Texas law · Section II · On both exams
Texas statutes and rules pertinent to life insurance only
Texas rules that apply only to life insurance and annuities: marketing and solicitation, the required individual life and annuity provisions, group life, credit life, replacement and the nonforfeiture law.
Questions on the exam
- Life, Accident and Health: 6 questions
- Life Agent: 10 questions
Life, Accident and Health exam · Life Agent exam
What the official outline lists
- Marketing and solicitation
- Individual life and annuity policy provisions (16 items)
- Group life
- Credit life
- Replacement
- Nonforfeiture 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 annuity disclosure rules (28 TAC §4.2310), which document is an appropriate buyer's guide for an annuity sale?
- The latest NAIC buyer's guide for the type of annuity that is the subject of the transaction
- A buyer's guide written by the insurer for the annuity that is the subject of the transaction
- The first NAIC buyer's guide ever adopted, used for every type of annuity in the transaction
- The agent's own written summary of the annuity that is the subject of the transaction
Show the answer
Correct answer: A. The latest NAIC buyer's guide for the type of annuity that is the subject of the transaction
According to 28 TAC §4.2310, an appropriate buyer's guide is "the latest version of the buyer's guide adopted by the National Association of Insurance Commissioners (NAIC) that applies to the particular type of annuity" that is the subject of the transaction.
Why the other options are wrong
- B. 28 TAC §4.2310 defines the appropriate buyer's guide as the one adopted by the NAIC, not a guide written by the insurer.
- C. 28 TAC §4.2310 requires the latest version of the NAIC buyer's guide that applies to the particular type of annuity, not the first version used for every type.
- D. 28 TAC §4.2310 points to the buyer's guide adopted by the NAIC; an agent's own written summary is not the appropriate buyer's guide under the rule.
For the purposes of this subchapter, an appropriate buyer's guide is the latest version of the buyer's guide adopted by the National Association of Insurance Commissioners (NAIC) that applies to the particular type of annuity (such as fixed deferred annuity, equity-indexed annuity, or variable annuity) that is the subject of the transaction.
2. Under the Texas Insurance Code, to what extent may an insured of legal age transfer or assign a life insurance policy or an interest in it?
- Only to the extent that the policy expressly permits it
- In writing, to the extent not prohibited by the policy
- Orally or in writing, without regard to the policy terms
- Only with the written approval of the beneficiary
Show the answer
Correct answer: B. In writing, to the extent not prohibited by the policy
According to TIC §1103.055(2), an individual of legal age who is insured under a life insurance policy may in writing, in a manner and to the extent not prohibited by the policy, transfer or assign the policy or an interest, benefit, right, or title in the policy.
Why the other options are wrong
- A. Incorrect. "To the extent permitted by the policy" is the standard TIC §1103.055(1) applies to designating a beneficiary. For a transfer or assignment, TIC §1103.055(2) uses the standard "not prohibited by the policy."
- C. Incorrect. TIC §1103.055 says the insured may act "in writing," and the transfer or assignment must be in a manner and to the extent not prohibited by the policy, so the policy terms do matter.
- D. Incorrect. TIC §1103.055(2) does not condition a transfer or assignment on the beneficiary's approval; the only limits it states are that it be in writing and not prohibited by the policy.
An individual of legal age who is insured under a life insurance policy may in writing: (1) in a manner and to the extent permitted by the policy, designate any individual, partnership, association, corporation, or other legal entity as a beneficiary of the policy; and (2) in a manner and to the extent not prohibited by the policy, transfer or assign to any entity described by Subdivision (1): (A) the policy; or (B) an interest, benefit, right, or title in the policy.
3. Under the Texas Insurance Code, a life insurance policy must provide that settlement after the death of the insured will be made no later than which deadline?
- Two months after receipt of proof of the death and of the claimant's right to the proceeds
- 30 days after receipt of proof of the death and of the claimant's right to the proceeds
- Two months after the date of the insured's death, whether or not any proof has been received
- Six months after receipt of proof of the death and of the claimant's right to the proceeds
Show the answer
Correct answer: A. Two months after receipt of proof of the death and of the claimant's right to the proceeds
According to TIC §1101.011(a), a life insurance policy "must provide that settlement under the policy after the death of the insured will be made not later than two months after the date of receipt of proof of" the death and the right of the claimant to the proceeds of the policy.
Why the other options are wrong
- B. TIC §1101.011(a) sets the limit at "two months" after receipt of the required proof, not 30 days.
- C. TIC §1101.011(a) measures the two months from "the date of receipt of proof of" the death and the claimant's right to the proceeds, not from the date of death itself.
- D. TIC §1101.011(a) sets the limit at "two months" after receipt of the required proof, not six months.
(a) Except as provided by Subsection (b), a life insurance policy must provide that settlement under the policy after the death of the insured will be made not later than two months after the date of receipt of proof of:
(1) the death; and
(2) the right of the claimant to the proceeds of the policy.
4. Pat applies for an annuity in Texas. The buyer's guide and the disclosure document required by the annuity disclosure rules are not provided at or before the time of application. What is the minimum free look period that must be provided, during which Pat may return the contract without penalty?
- 10 calendar days
- 15 calendar days
- 20 calendar days
- 30 calendar days
Show the answer
Correct answer: B. 15 calendar days
Under 28 TAC §4.2311(a), if the buyer's guide and the disclosure document required by the subchapter are not provided at or before the time of application, a free look period of at least 15 calendar days must be provided during which the applicant may return the contract without penalty. "At least 15" makes 15 calendar days the minimum.
Why the other options are wrong
- A. Incorrect. 28 TAC §4.2311(a) requires a free look period of at least 15 calendar days, so 10 calendar days falls short of the minimum.
- C. Incorrect. The minimum stated in 28 TAC §4.2311(a) is 15 calendar days ("at least 15"), not 20.
- D. Incorrect. 28 TAC §4.2311(a) sets the minimum free look period at 15 calendar days ("at least 15"), not 30.
(a) If the buyer's guide and the disclosure document required by this subchapter are
not provided at or before the time of application, a free look period of at least 15
calendar days must be provided during which the applicant may return the contract
without penalty.
5. Alex is insured under a group life policy issued many years ago, and the policy terms allow assignment. Alex wants to make a collateral assignment of the policy benefits to a bank as security for a loan. Under Texas law, which is correct?
- Alex may make the assignment, because the statute applies whatever the issue date
- Alex may not make it, because only absolute assignments are allowed in group life
- Alex may not make it, because the statute applies only to newly issued policies
- Alex may make it, but only if the assignee is Alex's employer instead of the bank
Show the answer
Correct answer: A. Alex may make the assignment, because the statute applies whatever the issue date
According to TIC §1131.006(a), subject to the policy terms, an insured may make an absolute or collateral assignment of all rights and benefits to any individual, firm, corporation, association, trust, or other legal entity other than the insured's employer. A bank is such an entity. Under §1131.006(b), subsection (a) applies without regard to the date a policy is issued.
Why the other options are wrong
- B. TIC §1131.006(a) allows "an absolute or collateral assignment," so collateral assignments are not prohibited.
- C. TIC §1131.006(b) states that subsection (a) applies without regard to the date a policy is issued, so an older policy is covered.
- D. TIC §1131.006(a) permits assignment to any legal entity "other than the insured's employer," so the employer is the one party that cannot be the assignee.
(a) Subject to the terms of a group life insurance policy, an insured under the policy may make to any individual, firm, corporation, association, trust, or other legal entity, other than the insured's employer, an absolute or collateral assignment of all rights and benefits conferred on the insured by the policy or by Subchapter C.
(b) Subsection (a) applies without regard to the date a policy is issued.
6. Under the Texas Insurance Code, the initial amount of credit life insurance on a debtor may not exceed which amount?
- The market value of the property that secures the credit transaction
- The total amount of debt repayable under the contract evidencing the credit transaction
- 125 percent of the total amount of debt repayable under the credit contract
- The debtor's annual income as stated on the application for the credit
Show the answer
Correct answer: B. The total amount of debt repayable under the contract evidencing the credit transaction
According to TIC §1153.155(a), "The initial amount of credit life insurance on a debtor may not exceed the total amount of debt repayable under the contract that evidences the credit transaction." The limit is tied to the debt itself. Subsection (b) adds that, for a debt repayable in substantially equal installments, the insurance may not at any time exceed the greater of the scheduled or actual unpaid amount of the debt.
Why the other options are wrong
- A. TIC §1153.155(a) measures the limit by "the total amount of debt repayable under the contract," not by the value of any property securing the transaction.
- C. TIC §1153.155(a) says the initial amount "may not exceed the total amount of debt repayable"; insurance equal to 125 percent of that debt would exceed the limit.
- D. The limit in TIC §1153.155(a) is based on the total amount of debt repayable under the contract, not on the debtor's income.
(a) The initial amount of credit life insurance on a debtor may not exceed the total amount of debt repayable under the contract that evidences the credit transaction.
(b) If the debt is repayable in substantially equal installments, the amount of insurance may not at any time exceed the greater of the scheduled or actual unpaid amount of the debt under the contract.
7. Under the Texas Insurance Code, the chapter on replacement of life insurance and annuities sets minimum standards of conduct to protect purchasers. In which transactions must those standards be observed?
- Replacement or group conversion transactions
- Replacement or policy reinstatement transactions
- Replacement or financed purchase transactions
- Replacement or beneficiary change transactions
Show the answer
Correct answer: C. Replacement or financed purchase transactions
According to TIC §1114.001(2), a purpose of the chapter is to "protect the interests of purchasers of life insurance or annuities by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions." The two transactions named are replacement and financed purchase.
Why the other options are wrong
- A. TIC §1114.001(2) names replacement or financed purchase transactions as the transactions in which the minimum standards of conduct are to be observed. Group conversion transactions are not named.
- B. TIC §1114.001(2) names replacement or financed purchase transactions, not policy reinstatement transactions, as the transactions in which the minimum standards of conduct are to be observed.
- D. TIC §1114.001(2) does not mention beneficiary changes; the minimum standards of conduct are to be observed in replacement or financed purchase transactions.
(2) protect the interests of purchasers of life insurance or annuities by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions;
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Key flashcards
Front and back, as in the app.
- Appropriate buyer's guide for an annuity transaction (28 TAC §4.2310)
- The latest version of the NAIC-adopted buyer's guide that applies to the particular type of annuity that is the subject of the transaction (28 TAC §4.2310, “Buyer's Guide”)
- TIC §1103.055: to what extent may an insured of legal age transfer or assign a life policy or an interest in it?
- In writing, in a manner and to the extent not prohibited by the policy. The insured may transfer or assign the policy, or an interest, benefit, right, or title in the policy, to any entity described by Subdivision (1). (Texas Insurance Code §1103.055, “Designation of beneficiary of policy; transfer or assignment of policy or interest”)
- Group life assignment made before September 1, 1969: is it valid, and how is the insurer protected?
- Subject to the policy terms, it is valid to vest in the assignee all assigned rights and privileges, but without prejudice to the insurer for any payment it makes or individual policy it issues before receiving notice of the assignment (TIC §1131.006(c)). (Texas Insurance Code §1131.006, “Assignment of benefits”)
- TIC §1114.001(2): in which transactions does the replacement chapter set minimum standards of conduct, and whose interests do they protect?
- Replacement or financed purchase transactions. The minimum standards of conduct protect the interests of purchasers of life insurance or annuities. (Texas Insurance Code §1114.001, “Purpose”)
- Texas annuities: what free look period is required if the buyer's guide and disclosure document are not provided at or before application?
- At least 15 calendar days, during which the applicant may return the contract without penalty (Texas Administrative Code, §4.2311(a)). (28 TAC §4.2311, “Free Look Period”)
Terms on this topic
- Annuity — Anualidad
- Free look — Período de revisión
- Assignment — Asignación (cesión)
- Application — Solicitud
- Replacement — Reemplazo
- Credit life — Seguro de vida de crédito
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