17 Free Texas Life Agent Practice Questions: Texas Insurance Law Common to Life and Health (2026)
How to Use This Texas Law Common to Life and Health Set
Texas statutes and rules common to life and health insurance is section I of the state-specific outline and carries 20 of the 30 scored state questions, the largest single block in that part of the exam. It covers how insurers are classified, how agents are licensed and disciplined, and the conduct rules that apply to every producer.
These 17 questions cover insurer classifications, nonresident and temporary licenses, the Commissioner, license discipline, rebating, defamation and boycott, cease and desist orders, commingling, the guaranty association, continuing education and advertising. Many answers are specific numbers or section cites, so check each explanation.
Practice Questions 1-6: Insurers, Licensing and Rebating
Domestic, foreign and alien insurers, mutual companies, nonresident licensing, the Commissioner and the line between a prohibited inducement and an ordinary sales presentation.
Question 1 (Chapter 7)
An insurance company is incorporated in Oklahoma but is authorized to do business in Texas. How would this insurer be classified according to the Texas Insurance Code?
- A) Domestic
- B) Foreign
- C) Alien
- D) Admitted Alien
Show answer & explanation
Answer: B
A company incorporated under the laws of another state (like Oklahoma) is considered a 'foreign' insurer in Texas. A 'domestic' insurer is incorporated in Texas, and an 'alien' insurer is incorporated in another country.
Question 2 (Chapter 7)
A life insurance company is owned by its policyholders and issues participating policies that pay dividends. This company is known as a:
- A) Stock company
- B) Mutual company
- C) Fraternal benefit society
- D) Reciprocal insurer
Show answer & explanation
Answer: B
A mutual insurance company is owned by its policyholders. When the company has a surplus, it may return a portion to policyholders in the form of dividends. Stock companies are owned by stockholders.
Question 3 (Chapter 7)
Which of the following is a requirement to obtain a nonresident agent license in Texas under TIC Chapter 4056?
- A) The individual must hold a similar license in good standing in their home state.
- B) The individual must move to Texas within 90 days of licensure.
- C) The individual must pass the Texas-specific portion of the exam.
- D) The individual must be appointed by a Texas-based domestic insurer.
Show answer & explanation
Answer: A
Texas grants nonresident licenses to individuals who are in good standing in their home state, provided that state has a reciprocal agreement with Texas. Usually, no additional exam is required if the home state requirements are met.
Question 4 (Chapter 7)
How is the Commissioner of Insurance in Texas chosen for the position?
- A) Appointed by the Governor for a 2-year term.
- B) Elected by popular vote every 4 years.
- C) Appointed by the State Senate for a 6-year term.
- D) Elected by the Board of Directors of the Guaranty Association.
Show answer & explanation
Answer: A
Under TIC 31.022, the Commissioner of Insurance is appointed by the Governor with the advice and consent of the Texas Senate for a two-year term expiring on February 1 of each odd-numbered year.
Question 5 (Chapter 7)
An agent is found to have intentionally lied on their license application regarding a past criminal record. Under TIC 4005.101, the Commissioner may:
- A) Only issue a small fine of $100.
- B) Do nothing if the crime happened in another state.
- C) Wait until the next renewal period to address the issue.
- D) Deny, suspend, or revoke the agent's license.
Show answer & explanation
Answer: D
TIC 4005.101 gives the Commissioner the authority to deny a license application or discipline an existing license holder for obtaining a license by fraud or misrepresentation.
Question 6 (Chapter 7)
During a sales presentation, an agent offers a prospective client a $50 credit toward their first year's premium if they sign the application today. This is a violation of which Texas statute?
- A) Defamation (TIC 541.053)
- B) Twisting (TIC 541.051)
- C) Coercion (TIC 541.054)
- D) Rebating (TIC 541.056)
Show answer & explanation
Answer: D
Rebating is offering any inducement for insurance that is not specified in the policy, such as a premium credit or a gift exceeding $25. TIC 541.056 prohibits this practice.
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Practice Questions 7-12: Conduct, Temporary Licenses and the Guaranty Association
Cease and desist orders, commingling premiums, defamation, the temporary license, what the guaranty association covers when an insurer fails and licensing a business entity.
Question 7 (Chapter 7)
An agent is found to have committed an unfair trade practice. The Commissioner issues an order requiring the agent to stop the activity immediately. This order is known as a:
- A) Cease and Desist Order
- B) Writ of Mandamus
- C) Summary Judgment
- D) Certificate of Authority
Show answer & explanation
Answer: A
Under TIC 83.051, the Commissioner may issue a Cease and Desist order if they determine a person is engaging in hazardous or prohibited conduct.
Question 8 (Chapter 7)
An agent collects a cash premium from a client but deposits it into their personal checking account for three days before writing a check to the insurance company. This practice is known as:
- A) Rebating
- B) Twisting
- C) Defamation
- D) Commingling
Show answer & explanation
Answer: D
Commingling is the illegal practice of mixing a client's funds (premiums) with the agent's personal or business funds. Agents have a fiduciary duty to keep premium funds separate.
Question 9 (Chapter 7)
An agent tells a client that a competitor's policy is 'junk' and that the competitor's agents are all 'thieves.' If these statements are false and intended to harm the competitor, the agent has committed:
- A) Twisting
- B) Coercion
- C) Rebating
- D) Defamation
Show answer & explanation
Answer: D
Defamation (TIC 541.053) involves making false or maliciously critical statements about an insurer's financial condition or the character of its representatives.
Question 10 (Chapter 7)
An individual is applying for a temporary life insurance license in Texas. According to TIC 4001.151, which of the following is a requirement for this applicant?
- A) The applicant must pass the state exam before the temporary license is issued.
- B) The applicant must be sponsored by a licensed insurance company.
- C) The applicant must complete 24 hours of continuing education immediately.
- D) The applicant must have at least 2 years of experience in another state.
Show answer & explanation
Answer: B
Under TIC 4001.151-.156, a temporary license is requested by a sponsoring insurer. It is valid for 180 days and does not require the applicant to pass the state exam first, but it does require a sponsor and specific training.
Question 11 (Chapter 7)
A Texas resident has a life insurance policy with a $500,000 death benefit. The insurer becomes insolvent and is liquidated. What is the maximum amount the Texas Life and Health Insurance Guaranty Association will pay for this death benefit claim?
- A) $100,000
- B) $300,000
- C) $500,000
- D) The Association only covers health insurance, not life insurance.
Show answer & explanation
Answer: B
Under TIC 463.201, the Guaranty Association's liability for death benefits is limited to $300,000 per life. Cash surrender values are limited to $100,000.
Question 12 (Chapter 7)
A business entity wants to obtain a Texas Life Agent license. According to TIC 4001.106, which of the following must be true?
- A) Every employee of the business must be licensed as an agent.
- B) The business must have at least 10 employees.
- C) At least one officer or partner must be individually licensed as an agent.
- D) The business must be a domestic corporation.
Show answer & explanation
Answer: C
To license an agency (business entity), TIC 4001.106 requires that at least one officer, partner, or other person in control of the entity be individually licensed as an agent.
Practice Questions 13-17: Continuing Education, Penalties and Advertising
Continuing education and ethics hours, the penalty for violating an order, boycott, immunity for reporting fraud and what a testimonial in an advertisement must be.
Question 13 (Chapter 7)
An agent is renewing their license for the first time. They have completed 24 hours of continuing education, all of which were technical courses on life insurance products. Is the agent in compliance with TIC 4004.051?
- A) Yes, because they completed the required 24 hours.
- B) No, because they must complete at least 3 hours of ethics.
- C) No, because 50% of the hours must be in health insurance.
- D) Yes, because the ethics requirement only applies after the second renewal.
Show answer & explanation
Answer: B
TIC 4004.051 requires 24 hours of CE every two years, and at least 3 of those hours must be in ethics/consumer protection.
Question 14 (Chapter 7)
The Commissioner of Insurance issues a Cease and Desist order to an agent for engaging in an unfair trade practice. If the agent knowingly violates this order, what is the maximum administrative penalty the Commissioner may impose per violation under TIC 84.022?
- A) $500
- B) $25,000
- C) $1,000
- D) $10,000
Show answer & explanation
Answer: B
Under the Texas Insurance Code, the Commissioner may impose an administrative penalty of up to $25,000 for each violation of a cease and desist order. This high penalty is intended to ensure compliance with regulatory directives.
Question 15 (Chapter 7)
Two insurance agencies agree to stop doing business with a specific medical clinic to force the clinic to lower its prices for insurance-related exams. This is an example of which prohibited practice?
- A) Defamation
- B) Twisting
- C) Boycott
- D) Rebating
Show answer & explanation
Answer: C
Under TIC 541.054, entering into an agreement to commit an act of boycott, coercion, or intimidation that results in the unreasonable restraint of, or a monopoly in, the insurance business is prohibited.
Question 16 (Chapter 7)
An agent reports a suspected case of insurance fraud to the TDI in good faith. Later, the individual accused of fraud sues the agent for defamation. Under TIC 701.052, what protection does the agent have?
- A) None; the agent is liable for any false reports.
- B) The TDI will pay for the agent's legal defense but the agent can still be held liable.
- C) The agent is immune from civil liability for reporting the fraud in good faith.
- D) The agent is only immune if the individual is eventually convicted.
Show answer & explanation
Answer: C
Texas law provides immunity from civil liability for persons who, in good faith, report suspected insurance fraud to the TDI or other law enforcement agencies.
Question 17 (Chapter 7)
An agent uses a testimonial in an advertisement for a life insurance policy. According to 28 TAC 21.108, which of the following is a requirement?
- A) The testimonial must be from a celebrity or public figure.
- B) The agent must pay the author at least $100 for the testimonial.
- C) The testimonial must be genuine and represent the current opinion of the author.
- D) Testimonials are prohibited in Texas life insurance advertising.
Show answer & explanation
Answer: C
Texas advertising rules require that any testimonial used must be genuine, represent the current opinion of the person giving it, and be applicable to the policy advertised.
The Mistakes That Cost Marks
Forgetting the ethics hours. Continuing education is 24 hours every two years and includes 3 hours of ethics.
Treating small inducements as harmless. A premium credit is rebating under TIC 541.056; the limited exception for items of nominal value is in TIC 541.058(b)(7), with a $25 limit.
Mislabeling prohibited practices. Rebating, twisting, defamation, boycott and commingling each have a distinct definition. Match the facts to the definition.
Skipping the statute numbers. This block rewards knowing which section governs which topic.
Mixing up the license routes. The temporary pathway sits under TIC 4001.151-.156 and is separate from the permanent license.
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.
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