17 Free Texas Life Agent Practice Questions: The Application, Underwriting and Policy Delivery (2026)
How to Use This Application and Underwriting Set
Completing the application, underwriting and delivering the policy is section III of the general knowledge outline and carries 12 of the 50 scored questions. It includes contract law as it applies to the application and delivery of a life policy.
These 17 questions cover correcting an application, replacement, the HIPAA authorization, the Medical Information Bureau, conditional receipts, privacy and credit report rules, when the free-look period starts, warranties and representations, and insurable interest. Think like the underwriter and like the consumer, in turn.
Practice Questions 1-6: Application, Underwriting and Receipts
Fixing a mistake on the application, the duty in a replacement, medical records, the Medical Information Bureau, stranger-originated arrangements and what a conditional receipt does.
Question 1 (Chapter 5)
During the application process for a life insurance policy, an applicant, Maria, realizes she accidentally wrote her birth year incorrectly. The agent, Tom, notices the error. What is the correct procedure for correcting this mistake on the application form?
- A) Tom, the agent, should cross out the incorrect year, write the correct one, and initial the change.
- B) Tom should use correction fluid to cover the error and then write the correct year.
- C) A new application form must be completed entirely to avoid any discrepancies.
- D) Maria must cross out the incorrect year, write the correct one, and initial the change.
Show answer & explanation
Answer: D
Any changes or corrections made to an insurance application must be initialed by the applicant, not the producer. This confirms the applicant's awareness and approval of the modification. While a new application is an option for extensive changes, a simple correction can be initialed.
Question 2 (Chapter 5)
An agent, Lisa, is discussing a new life insurance policy with a client, Mrs. Rodriguez, who currently holds an existing policy with another insurer. Mrs. Rodriguez is considering replacing her old policy with the new one Lisa is offering. What is Lisa's primary duty as a producer in a replacement situation under Texas law?
- A) To provide Mrs. Rodriguez with a Notice Regarding Replacement and compare the benefits and costs of both policies fairly and accurately.
- B) To immediately submit the new application and cancel the old policy upon approval.
- C) To advise Mrs. Rodriguez to keep her existing policy, as replacement is always detrimental.
- D) To only disclose the benefits of the new policy, as the old policy's details are irrelevant to the new sale.
Show answer & explanation
Answer: A
In a replacement situation, the producer has a crucial duty to disclose the implications of replacement to the applicant. This includes providing a 'Notice Regarding Replacement' and conducting a fair and accurate comparison of the existing policy's benefits, costs, and features against the proposed new policy. This is mandated by Texas Insurance Code Chapter 1114 to protect consumers.
Question 3 (Chapter 5)
An underwriter requests additional medical information for an applicant, Ms. Kim, during the life insurance application process. To obtain these records from Ms. Kim's physician, what must the insurer have?
- A) A signed HIPAA authorization from Ms. Kim.
- B) A court order from the Texas Department of Insurance (TDI).
- C) Verbal consent from Ms. Kim over the phone.
- D) The agent's authorization, as they represent the insurer.
Show answer & explanation
Answer: A
Under the Health Insurance Portability and Accountability Act (HIPAA), an insurer must obtain a signed authorization from the applicant (Ms. Kim) to access their protected health information from medical providers. Verbal consent or agent authorization is insufficient.
Question 4 (Chapter 5)
During the underwriting process, a life insurance company accesses information from the Medical Information Bureau (MIB). Which statement accurately describes the purpose and nature of MIB reports?
- A) MIB reports provide detailed medical records and diagnostic test results directly to the insurer.
- B) Insurers can use MIB reports as the sole basis for declining an applicant for coverage.
- C) Applicants must provide written consent to the MIB before any information can be accessed.
- D) The MIB is a non-profit organization that stores coded medical information shared by member insurers to detect misrepresentations and fraud.
Show answer & explanation
Answer: D
The Medical Information Bureau (MIB) is a non-profit trade organization that maintains coded information about medical conditions and other factors that could affect insurability, shared by member insurance companies. Its primary purpose is to help detect misrepresentations and fraud during the underwriting process. It does not provide detailed medical records, and insurers cannot decline coverage solely based on an MIB report; it serves as an alert for further investigation. Consent for MIB access is typically part of the general application authorization.
Question 5 (Chapter 5)
A group of investors approaches an individual, Mr. White, and offers to pay for a large life insurance policy on his life, naming themselves as beneficiaries. Mr. White has no existing relationship with these investors, and the primary purpose of the policy is for the investors to profit from his death. This arrangement is commonly known as:
- A) Stranger-Originated Life Insurance (STOLI) or Investor-Owned Life Insurance (IOLI).
- B) Key person insurance.
- C) A buy-sell agreement.
- D) A legitimate estate planning strategy.
Show answer & explanation
Answer: A
Stranger-Originated Life Insurance (STOLI) or Investor-Owned Life Insurance (IOLI) refers to arrangements where investors initiate a life insurance policy on the life of an individual with whom they have no insurable interest, purely for speculative profit upon the insured's death. This practice is generally considered illegal and against public policy because it lacks the fundamental principle of insurable interest at inception, turning life insurance into a mere wager on someone's life.
Question 6 (Chapter 5)
Mr. Chang completes a life insurance application and pays the initial premium to his agent, receiving a Conditional Receipt. Before the insurer can schedule his required medical examination, Mr. Chang is involved in a fatal accident. Assuming he would have been found insurable as applied for had the medical exam occurred, what is the status of coverage?
- A) Coverage is not in effect because the medical exam was not completed.
- B) The premium will be refunded, and no coverage will be provided.
- C) Coverage is pending, and the insurer will decide based on a post-mortem medical review.
- D) Coverage is in effect as of the date of the application, and the death benefit will be paid.
Show answer & explanation
Answer: D
A Conditional Receipt provides interim coverage from the date of application or medical exam (whichever is later), provided the applicant is found to be insurable as applied for. Since the scenario states Mr. Chang *would have been found insurable*, the condition of insurability is met, and coverage is considered to have been in effect from the application date. The death benefit would therefore be paid.
Get the 25-question sample set by email
Want a full-exam practice set to study offline? Drop your email — we'll send 25 questions across every content area, each with the answer and explanation.
No spam. Just the questions and one optional follow-up.
Practice Questions 7-12: Privacy, Credit Reports and Delivery
Privacy notices, the rights that follow an adverse decision based on a consumer report, when the free-look period begins and the difference between a warranty and a representation.
Question 7 (Chapter 5)
Under the Gramm-Leach-Bliley Act (GLBA), when must an insurance company provide a privacy notice to its customers regarding the collection and sharing of their nonpublic personal information?
- A) Only when the customer specifically requests it.
- B) Only if the company intends to share the customer's information with third parties.
- C) Upon policy delivery only, never at the point of application.
- D) Annually, as long as the customer relationship exists, and at the time the customer relationship is established.
Show answer & explanation
Answer: D
The Gramm-Leach-Bliley Act (GLBA) requires financial institutions, including insurance companies, to provide privacy notices to customers at the time the customer relationship is established and annually thereafter, for as long as the customer relationship exists. This notice explains the company's privacy policies and practices, including how it collects and shares nonpublic personal information, and offers customers the opportunity to opt out of certain sharing.
Question 8 (Chapter 5)
Ms. Green applies for a life insurance policy and is subsequently declined. The insurer informs her that the decision was based on adverse information contained in a consumer report. Under the Fair Credit Reporting Act (FCRA), what specific right does Ms. Green have in this situation?
- A) The right to demand the insurer issue the policy despite the report.
- B) The right to sue the insurer for discrimination based on the report.
- C) The right to be informed of the name and address of the consumer reporting agency that supplied the report.
- D) The right to have the adverse information permanently removed from her report without verification.
Show answer & explanation
Answer: C
Under the Fair Credit Reporting Act (FCRA), if an adverse underwriting decision (like declining coverage) is based on information from a consumer report, the insurer must inform the applicant of the name and address of the consumer reporting agency that supplied the report. This allows the applicant to contact the agency, obtain a copy of the report, and dispute any inaccurate information. The FCRA does not grant the right to demand issuance of a policy or automatic removal of information.
Question 9 (Chapter 5)
Ms. Lopez receives her new life insurance policy from her agent on October 15th. The policy includes a 30-day free-look provision, as required for replacement policies in Texas (TIC 1114.053(e)). From what date does Ms. Lopez's free-look period officially begin?
- A) The date the application was signed.
- B) The date the policy was issued by the insurer.
- C) The date the first premium payment was processed.
- D) The date the policy was delivered to Ms. Lopez.
Show answer & explanation
Answer: D
The free-look period (also known as the 'right to examine' period) always begins on the date the policy is delivered to the policyowner, not the application date, issue date, or premium payment date. This ensures the policyowner has the full statutory period to review the policy document after receiving it. For replacement policies in Texas, this period is 30 days.
Question 10 (Chapter 5)
During the underwriting process for a life insurance policy, an insurer needs to obtain detailed medical records from an applicant's physician. Under HIPAA, what specific requirement must the insurer meet to legally access and use this protected health information?
- A) The insurer must obtain a general verbal consent from the applicant over the phone.
- B) The insurer can access records directly if the applicant has paid the initial premium.
- C) The insurer only needs to notify the applicant that their medical records will be accessed.
- D) The insurer must have a specific, written authorization signed by the applicant.
Show answer & explanation
Answer: D
Under HIPAA (Health Insurance Portability and Accountability Act), Protected Health Information (PHI) can only be accessed and used by an insurer with a specific, written authorization signed by the applicant. Verbal consent (A) is insufficient, and payment of premium (B) or mere notification (C) does not grant the necessary legal right to access medical records.
Question 11 (Chapter 5)
Ms. Green applied for a life insurance policy and was subsequently declined coverage. The insurer informed her that the decision was based on adverse information found in a consumer report. Under the Fair Credit Reporting Act (FCRA), what specific action must the insurer take after taking adverse action based on a consumer report?
- A) The insurer must immediately re-evaluate the application with new information provided by Ms. Green.
- B) The insurer must pay for Ms. Green to obtain a new consumer report.
- C) The insurer must provide Ms. Green with a copy of the consumer report and the name and address of the reporting agency.
- D) The insurer must obtain written consent from Ms. Green before declining the policy.
Show answer & explanation
Answer: C
Under the Fair Credit Reporting Act (FCRA), if an adverse action (like declining coverage) is taken based on information in a consumer report, the insurer must inform the applicant of the adverse action and provide the name, address, and phone number of the consumer reporting agency that furnished the report, as well as a statement that the agency did not make the decision and cannot explain why the decision was made. The applicant also has the right to obtain a free copy of the report from the agency and dispute its accuracy. The insurer is not required to re-evaluate (A), pay for a new report (B), or obtain consent before declining (D).
Question 12 (Chapter 5)
In the context of insurance, a statement that is guaranteed to be absolutely true is known as a warranty. While life insurance applications typically involve representations, warranties are more common in other types of insurance. Which of the following is an example of a warranty in a property insurance context?
- A) A homeowner stating their belief that their house is in good condition.
- B) A business owner guaranteeing that a sprinkler system will be maintained in working order.
- C) An applicant for auto insurance stating their driving history to the best of their knowledge.
- D) A life insurance applicant stating they are a non-smoker.
Show answer & explanation
Answer: B
A warranty is a statement of absolute truth, and if breached, can void the policy. In property insurance, a common warranty might be a promise to maintain certain safety features, such as a sprinkler system (B). If the sprinkler system is not maintained as warranted, the insurer could deny a claim, even if the lack of maintenance wasn't directly related to the loss. Statements of belief (A) and statements to the best of one's knowledge (C, D) are representations, not warranties, in an insurance context.
Practice Questions 13-17: Replacement and Insurable Interest
What a replacing agent must provide, what the privacy rules let an insurer share, why a replacement restarts the contestable period and who has insurable interest in whom.
Question 13 (Chapter 5)
An agent, Mr. Lee, is assisting a client, Mrs. Chen, in replacing her existing life insurance policy with a new one. Beyond providing the 'Notice Regarding Replacement' form, what specific comparative document is Mr. Lee required to present to Mrs. Chen under Texas regulations to ensure she understands the implications of the replacement?
- A) A copy of the replacing insurer's internal underwriting guidelines.
- B) A detailed written comparison statement outlining the benefits and costs of both the existing and proposed policies.
- C) A sworn affidavit from the replacing insurer stating the new policy is superior.
- D) Only the 'Notice Regarding Replacement' form is legally required; other comparisons are optional.
Show answer & explanation
Answer: B
Under Texas Insurance Code Chapter 1114, which governs replacement of life insurance, the replacing agent has a duty to provide the applicant with a 'Notice Regarding Replacement' and a written proposal or comparison statement. This detailed comparison helps the applicant understand the potential advantages and disadvantages of replacing their existing policy, including any new contestability periods, surrender charges, or changes in benefits. This goes beyond just the notice form (D).
Question 14 (Chapter 5)
Under the Gramm-Leach-Bliley Act (GLBA), insurance companies must provide privacy notices and allow customers to opt-out of sharing certain nonpublic personal information. However, some information can be shared without an opt-out. Which of the following types of information can an insurer generally share with third parties *without* giving the customer an opt-out option?
- A) Information shared with non-affiliated third parties for marketing purposes.
- B) Information shared with credit reporting agencies for underwriting purposes.
- C) Information shared with affiliated companies for their own marketing efforts.
- D) Information shared with any third party that is not part of the insurance transaction.
Show answer & explanation
Answer: B
The GLBA generally requires an opt-out for sharing nonpublic personal information with non-affiliated third parties for marketing purposes (A) or with affiliates for their marketing (C). However, the GLBA allows insurers to share information without an opt-out option for certain routine business purposes, such as with credit reporting agencies for underwriting (B), or to process transactions, prevent fraud, or comply with legal requirements. Sharing with any third party not part of the transaction (D) would likely require an opt-out.
Question 15 (Chapter 5)
A key concern when replacing an existing life insurance policy with a new one is the establishment of a new contestability period. Why is this a significant disadvantage for the policyholder?
- A) It means the new policy will have higher premiums than the old one.
- B) It allows the new insurer to deny claims for a longer period if misrepresentations are discovered.
- C) It prevents the policyholder from taking out a policy loan for the first two years.
- D) It automatically voids any riders or endorsements from the previous policy.
Show answer & explanation
Answer: B
The contestability period, typically two years in Texas (TIC 1101.006), allows the insurer to contest a claim and potentially deny benefits if material misrepresentations were made on the application. When a policy is replaced, a new contestability period begins with the new policy, meaning the policyholder loses the benefit of the time that had already passed on their original policy's contestability period. This exposes the policyholder to a renewed risk of a claim denial for a fresh two-year period. Options A, C, and D are not direct consequences of a new contestability period.
Question 16 (Chapter 5)
Mr. Garcia applies for a life insurance policy on his spouse, Mrs. Garcia. They have been married for 15 years. Which statement accurately describes the requirement for insurable interest in this scenario?
- A) Mr. Garcia must demonstrate a financial dependency on Mrs. Garcia to prove insurable interest.
- B) Insurable interest is automatically presumed to exist between spouses.
- C) Mr. Garcia needs to provide a notarized statement from Mrs. Garcia confirming her consent.
- D) Insurable interest is only required if the policy's face amount exceeds a certain threshold.
Show answer & explanation
Answer: B
Insurable interest is generally presumed to exist between close family members, such as spouses, parents and minor children, and sometimes siblings. There is no need to prove financial dependency in such cases. The insurable interest must exist at the time of application. Option A is incorrect as financial dependency is not required for spouses. Option C relates to consent, not insurable interest itself. Option D is incorrect; insurable interest is a fundamental principle regardless of policy size.
Question 17 (Chapter 5)
A group of investors convinces an elderly individual, Ms. White, to purchase a large life insurance policy on her own life, with the investors paying all premiums and being named as beneficiaries. Ms. White has no prior relationship with these investors, and the sole purpose is for them to profit from her death. This arrangement, known as STOLI/IOLI, is prohibited primarily because it violates which fundamental insurance principle?
- A) The principle of utmost good faith.
- B) The principle of indemnity.
- C) The requirement for insurable interest at the inception of the policy.
- D) The principle of subrogation.
Show answer & explanation
Answer: C
Stranger-Originated Life Insurance (STOLI) or Investor-Owned Life Insurance (IOLI) schemes are illegal because they violate the fundamental principle of insurable interest. Insurable interest must exist at the time the policy is purchased (inception) between the policyowner and the insured. In STOLI/IOLI, the investors have no legitimate insurable interest in Ms. White's life; their only interest is speculative profit from her death. Option A (utmost good faith) is also related but C is the primary and most direct violation. Options B (indemnity) and D (subrogation) are principles primarily associated with property and casualty insurance, not life insurance.
The Mistakes That Cost Marks
Who initials a correction. The applicant initials changes, not the producer.
Thinking verbal consent is enough for medical records. A signed written authorization is needed.
Starting the free-look period from the wrong date. It runs from delivery. For a replacement in Texas, the right of return is 30 days under TIC 1114.053(e), not 20.
Overstating the Medical Information Bureau. It holds coded information that alerts an underwriter; it is not a source of full records and not the sole basis for a decision.
Forgetting insurable interest at inception. It must exist when the policy is issued, which is why stranger-originated arrangements fail.
Your Next Step
Take what you missed back to the chapter and listen to it again, then retest in a day or two. The free course preview shows how the audio chapters and quizzes work together.
For the rest of the free questions, go to the full list of free Texas Life Agent practice questions. The exam is 90 questions in 120 minutes with a scaled passing score of 70, and 45-46% of first-time candidates passed in July to September 2026.
Free: 25 Texas Life Agent practice questions
Liked this article? Get 25 exam-style questions emailed to you — with full answer explanations, no credit card. Closest thing to studying offline.
No spam. Just the questions and one optional follow-up.
Study this topic with LanePrep
Listen to these audio chapters on your commute — no screen required.
Related Articles
How to Pass the Texas Life Agent Exam on the First Try (2026)
9 min read
About $130 in Fees: Texas Life Agent License Cost 2026
6 min read
25 Free Texas Life Agent Exam Practice Questions (2026)
25 min read
Is the Texas Life Agent Exam Hard? Pass Rates and Difficulty (2026)
4 min read
17 Free Texas Life Agent Practice Questions: Types of Life Insurance Policies (2026)
14 min read
17 Free Texas Life Agent Practice Questions: Annuities (2026)
14 min read
17 Free Texas Life Agent Practice Questions: Policy Riders, Provisions and Options (2026)
14 min read