Texas law · Section I · On both exams
Texas statutes and rules common to life and health insurance
Texas law that applies to both life and health agents: the Commissioner of Insurance, insurance definitions, licensing requirements, marketing practices, agent duties and the Texas Life and Health Guaranty Association. On the Life Agent exam this section carries even more weight.
Questions on the exam
- Life, Accident and Health: 14 questions
- Life Agent: 20 questions
Life, Accident and Health exam · Life Agent exam
What the official outline lists
- Commissioner of Insurance
- Insurance definitions
- Licensing requirements
- Marketing practices
- Agent duties/responsibilities
- Texas Life and Health Guaranty Association
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. Apart from the rules for carriers organized or incorporated for less than five years, what is the minimum frequency at which the Texas Department of Insurance must examine a carrier?
- At least once every year
- At least once every three years
- At least once every five years
- At least once every ten years
Show the answer
Correct answer: C. At least once every five years
According to TIC §401.052(a), the department shall examine a carrier as frequently as it considers necessary and, at a minimum, not less frequently than once every five years. Under §401.052(b), the commissioner adopts separate rules for carriers organized or incorporated for less than five years.
Why the other options are wrong
- A. TIC §401.052 sets the minimum at once every five years, not once a year; the department may examine more often if it considers it necessary, but annual examination is not the required minimum.
- B. Three years is not the figure in TIC §401.052; the statute says the department shall examine a carrier not less frequently than once every five years.
- D. Ten years is longer than the statute allows; TIC §401.052 requires an examination not less frequently than once every five years.
(a) Subject to Subsection (b) and except as provided by the rules adopted under that subsection, the department shall visit and examine a carrier as frequently as the department considers necessary. At a minimum, the department shall examine a carrier not less frequently than once every five years. (b) The commissioner shall adopt rules governing the frequency of examinations of carriers that have been organized or incorporated for less than five years.
2. Under the Texas Insurance Code, how long is the term served by the Texas commissioner of insurance?
- A one-year term
- A two-year term
- A four-year term
- A six-year term
Show the answer
Correct answer: B. A two-year term
Under TIC §31.022(a), the governor, with the advice and consent of the senate, appoints the commissioner, and the commissioner serves a two-year term that expires on February 1 of each odd-numbered year.
Why the other options are wrong
- A. Incorrect. TIC §31.022(a) sets a two-year term, not a one-year term.
- C. Incorrect. TIC §31.022(a) states that the commissioner serves a two-year term, not a four-year term.
- D. Incorrect. TIC §31.022(a) provides a two-year term expiring on February 1 of each odd-numbered year, not a six-year term.
(a) The governor, with the advice and consent of the senate, shall appoint the commissioner. The commissioner serves a two-year term that expires on February 1 of each odd-numbered year.
3. Under the definition of "insurer" in Chapter 801 of the Texas Insurance Code, which of the following is expressly listed as included in the term?
- A stock company
- An insurance agency
- A premium finance company
- A claims adjusting firm
Show the answer
Correct answer: A. A stock company
Per TIC §801.001(2), "insurer" means the issuer of an insurance policy issued to another in consideration of a premium, and the term expressly includes, among others, a mutual company of any kind and, in item (H), a stock company.
Why the other options are wrong
- B. Incorrect. An insurance agency is not among the entities listed in TIC §801.001(2), and the definition describes an insurer as the issuer of an insurance policy.
- C. Incorrect. A premium finance company is not listed in TIC §801.001(2); the listed entities include mutual companies of any kind and a stock company.
- D. Incorrect. A claims adjusting firm is not listed in TIC §801.001(2), which defines an insurer as the issuer of an insurance policy and lists, among others, a stock company.
(2) "Insurer" means the issuer of an insurance policy that is issued to another in consideration of a premium and that insures against a loss that may be insured against under the law. The term includes a:
(A) fraternal benefit society;
(B) Lloyd's plan;
(C) mutual company of any kind, including a:
(i) statewide mutual assessment association;
(ii) local mutual aid association or burial association; and
(iii) county or farm mutual insurance company;
(D) reciprocal or interinsurance exchange;
(E) group hospital service corporation;
(F) health maintenance organization;
(G) nonprofit legal services corporation; and
(H) stock company.
4. Under the Texas Insurance Code, how many hours of continuing education in ethics must each individual who holds a license issued by the department complete during each license renewal period?
- Three hours
- Four hours
- Five hours
- Eight hours
Show the answer
Correct answer: A. Three hours
Per TIC §4004.054, each individual who holds a license issued by the department shall complete three hours of continuing education in ethics during each license renewal period.
Why the other options are wrong
- B. Incorrect. TIC §4004.054 requires three hours of continuing education in ethics during each license renewal period, not four.
- C. Incorrect. TIC §4004.054 requires three hours of continuing education in ethics during each license renewal period, not five.
- D. Incorrect. TIC §4004.054 requires three hours of continuing education in ethics during each license renewal period, not eight.
Sec. 4004.054. ETHICS REQUIREMENT. Each individual who holds a license issued by the department shall complete three hours of continuing education in ethics during each license renewal period.
5. Under the Texas Insurance Code, an individual whose license has been revoked may not apply for an agent license before which anniversary of the effective date of the revocation, if no judicial review was sought?
- The first anniversary
- The second anniversary
- The third anniversary
- The fifth anniversary
Show the answer
Correct answer: D. The fifth anniversary
According to TIC §4005.105(b), an individual whose license has been revoked under this subchapter "may not apply for an agent license before the fifth anniversary of" the effective date of the denial or revocation (or of the date of a final court order affirming it, if judicial review was sought).
Why the other options are wrong
- A. TIC §4005.105(b) bars a new agent license application until the fifth anniversary of the effective date of the revocation, not the first.
- B. TIC §4005.105(b) sets the waiting period at the fifth anniversary of the effective date of the revocation, not the second.
- C. TIC §4005.105(b) sets the waiting period at the fifth anniversary of the effective date of the revocation, not the third.
An individual whose license application has been denied or whose license has been revoked under this subchapter may not apply for an agent license before the fifth anniversary of:
(1) the effective date of the denial or revocation; or
(2) the date of a final court order affirming the denial or revocation if judicial review was sought.
6. Texas Insurance Code §544.002(a) lists the characteristics on which a person may not base a refusal to insure an individual or a different rate for the same coverage. Which of the following is on that list?
- The individual's occupation
- The individual's tobacco use
- The individual's geographic location
- The individual's driving record
Show the answer
Correct answer: C. The individual's geographic location
According to TIC §544.002(a), a person may not refuse to insure, limit coverage, or "charge an individual a rate that is different from the rate charged to other individuals for the same coverage because of the individual's" race, color, religion, or national origin; "age, gender, marital status, or geographic location"; or "disability or partial disability." Geographic location is expressly listed.
Why the other options are wrong
- A. Occupation is not among the characteristics listed in TIC §544.002(a), which are race, color, religion, national origin, age, gender, marital status, geographic location, disability, and partial disability.
- B. Tobacco use does not appear in the list of characteristics in TIC §544.002(a); the listed items are race, color, religion, national origin, age, gender, marital status, geographic location, disability, and partial disability.
- D. A driving record is not one of the characteristics named in TIC §544.002(a); the section lists race, color, religion, national origin, age, gender, marital status, geographic location, disability, and partial disability.
(a) A person may not refuse to insure or provide coverage to an individual, refuse to continue to insure or provide coverage to an individual, limit the amount, extent, or kind of coverage available for an individual, or charge an individual a rate that is different from the rate charged to other individuals for the same coverage because of the individual's: (1) race, color, religion, or national origin; (2) age, gender, marital status, or geographic location; or (3) disability or partial disability.
7. Under the Texas Insurance Code, a temporary license holder may not receive a commission on the sale of a contract covering a person who is, or has been within what period, the license holder's employer?
- During the past three months
- During the past six months
- During the past twelve months
- During the past two years
Show the answer
Correct answer: B. During the past six months
Under TIC §4001.157(b)(3), an agent, insurer, or HMO may not knowingly pay, and a temporary license holder may not receive or accept, a commission on the sale of a contract of insurance or membership covering a person who is or has been during the past six months the temporary license holder's employer.
Why the other options are wrong
- A. Incorrect. TIC §4001.157(b)(3) uses a look-back period of the past six months, not three months.
- C. Incorrect. The period stated in TIC §4001.157(b)(3) is the past six months, not twelve months.
- D. Incorrect. TIC §4001.157(b)(3) refers to a person who is or has been the employer during the past six months, not two years.
(b) An agent, insurer, or health maintenance organization may not knowingly pay, directly or indirectly, to a temporary license holder, and a temporary license holder may not receive or accept, a commission on the sale of a contract of insurance or membership covering:
(1) the temporary license holder;
(2) a person related to the temporary license holder by consanguinity or affinity;
(3) a person who is or has been during the past six months the temporary license holder's employer, either as an individual or as a member of a partnership, association, firm, or corporation; or
(4) a person who is or has been during the past six months an employee of the temporary license holder.
8. Under the Texas Insurance Code definitions for insurer receivership, a "guaranty association" is a mechanism created for which purpose?
- Paying claims or continuing policy obligations of financially impaired or insolvent insurers
- Setting the premium rates that member insurers may charge to their policyholders
- Licensing and disciplining the agents who sell policies for financially troubled insurers
- Investing the excess surplus of solvent insurers to increase policyholder dividends
Show the answer
Correct answer: A. Paying claims or continuing policy obligations of financially impaired or insolvent insurers
According to TIC §443.004(a)(11), "Guaranty association" means any mechanism mandated by Chapter 462, 463, or 2602 or other laws of this state, or a similar mechanism in another state, "that is created for the payment of claims or continuation of policy obligations of financially impaired or insolvent insurers."
Why the other options are wrong
- B. TIC §443.004(a)(11) defines a guaranty association by its purpose of paying claims or continuing policy obligations of financially impaired or insolvent insurers; setting premium rates is not part of that definition.
- C. The definition in TIC §443.004(a)(11) says nothing about licensing or disciplining agents; the mechanism exists to pay claims or continue policy obligations when an insurer is financially impaired or insolvent.
- D. TIC §443.004(a)(11) ties the guaranty association to impaired or insolvent insurers and to paying their claims or continuing their policy obligations, not to investing the surplus of solvent insurers or raising dividends.
(11) "Guaranty association" means any mechanism mandated by Chapter 462, 463, or 2602 or other laws of this state or a similar mechanism in another state that is created for the payment of claims or continuation of policy obligations of financially impaired or insolvent insurers.
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Key flashcards
Front and back, as in the app.
- Texas commissioner of insurance: who appoints the commissioner, and how long is the term?
- The governor appoints the commissioner, with the advice and consent of the senate. The term is two years and expires on February 1 of each odd-numbered year (TIC §31.022(a)). (Texas Insurance Code §31.022, “Appointment; term”)
- TIC §801.001: what is an "insurer," and does it include a stock company?
- The issuer of an insurance policy issued to another in consideration of a premium that insures against a loss insurable under the law. Yes: the term includes a stock company, as well as a mutual company of any kind. (Texas Insurance Code §801.001, “Definitions”)
- Temporary license holder: how far back does the commission ban reach for a person who was the holder's employer or employee?
- The past six months: an agent, insurer, or HMO may not knowingly pay, and the temporary license holder may not receive or accept, a commission on a contract covering a person who is or has been during the past six months the holder's employer or an employee of the holder (TIC §4001.157(b)(3)-(4)). (Texas Insurance Code §4001.157, “Obtaining certain commissions prohibited”)
- TIC §4001.105: minimum age and exam timing for an individual agent license?
- The individual must be at least 18 years of age and must have passed the required licensing examination within the past 12 months. (Texas Insurance Code §4001.105, “Issuance of license to individual”)
- TIC §542.055(a): what must an insurer do after receiving notice of a claim, and by when?
- Not later than the 15th day (30th business day for an eligible surplus lines insurer): acknowledge receipt of the claim, commence any investigation, and request from the claimant all items, statements, and forms it reasonably believes will be required. (Texas Insurance Code §542.055, “Receipt of notice of claim”)
- TIC §463.205: when does the Texas Life and Health Insurance Guaranty Association Act not cover a Texas resident for an impaired or insolvent insurer domiciled in another jurisdiction?
- When guaranty protection is provided to the resident by the law of that other jurisdiction. In that case, Chapter 463 does not provide coverage for the resident with respect to that insurer. (Texas Insurance Code §463.205, “Protection provided by other jurisdiction”)
Terms on this topic
- Disability — Discapacidad
- Consideration — Contraprestación
- Commissioner of Insurance — El Comisionado de Seguros
- Temporary license — Licencia temporal
- Continuing education — Educación continuada
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