General knowledge · Section I · On both exams
Types of policies
This section is about the kinds of life insurance and annuities you will be asked to tell apart: whole life, interest-sensitive and adjustable products, term life, annuities and combination plans. Most questions turn on how long coverage lasts, whether there is cash value, and who controls the premium.
Questions on the exam
- Life, Accident and Health: 15 questions
- Life Agent: 15 questions
Life, Accident and Health exam · Life Agent exam
What the official outline lists
- Traditional whole life products
- Interest/market-sensitive/adjustable life products
- Term life
- Annuities
- Combination plans and variations
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. According to the Texas Department of Insurance, how long does a whole-life insurance policy stay in effect, as long as the policyholder does not cash it in or stop paying premiums?
- For the insured's entire life, with no set end date
- Until the end of a term chosen when the policy is bought
- Until a maturity date that is usually age 95 or 100
- Until the insured reaches age 65, when coverage must end
Show the answer
Correct answer: A. For the insured's entire life, with no set end date
According to the TDI Life insurance guide (Types of permanent life insurance), whole-life insurance stays in effect for your entire life unless you cash the policy in or stop paying premiums.
Why the other options are wrong
- B. A coverage period fixed when the policy is bought is not what the TDI passage says about whole life; it says whole life stays in effect for the entire life.
- C. The passage gives no maturity date for whole life; it says the policy stays in effect for your entire life unless you cash it in or stop paying premiums.
- D. The passage sets no age limit at which whole-life coverage must end; it stays in effect for your entire life unless you cash it in or stop paying premiums.
Whole-life insurance stays in effect for your entire life unless you cash the policy in or stop paying premiums.
2. The Texas Department of Insurance names whole-life insurance, along with universal life insurance, as one of the two most common types of what?
- Permanent life insurance
- Term life insurance
- Group life insurance
- Credit life insurance
Show the answer
Correct answer: A. Permanent life insurance
According to the TDI Life insurance guide, the two most common types of permanent life insurance are whole-life insurance and universal life insurance.
Why the other options are wrong
- B. The passage places whole life and universal life under permanent life insurance, not term life insurance.
- C. The passage places whole life and universal life under permanent life insurance, not group life insurance.
- D. The passage places whole life and universal life under permanent life insurance, not credit life insurance.
The two most common types of permanent life insurance are whole-life insurance and universal life insurance.
3. Under the Texas Insurance Code subchapter on disclosures for life insurance policies with non-guaranteed charges, which statement correctly describes "non-guaranteed charges"?
- A scale of charges in the policy at issue that the insurer may change at its discretion, without the policy owner's consent or request
- A scale of charges in the policy at issue that the insurer may change only after the policy owner consents in writing
- The interest rate the insurer charges the policy owner on a policy loan taken against the policy
- The schedule of charges in effect for the policy during the period immediately before an adverse change
Show the answer
Correct answer: A. A scale of charges in the policy at issue that the insurer may change at its discretion, without the policy owner's consent or request
Under TIC §1101.202(3), "non-guaranteed charges" means the scale or schedule of charges in a policy provision at issuance that may be changed at the insurer's discretion without the consent or request of the policy owner.
Why the other options are wrong
- B. Incorrect. TIC §1101.202(3) says the charges may be changed without the consent or request of the policy owner, so written consent is not required.
- C. Incorrect. TIC §1101.202(3) states that the term does not include a policy loan interest rate charged on a policy loan.
- D. Incorrect. That describes the "current scale of charges" defined in TIC §1101.202(2), a different term from non-guaranteed charges.
(3) "Non-guaranteed charges" means the scale or schedule of charges in a policy provision at the time the policy was issued that may be changed at the insurer's discretion without the consent or request of the policy owner. The term does not include a policy loan interest rate charged on a policy loan.
4. Which provisions must an individual variable life insurance contract delivered or issued for delivery in Texas contain under Chapter 1152 of the Insurance Code?
- Grace and reinstatement provisions, with nonforfeiture optional
- Reinstatement and nonforfeiture provisions, with no grace provision
- Grace and nonforfeiture provisions, but not reinstatement
- Grace, reinstatement, and nonforfeiture provisions appropriate to the contract
Show the answer
Correct answer: D. Grace, reinstatement, and nonforfeiture provisions appropriate to the contract
TIC §1152.108(a) says an individual variable life insurance contract delivered or issued for delivery in Texas must contain grace, reinstatement, and nonforfeiture provisions appropriate to the contract.
Why the other options are wrong
- A. TIC §1152.108(a) lists nonforfeiture provisions among the three that the contract must contain, so they are not optional.
- B. TIC §1152.108(a) requires a grace provision as well as reinstatement and nonforfeiture provisions.
- C. TIC §1152.108(a) requires reinstatement provisions along with the grace and nonforfeiture provisions.
An individual variable life insurance or individual variable annuity contract delivered or issued for delivery in this state must contain grace, reinstatement, and nonforfeiture provisions appropriate to the contract.
5. A term life policy has a renewability feature. What does that feature let the policyholder do?
- Extend the policy for additional terms without a medical exam
- Exchange the policy for a permanent policy without a medical exam
- Keep the same premium after each renewal at the end of a term
- Build cash value that can be borrowed against during the term
Show the answer
Correct answer: A. Extend the policy for additional terms without a medical exam
According to the Texas Department of Insurance (TDI), renewability lets you extend your policy for additional terms, regardless of your health and without having to take a medical exam.
Why the other options are wrong
- B. That describes convertibility, not renewability. TDI says convertibility lets you exchange a term policy for a permanent life policy; renewability only extends the policy for additional terms.
- C. Renewability does not fix the premium. TDI's description of renewability says nothing about a constant premium, and the same TDI page states that premiums go up if you renew at the end of the term.
- D. Building cash value is a feature of some permanent life insurance, not of renewability. Renewability only lets you extend the policy for additional terms.
Renewability lets you extend your policy for additional terms, regardless of your health and without having to take a medical exam.
6. According to TDI, term life policies can usually be converted only for a limited time, typically until the policyholder reaches what age?
- Until the policyholder turns 65
- Until the policyholder turns 55
- Until the policyholder turns 70
- Until the policyholder turns 80
Show the answer
Correct answer: A. Until the policyholder turns 65
TDI states that companies usually allow you to convert term life policies only for a time, typically until you turn 65.
Why the other options are wrong
- B. Age 55 is not the typical conversion limit given by TDI, which says 65.
- C. Age 70 appears on the same TDI page only as an age up to which companies usually offer term life insurance, not as the conversion limit. The conversion limit is typically 65.
- D. Age 80 appears on the same TDI page only as an age up to which companies usually offer term life insurance, not as the conversion limit. The conversion limit is typically 65.
Companies usually allow you to convert term life policies only for a time, typically until you turn 65.
7. According to the Texas Department of Insurance, who determines the interest rates paid on a fixed annuity?
- The insurance company
- The annuity owner
- The agent who sold it
- A federal securities regulator
Show the answer
Correct answer: A. The insurance company
According to the TDI Annuities guide (Fixed annuities), the insurance company determines the interest rates, which can change monthly, quarterly, semiannually, or annually.
Why the other options are wrong
- B. The passage says the insurance company, not the owner, determines the interest rates; the owner should only understand how and when they change.
- C. The passage does not give the selling agent any role in setting rates; it says the insurance company determines the interest rates.
- D. The passage gives no role to a regulator in setting fixed annuity rates; it says the insurance company determines fixed annuity interest rates.
The insurance company determines the interest rates, which can change monthly, quarterly, semiannually, or annually.
8. What can the purchaser choose under flexible and periodic payments in an annuity?
- Only the interval between payments
- Only the amount of each payment
- The time and the amount of each payment
- Neither, because every payment is set by the contract
Show the answer
Correct answer: C. The time and the amount of each payment
According to the TDI Annuities guide, flexible and periodic payments allow you to choose the time and amount of the payment.
Why the other options are wrong
- A. The guide says the purchaser chooses the time and the amount, not only the interval.
- B. The guide says the purchaser chooses the amount and also the time, so choosing only the amount is incomplete.
- D. The guide says flexible and periodic payments let the purchaser choose; they are not set entirely by the contract.
Flexible and periodic payments allow you to choose the time and amount of the payment.
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Key flashcards
Front and back, as in the app.
- TIC Subchapter E: what are "non-guaranteed charges"?
- The scale or schedule of charges in a policy provision at issuance that may be changed at the insurer's discretion without the consent or request of the policy owner. It does not include a policy loan interest rate (TIC §1101.202(3)). (Texas Insurance Code §1101.202, “Definitions”)
- Which provisions must an individual variable life contract contain in Texas (TIC §1152.108)?
- Grace, reinstatement, and nonforfeiture provisions appropriate to the contract. (Texas Insurance Code §1152.108, “Grace, reinstatement, and nonforfeiture provisions required”)
Terms on this topic
- Universal life — Seguro de vida universal
- Term life — Seguro de vida de término
- Annuity — Anualidad
- Reinstatement — Reinstalación
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