Texas Life Insurance Practice Exam Free - 2026

• A. One year
• B. Two years
• C. Three years
• D. Five years

Correct answer: B. Two years

Explanation: A Texas life insurance policy must provide that it is incontestable after it has been in force for two years from its date of issue during the lifetime of the insured, except for nonpayment of premiums. The policy may still reserve the right to contest at any time for violation of conditions relating to naval or military service in time of war. See Tex. Ins. Code 1101.006.

• A. 15 days after receipt of proof
• B. 30 days after receipt of proof
• C. 45 days after receipt of proof
• D. Two months after receipt of proof

Correct answer: D. Two months after receipt of proof

Explanation: Texas requires a life insurance policy to provide that settlement after the insured's death will be made not later than two months after the insurer receives proof of the death and of the claimant's right to the proceeds. The shorter day counts belong to the general prompt-payment rules for other claims, not to the life-policy settlement provision. See Tex. Ins. Code 1101.011.

• A. Three years
• B. Five years
• C. Seven years
• D. Ten years

Correct answer: A. Three years

Explanation: Texas rules require policies with nonforfeiture benefits to allow reinstatement within three years of the premium default, or longer at the company's option, on satisfactory evidence of insurability and payment of premium arrears with interest. The rule does not apply to single-premium policies. See 28 TAC 4.611.

• A. One year
• B. Two years
• C. Three years
• D. Five years

Correct answer: B. Two years

Explanation: Texas rules prohibit a life policy provision that limits the time within which any action at law or in equity may be commenced to less than two years after the cause of action accrues. A one-year or six-month limitation clause would therefore be unenforceable in Texas. See 28 TAC 4.619.

• A. Surrender the policy for its net cash value
• B. Elect the extended term nonforfeiture option
• C. Elect the reduced paid-up nonforfeiture option
• D. Take a maximum policy loan and let the policy lapse

Correct answer: C. Elect the reduced paid-up nonforfeiture option

Explanation: The reduced paid-up option uses the existing cash value as a single premium to buy a smaller amount of fully paid permanent insurance, so some coverage continues for life with no further premiums - exactly Marcus's goal. Surrender ends the coverage in exchange for cash, extended term keeps the full face amount but only for a limited period, and borrowing then lapsing destroys the coverage. Nonforfeiture options exist so a policyowner who stops paying does not forfeit the value already built.

• A. A nonparticipating policy
• B. A participating policy
• C. An assessable mutual policy
• D. A variable whole life policy

Correct answer: A. A nonparticipating policy

Explanation: A nonparticipating policy pays no dividends; everything the owner will receive is fixed and guaranteed in the contract at issue. A participating policy, by contrast, shares in the insurer's divisible surplus through dividends - the NAIC glossary describes a dividend as 'a refund of a portion of the premium paid by the insured from insurer surplus.' Fixed guaranteed values with no surplus sharing is the defining mark of nonpar coverage.

• A. The baby is excluded until the rider is rewritten and repriced with a medical exam
• B. The baby must be covered under a separate, individually underwritten juvenile policy
• C. Coverage applies only to children alive when the rider was issued
• D. The baby is automatically covered under the same rider for the same single premium after a brief minimum age is reached

Correct answer: D. The baby is automatically covered under the same rider for the same single premium after a brief minimum age is reached

Explanation: A children's term rider provides level term coverage on all eligible children of the insured for one premium, and children born or adopted after issue are typically covered automatically once past a minimum age (such as 15 days), with no additional premium or underwriting. New York's insurance regulator notes a children's rider 'will generally provide level term coverage on the life of your children and is usually offered at one premium rate.' That one-premium, all-children design is what distinguishes it from buying separate juvenile policies.

• A. A paid-up whole life policy equal to the original face amount
• B. A refund of all or a stated portion of the premiums she paid, since no death benefit was paid during the term
• C. Nothing, because return of premium applies only if the insured dies during the term
• D. The face amount, paid in installments over her remaining lifetime

Correct answer: B. A refund of all or a stated portion of the premiums she paid, since no death benefit was paid during the term

Explanation: New York's insurance regulator explains that a return of premium rider 'will generally provide for a refund of all or some of the premiums you paid for the term insurance at the end of a level term period... if no death benefit was paid out during that period.' The rider costs extra and pays the insured for outliving the term; it does not convert the policy to paid-up whole life or pay the face amount to a living insured.

• A. The accelerated death benefit (terminal illness) rider, because any serious condition qualifies
• B. The waiver of premium rider
• C. A long-term care or chronic illness rider, which pays when the insured cannot perform activities of daily living
• D. The guaranteed insurability rider

Correct answer: C. A long-term care or chronic illness rider, which pays when the insured cannot perform activities of daily living

Explanation: A long-term care rider lets the insured 'use part of your death benefit to pay for long-term care expenses,' and chronic illness triggers are based on inability to perform activities of daily living - not on a terminal diagnosis (NAIC consumer guidance). The basic accelerated death benefit for terminal illness requires a diagnosis with a limited life expectancy, which Gloria does not have. Waiver of premium excuses premiums during disability, and guaranteed insurability only permits buying more coverage.

• A. A cost of living rider, which allows additional coverage tied to increases in a cost-of-living index
• B. A return of premium rider, which refunds premiums at the end of the term
• C. An accidental death benefit rider, which doubles the payout for accidental death
• D. A payor benefit rider, which waives premiums if the premium payor dies

Correct answer: A. A cost of living rider, which allows additional coverage tied to increases in a cost-of-living index

Explanation: A cost of living rider lets the policyowner purchase additional insurance periodically, with the amount 'based on increases in the cost of living index,' so the death benefit can keep pace with inflation (New York DFS consumer guidance on optional riders). The typical index is the Consumer Price Index. None of the other riders changes the amount of coverage in response to inflation.

• A. It pays the policy's face amount immediately to the child's guardian
• B. It cancels the policy and refunds all premiums paid to the mother's estate
• C. It waives the premiums on the child's policy, keeping it in force until the child reaches the age specified in the rider
• D. It converts the juvenile policy into term insurance on the guardian's life

Correct answer: C. It waives the premiums on the child's policy, keeping it in force until the child reaches the age specified in the rider

Explanation: The payor benefit rider is attached to juvenile policies and 'provides for waiving future premiums on the child's policy in the event of the death of the person who pays the premium' - most versions also apply if the payor becomes totally disabled - until the child reaches a stated age such as 21 or 25 (New York DFS consumer guidance). The insured child is alive, so no death benefit is payable, and the coverage continues rather than being canceled or converted.

• A. Both riders pay him identical monthly cash benefits
• B. Waiver of premium keeps the policy in force without premium payments, while the disability income rider pays him a monthly income, typically limited to a percentage of the face amount
• C. The disability income rider waives his premiums, while waiver of premium pays him monthly income
• D. Both riders merely suspend the policy until he recovers, with no cash paid and no coverage in force

Correct answer: B. Waiver of premium keeps the policy in force without premium payments, while the disability income rider pays him a monthly income, typically limited to a percentage of the face amount

Explanation: Waiver of premium excuses premium payments during total disability so the coverage continues, but it puts no cash in the insured's pocket. The separate disability income rider 'provides a monthly income while you are totally disabled after an initial waiting period, with the monthly disability income benefit limited to a percentage of the death benefit' (New York DFS consumer guidance). Option C reverses the two riders' functions.