured during which period?
- At all times after the designation
- Only on the date the application is signed
- Only until the first premium is paid
- Only for as long as the insured is a family member
Show the answer
Correct answer: A. At all times after the designation
Under TIC Section 1103.053(a), a designated beneficiary or owner has, at all times after the designation, an insurable interest in the life of the individual insured, except as provided by Subsections (b) and (c).
Why the other options are wrong
- B. The text says the interest exists at all times after the designation, not only on the date of application.
- C. Nothing in the text ends the interest when the first premium is paid; it lasts at all times after the designation.
- D. The text does not condition the interest on family relationship; it applies at all times after the designation.
Except as provided by Subsection (b) or (c), a beneficiary or owner of a life insurance policy who is designated in accordance with this subchapter or an entity to which a life insurance policy or an interest, benefit, right, or title in a life insurance policy is transferred or assigned in accordance with this subchapter has, at all times after the designation, an insurable interest in the life of the individual who is insured under the policy.
6. An insurer takes adverse action against an applicant that is based in part on information in a consumer report. Which of the following must the insurer do?
- Provide oral, written, or electronic notice of the adverse action to the consumer
- Wait until the consumer requests an explanation before giving any notice of the adverse action
- Give notice of the adverse action only to the consumer reporting agency that furnished the report
- Give notice of the adverse action only if the consumer first disputes the information in the report
Show the answer
Correct answer: A. Provide oral, written, or electronic notice of the adverse action to the consumer
According to 15 U.S.C. 1681m(a)(1), if any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall provide oral, written, or electronic notice of the adverse action to the consumer.
Why the other options are wrong
- B. 15 U.S.C. 1681m(a)(1) says the person 'shall' provide notice of the adverse action to the consumer; it does not make the notice depend on a request by the consumer.
- C. 15 U.S.C. 1681m(a)(1) requires notice of the adverse action to the consumer, not only to the consumer reporting agency.
- D. 15 U.S.C. 1681m(a)(1) says the person 'shall' provide notice of the adverse action to the consumer; it does not make the notice depend on a dispute by the consumer.
(a) Duties of users taking adverse actions on basis of information contained in consumer reports If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall— (1) provide oral, written, or electronic notice of the adverse action to the consumer;
7. For purposes of the backdating limit in TIC Section 1101.054(a), how is the age of the insured on the date of the application determined?
- By the birthday of the insured that is nearest to the date of the application
- By the most recent birthday of the insured before the date of the application
- By the next birthday of the insured after the date of the application
- By the age of the insured on the date the policy is issued
Show the answer
Correct answer: A. By the birthday of the insured that is nearest to the date of the application
Under TIC Section 1101.054(a), the age of the insured on the date of the application is the age of the insured on the birthday of the insured that is nearest to the date of the application.
Why the other options are wrong
- B. The section uses the birthday nearest to the application date, which may fall after the application date; it is not limited to the most recent past birthday.
- C. The section uses the birthday nearest to the application date, which may fall before it; it is not limited to the next birthday.
- D. The section measures age on the date of the application, using the nearest birthday, not on the date of issue.
For the purposes of this subsection, the age of the insured on the date of the application is the age of the insured on the birthday of the insured that is nearest to the date of the application.
8. A life insurance policy is subject to the Texas statute on non-guaranteed charge disclosures. For which situation must the insurer offer the owner its annual in-force illustration at no charge?
- The insurer has changed any non-guaranteed charges or the credited interest rate
- The owner has held the policy for more than ten years
- The owner has asked for the illustration more than once
- The policy has never had any change in its charges or rate
Show the answer
Correct answer: A. The insurer has changed any non-guaranteed charges or the credited interest rate
Under TIC Section 1101.206, if the insurer has changed any non-guaranteed charges or the credited interest rate, the insurer must offer the illustration at no charge.
Why the other options are wrong
- B. The section does not mention how long the policy has been held; the no-charge condition is a change in charges or in the credited interest rate.
- C. The number of requests is not a condition in the section; the no-charge offer depends on a change by the insurer.
- D. The section requires the no-charge offer when the insurer has changed charges or the rate, not when nothing has changed.
Regardless of whether any non-guaranteed charges are changed, an insurer that issues a policy subject to this subchapter must offer to provide to the policy owner at least annually an in-force illustration. If the insurer has changed any non-guaranteed charges or the credited interest rate, the insurer must offer the illustration at no charge.
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Key flashcards
Front and back, as in the app.
- In the absence of fraud, how must a life insurance policy treat a statement made by an insured (TIC §1101.007)?
- As a representation and not a warranty. (Texas Insurance Code §1101.007, “Statements of insured”)
Terms on this topic
- Application — Solicitud
- Insurable interest — Interés asegurable
- Fraud — Fraude
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