17 Free Texas Life Agent Practice Questions: Policy Riders, Provisions and Options (2026)

Question 1 (Chapter 4)

A policyowner purchased a whole life insurance policy. After 7 years, she decided she could no longer afford the premiums but still wanted to maintain some level of life insurance coverage without paying any further premiums. Which nonforfeiture option should she choose?

• A) Cash Surrender Value
• B) Extended Term Insurance
• C) Automatic Premium Loan
• D) Reduced Paid-Up Insurance

Question 2 (Chapter 4)

A policyowner wants to ensure that if she dies, her three children (Alice, Bob, and Carol) receive equal shares of the death benefit. If one of her children predeceases her, she wants that child's share to go to their own children (her grandchildren). Which beneficiary designation method should she use?

• A) Per Capita
• B) Revocable
• C) Irrevocable
• D) Per Stirpes

Question 3 (Chapter 4)

A policyowner allows their life insurance policy to lapse after failing to pay premiums for several months. They later decide they want to restore the policy to its original terms. Which of the following is typically NOT a requirement for reinstating a lapsed policy?

• A) Purchasing a new policy with a new issue date and updated premiums.
• B) Paying all back premiums with interest.
• C) Providing proof of insurability.
• D) Repaying any outstanding policy loans with interest.

Question 4 (Chapter 4)

Upon the death of her husband, Maria, the beneficiary, wants to ensure that the death benefit principal remains intact and continues to earn interest with the insurance company for a period, while she receives regular income payments from the interest earned. Which settlement option should Maria choose?

• A) Fixed Period Option
• B) Fixed Amount Option
• C) Life Income with Period Certain Option
• D) Interest Only Option

Question 5 (Chapter 4)

A policyowner has named her three adult children — Anne, Brian, and Carla — as primary beneficiaries 'per capita.' Anne dies before the insured, leaving two children of her own. When the insured dies, how will the $300,000 death benefit be distributed?

• A) $150,000 each to Brian and Carla; Anne's children receive nothing under per capita.
• B) $100,000 each to Brian and Carla; Anne's $100,000 share goes to her two children equally.
• C) $100,000 each to Brian, Carla, and Anne's estate.
• D) $75,000 each to Brian, Carla, and Anne's two children.

Question 6 (Chapter 4)

A retired couple in their 70s wants to receive monthly income from a $400,000 death benefit for as long as either of them is alive. They are willing to accept a smaller payment in exchange for survivor protection. Which settlement option is most appropriate?

• A) Straight Life Income
• B) Fixed Amount Option
• C) Lump Sum
• D) Joint and Survivor Life Income

Question 7 (Chapter 4)

An insured holds a participating policy and wants to use the annual dividend to lower the out-of-pocket cost of next year's premium. Which dividend option should be elected?

• A) Accumulate at Interest
• B) Paid-Up Additions
• C) Reduction of Premium
• D) One-Year Term Insurance

Question 8 (Chapter 4)

An insured with a $400,000 policy and an Accelerated Death Benefit (ADB) rider is diagnosed with a terminal illness with a life expectancy of less than 24 months. She accepts a $200,000 accelerated payment. She dies six months later. What does the insurer pay to her beneficiary?

• A) $400,000 — the original death benefit, because the accelerated payment was a loan.
• B) $600,000 — the original face amount plus the accelerated payment.
• C) $200,000 — the remaining death benefit after the $200,000 accelerated payment.
• D) Nothing — accepting the accelerated benefit terminated the contract.

Question 9 (Chapter 4)

An insurer discovers during a claim investigation that the insured lacked any insurable interest in the policy at issuance. The policy has been in force for 4 years (past the 2-year contestable period). Can the insurer contest the policy?

• A) No — once 2 years pass, the incontestability clause bars ALL challenges.
• B) Only if fraud is also proven beyond reasonable doubt.
• C) Yes — lack of insurable interest at inception is an illegal contract that can be contested at any time, regardless of the incontestability period.
• D) No — only the insured's family can void the policy on insurable interest grounds.

Question 10 (Chapter 4)

An insured pays an annual premium of $1,200. He receives a $200 dividend and elects the Cash Payout option. Which statement BEST describes the tax treatment of that $200?

• A) It is fully taxable as ordinary income in the year received.
• B) It is taxable as a long-term capital gain.
• C) It is treated as a return of premium and is not taxable as income.
• D) It is taxable only if the policy is later surrendered.

Question 11 (Chapter 4)

An insured named her three children — Alex, Beth, and Casey — as equal primary beneficiaries per capita. Beth and Casey both predecease the insured, leaving children of their own. Alex is alive. How is the death benefit distributed?

• A) Alex receives 1/3; Beth's and Casey's children split the remaining 2/3.
• B) Alex receives the entire death benefit, as the only surviving named beneficiary.
• C) The death benefit is split into thirds among Alex and the children of Beth and Casey.
• D) The death benefit passes to the insured's estate.

Question 12 (Chapter 4)

A policyowner elects Paid-Up Additions as her dividend option. Which BEST describes the effect on her policy over time?

• A) The premium gradually decreases until the policy is fully paid up.
• B) The face amount and cash value gradually increase as each dividend purchases a small amount of additional paid-up whole life coverage.
• C) Coverage temporarily increases each year via term insurance, then resets to face amount.
• D) The cash value grows but the face amount remains exactly the same.

Question 13 (Chapter 4)

An insured selects the Fixed Period Settlement option for 10 years on a $200,000 death benefit. If the beneficiary dies in year 4, what happens to the remaining payments?

• A) Payments stop immediately; the remainder is forfeited to the insurer.
• B) Remaining payments for years 5 through 10 are made to a designated contingent payee or the beneficiary's estate.
• C) The remaining funds revert to the insured's estate.
• D) Payments are converted to life income for the contingent payee.

Question 14 (Chapter 4)

An insured wants the beneficiary to receive a guaranteed monthly income for life, but is also concerned about the beneficiary dying prematurely. Which settlement option best balances both concerns?

• A) Straight Life Income
• B) Life Income with Period Certain (e.g., Life with 10- or 20-year certain)
• C) Fixed Period for 30 years
• D) Interest Only

Question 15 (Chapter 4)

Maria purchases a life insurance policy on her 5-year-old son, Alex. She adds a rider to the policy that states if she, as the policyowner, becomes totally disabled or dies before Alex reaches a certain age, the premiums on Alex's policy will be waived. Which rider did Maria most likely add?

• A) Waiver of Premium rider
• B) Guaranteed Insurability rider
• C) Payor Benefit rider
• D) Children's Term rider

Question 16 (Chapter 4)

Mark, a young professional, purchases a life insurance policy. He is concerned that if he becomes disabled and cannot work, he will lose his income and struggle to pay his living expenses. He wants a rider that would provide him with a monthly income benefit if he becomes totally disabled. Which rider should he add to his life insurance policy?

• A) Waiver of Premium rider
• B) Disability Income rider
• C) Payor Benefit rider
• D) Accidental Death and Dismemberment rider

Question 17 (Chapter 4)

As the policyowner of a whole life insurance policy, Sarah has several rights. Which of the following actions is exclusively a right of the policyowner?

• A) Receiving the death benefit upon the insured's death
• B) Designating and changing the beneficiary
• C) Being protected by the incontestability clause
• D) Having premiums waived if the insured becomes disabled