25 Free Texas Life & Health Exam Practice Questions (2026)
How to Use These Practice Questions
These 25 questions are drawn from LanePrep's 704-question Texas Life, Accident & Health quiz bank — built on the same Pearson VUE content outline that drives the real exam, with every Texas statute reference reviewed. Each question includes the correct answer and a short explanation so you learn why, not just what.
Work through them without looking at the answers first. Keep score. If you miss more than 30%, you need more study time before exam day. If you get 80%+, you are on track to pass.
Tip: The real exam is 145 questions in 2.5 hours — just over a minute per question. Practice timing yourself: give yourself 25 minutes for these 25 questions.
Practice Questions 1-6: Life Insurance Basics & Policy Types
Question 1 (Chapter 1)
Sarah frequently leaves her expensive jewelry visible in her unlocked car while running errands, thinking, 'It's okay, I have insurance to cover it if anything happens.' What type of hazard does Sarah's attitude represent in the context of insurance?
- A) Physical hazard
- B) Moral hazard
- C) Morale hazard
- D) Peril hazard
Show answer & explanation
Answer: C
Sarah's attitude of indifference or carelessness, which increases the likelihood of a loss, is characteristic of a morale hazard. A physical hazard is a physical condition that increases risk (e.g., a heart condition). A moral hazard involves dishonesty or a tendency to defraud (e.g., faking a loss). Peril is the cause of loss itself, not a condition that increases its likelihood.
Question 2 (Chapter 1)
Michael names his wife, Lisa, as the primary beneficiary of his life insurance policy. He also wants to ensure that if Lisa predeceases him, their children, David and Emily, will receive the policy proceeds. David and Emily would be designated as:
- A) Irrevocable beneficiaries
- B) Tertiary beneficiaries
- C) Contingent beneficiaries
- D) Per capita beneficiaries
Show answer & explanation
Answer: C
Contingent beneficiaries (also known as secondary beneficiaries) are those who receive the policy proceeds if the primary beneficiary dies before the insured. Irrevocable beneficiaries cannot be changed without their consent. Tertiary beneficiaries would be next in line after contingent beneficiaries. Per capita refers to how proceeds are distributed among a group, not the designation of their role.
Question 3 (Chapter 2)
Emily purchased a 20-year term life insurance policy with a unique provision. If she outlives the 20-year term, she will receive all of the premiums she paid back. Which type of term life insurance policy did Emily purchase?
- A) Level Term Life
- B) Decreasing Term Life
- C) Return-of-Premium Term Life
- D) Increasing Term Life
Show answer & explanation
Answer: C
Return-of-Premium Term Life insurance is a specific type of term policy that, if the insured outlives the policy term, returns all or a portion of the premiums paid to the policyowner. This feature makes the premiums significantly higher than traditional term policies. The other options (Level, Decreasing, Increasing Term) do not offer a return of premiums if the insured outlives the term.
Question 4 (Chapter 2)
An older whole life policy issued in 1985 references the policy 'endowing' or maturing when the insured reaches a specified age. Based on the CSO mortality table in effect at that time, at what age would this older policy typically mature?
- A) Age 100
- B) Age 121
- C) Age 65
- D) Age 85
Show answer & explanation
Answer: A
Older whole life policies issued before the adoption of the 2001 CSO mortality table typically matured at age 100. The 2001 CSO table extended the maturity to age 121. Both ages are testable on the Texas exam depending on whether the question references an older or newer policy. Age 65 is a common premium-paying endpoint for Limited-Pay Whole Life, not maturity.
Question 5 (Chapter 2)
After 22 years with the company, Jennifer is laid off on March 1st. She had $100,000 in employer-paid group term life coverage. She wants to convert this to an individual policy without proving insurability. By what date must she exercise her conversion right?
- A) Within 15 days of termination
- B) Within 31 days of termination
- C) Within 60 days of termination
- D) Within 90 days of termination
Show answer & explanation
Answer: B
Under Texas Insurance Code Chapter 1131 and standard group life provisions, terminated employees must exercise their conversion privilege within 31 days of termination of group coverage. The new individual policy will be permanent (typically whole life), with premiums based on the insured's ATTAINED AGE at the time of conversion. The 31-day window and attained-age pricing are two of the most heavily tested facts about group conversion.
Question 6 (Chapter 2)
ABC Corporation offers a contributory group life plan where employees pay part of the premium. To meet group underwriting requirements and avoid adverse selection, what minimum percentage of eligible employees must participate?
- A) 50%
- B) 75%
- C) 85%
- D) 100%
Show answer & explanation
Answer: B
Contributory group plans (where employees pay part of the premium) require at least 75% participation of eligible employees. This minimum participation level helps prevent adverse selection by ensuring a broad cross-section of the group enrolls, not just those with health concerns. In contrast, NON-contributory plans (where the employer pays 100% of the premium) require 100% participation of eligible employees. Memorize: Contributory = 75%, Non-contributory = 100%.
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Practice Questions 7-13: Policy Provisions, Riders & Annuities
Question 7 (Chapter 3)
An insured purchased a life insurance policy and mistakenly stated her age as 35 on the application, when in fact she was 40. Five years later, she dies. What action will the insurance company most likely take regarding the death benefit?
- A) Void the policy due to material misrepresentation and return all premiums paid.
- B) Pay the full death benefit as the incontestability period has passed.
- C) Adjust the death benefit to the amount that the premiums paid would have purchased at the correct age of 40.
- D) Charge the beneficiary the difference in premiums that should have been paid.
Show answer & explanation
Answer: C
The Misstatement of Age or Sex provision states that if the insured's age or sex was incorrectly stated, the policy will not be voided. Instead, the death benefit will be adjusted to the amount that the premium paid would have purchased at the correct age or sex. This is a standard provision and applies regardless of the incontestability period. The policy is not voided, and the beneficiary is not charged additional premiums.
Question 8 (Chapter 3)
A life insurance policy was issued on January 1, 2022. On October 15, 2023, the insured committed suicide. Assuming the policy contains a standard suicide clause, what will the insurance company pay?
- A) The full death benefit.
- B) The full death benefit plus any accumulated interest.
- C) A refund of the premiums paid.
- D) Nothing, as suicide is an excluded cause of death.
Show answer & explanation
Answer: C
Most life insurance policies include a suicide clause that states if the insured commits suicide within a specified period (typically two years from the policy's issue date), the insurer will only refund the premiums paid, without interest. Since the suicide occurred within this two-year period (January 1, 2022, to October 15, 2023), only the premiums will be refunded. If the suicide occurred after the two-year period, the full death benefit would typically be paid.
Question 9 (Chapter 3)
John has a whole life insurance policy with a Waiver of Premium rider. He becomes totally disabled and is unable to work. What will happen to his policy premiums?
- A) The premiums will be paid by the insurance company for the duration of his disability, and the policy will remain in force.
- B) The policy will automatically convert to a paid-up policy with a reduced face amount.
- C) The premiums will be deducted from the policy's cash value as an automatic premium loan.
- D) John must continue to pay premiums, but he will receive a tax credit for the payments.
Show answer & explanation
Answer: A
The Waiver of Premium rider is designed to protect the policy if the insured becomes totally disabled. If the insured meets the definition of total disability as defined in the policy, the insurance company will waive (pay) all future premiums for the duration of the disability, keeping the policy in force. Options B and C describe other policy provisions or nonforfeiture options, and option D is incorrect regarding tax credits for premium payments.
Question 10 (Chapter 3)
An insured's life insurance premium was due on May 1st. The insured forgot to pay the premium. On May 20th, the insured unexpectedly passed away. No premium payment had been made. What will happen regarding the death benefit?
- A) The policy lapsed on May 1st, so no death benefit will be paid.
- B) The full death benefit will be paid, as the policy was still in force.
- C) The death benefit will be paid, minus the unpaid premium.
- D) The policy will be reinstated, and then the death benefit will be paid.
Show answer & explanation
Answer: C
The Grace Period provision typically allows a period (usually 31 days in Texas) after the premium due date during which the policy remains in force, even if the premium has not been paid. If the insured dies during this grace period, the death benefit will be paid, but any unpaid premium will be deducted from the payout. Since the insured died on May 20th, which is within the 31-day grace period from May 1st, the policy was still in force.
Question 11 (Chapter 4)
A client is in the accumulation phase of her deferred annuity. Which of the following activities is characteristic of this phase?
- A) The annuitant begins receiving regular income payments.
- B) The contract value grows tax-deferred through interest or investment gains.
- C) The annuitant irrevocably converts the cash value into a stream of income.
- D) The insurance company determines the payout amount based on life expectancy.
Show answer & explanation
Answer: B
During the accumulation phase, the annuitant makes premium payments, and the contract's value grows, typically on a tax-deferred basis. No income payments are received during this phase. Receiving income payments and the conversion of cash value into an income stream are characteristics of the annuitization phase.
Question 12 (Chapter 4)
An agent recommends a variable annuity to a client. The client's funds will be allocated among several sub-accounts. Where are these funds held?
- A) In the insurance company's general account, alongside other policyholder reserves.
- B) In a separate account, segregated from the insurer's general assets.
- C) In a Texas state-managed reserve fund.
- D) In the agent's broker-dealer's custody account.
Show answer & explanation
Answer: B
Variable annuity sub-account funds are held in the insurer's separate account, which is distinct from the general account. This segregation is what makes variable annuities a security: investment risk passes to the annuitant. Fixed and indexed annuity funds are held in the general account, where the insurer bears the investment risk. The separate-account structure is the legal basis for requiring a securities license to sell variable products.
Question 13 (Chapter 4)
Mr. Singh, age 65, annuitizes a $200,000 non-qualified deferred annuity under a Life Only option. He receives his first monthly payment in January. Six weeks later, he dies unexpectedly. What is paid to his named beneficiary?
- A) The full remaining account value of $200,000 minus payments already received.
- B) A refund of the original purchase price minus payments received.
- C) Nothing. Payments cease at the annuitant's death under Life Only.
- D) Ten years of guaranteed payments to the beneficiary.
Show answer & explanation
Answer: C
Life Only (also called Straight Life) pays the highest periodic income because the insurer's obligation ends at the annuitant's death. There is no refund, no period certain, and no beneficiary payment, even if death occurs shortly after annuitization. This forfeiture risk is precisely why the payment is highest. A refund feature would be Life with Refund; a guaranteed payment period would be Life with Period Certain.
Practice Questions 14-19: Taxation & Health Insurance Basics
Question 14 (Chapter 5)
Olivia owns a non-MEC whole life policy with a $60,000 cost basis and $95,000 of cash value. She surrenders the policy and receives the entire $95,000 surrender value. How much is taxable as ordinary income?
- A) $0 — life insurance proceeds are tax-free.
- B) $35,000 — the gain over basis.
- C) $60,000 — the basis.
- D) $95,000 — the entire surrender value.
Show answer & explanation
Answer: B
On surrender of a non-MEC life insurance policy, basis (premiums paid) comes out tax-free first under the cost-recovery method; only the gain over basis is taxable as ordinary income. $95,000 − $60,000 = $35,000 of taxable gain. The death-benefit exclusion under IRC § 101(a) does not apply to surrenders during the insured's life.
Question 15 (Chapter 5)
Thomas, age 48, is the policyowner and insured on a MEC. He takes a $20,000 policy loan to consolidate credit card debt. The policy has a $50,000 basis and $80,000 cash value (so $30,000 of gain). How is the loan taxed?
- A) Not taxable — policy loans are never taxable distributions.
- B) The full $20,000 is taxable as ordinary income, plus a 10% penalty on the $20,000.
- C) Only $5,000 (the amount exceeding the basis) is taxable.
- D) Taxable as long-term capital gain because the policy is over 1 year old.
Show answer & explanation
Answer: B
On a MEC, loans ARE treated as distributions and follow LIFO. Because the gain ($30,000) exceeds the $20,000 loan, the entire $20,000 is treated as earnings and is taxable as ordinary income. Since Thomas is under 59½ and no exception applies, an additional 10% penalty applies to the taxable portion. Option A describes non-MEC treatment.
Question 16 (Chapter 6)
Brandon has a major medical plan with a $1,000 deductible, 80/20 coinsurance, and a $4,000 out-of-pocket maximum. He suffers a serious accident and incurs $50,000 in covered medical expenses. How much will he be responsible for paying out-of-pocket?
- A) $1,000
- B) $4,000
- C) $10,800
- D) $11,000
Show answer & explanation
Answer: B
Without the out-of-pocket maximum, Brandon would owe his $1,000 deductible plus 20% of the remaining $49,000 ($9,800), totaling $10,800. However, his out-of-pocket maximum caps total cost-sharing at $4,000 per year. Once he reaches $4,000, the insurer pays 100% of remaining covered expenses. So Brandon pays $4,000.
Question 17 (Chapter 6)
Lisa pays $30 every time she visits her primary care physician under her health plan. This fixed dollar amount, due at the time of service, is best described as what type of cost-sharing?
- A) Deductible
- B) Coinsurance
- C) Copayment
- D) Premium
Show answer & explanation
Answer: C
A copayment (copay) is a fixed dollar amount paid by the insured for a specific service, typically at the point of service. A deductible is an annual threshold the insured must pay before coverage begins. Coinsurance is a percentage of cost shared after the deductible. A premium is the periodic payment to keep coverage in force.
Question 18 (Chapter 6)
Greg has a Point-of-Service (POS) plan. He sees an out-of-network orthopedic surgeon for knee surgery without first obtaining a referral from his PCP. Which statement most accurately describes how his POS plan will handle this claim?
- A) The claim will be denied entirely because POS plans never cover out-of-network care.
- B) The claim will be paid at 100% because POS plans don't require referrals.
- C) The claim may be paid, but at a higher out-of-pocket cost to Greg than if he had stayed in-network with a PCP referral.
- D) The claim will be paid only if Greg files an appeal with the Texas Department of Insurance.
Show answer & explanation
Answer: C
A POS plan is a hybrid of HMO and PPO. It typically requires a PCP and referrals for the best (in-network) benefits, similar to an HMO. However, like a PPO, the plan does provide coverage for out-of-network care, but the insured will pay significantly more out-of-pocket. So Greg's claim will likely be paid, but at the higher out-of-network cost-sharing rate.
Question 19 (Chapter 6)
Rebecca's employer offers an HMO with a low monthly premium and very low copays for in-network care. Rebecca lives in a rural part of Texas where the HMO network is limited. Which characteristic of an HMO should she most carefully evaluate before enrolling?
- A) Whether the HMO uses fee-for-service reimbursement
- B) Whether her preferred doctors are in-network, since out-of-network care is generally not covered except in emergencies
- C) Whether the HMO has guaranteed renewability
- D) Whether the HMO offers a Health Savings Account
Show answer & explanation
Answer: B
HMOs only cover services from in-network providers (except in emergencies). If Rebecca's preferred or local doctors are not in the network, she will have to switch providers or pay full price. HMOs typically use capitation, not fee-for-service. HSAs require an HDHP, not an HMO. Renewability is a separate issue.
Practice Questions 20-25: Group Health, ACA & Texas Statutes
Question 20 (Chapter 7)
Under the Affordable Care Act (ACA), which of the following is a key provision regarding dependent coverage on a parent's health insurance plan?
- A) Dependents can remain on a parent's plan until age 21, or 23 if a full-time student.
- B) Dependents can remain on a parent's plan until age 26, regardless of student status or marital status.
- C) Dependents must be financially dependent on the parent to remain on their plan beyond age 18.
- D) Dependent coverage is only available if the dependent has a qualifying disability.
Show answer & explanation
Answer: B
A key provision of the ACA is that health plans must allow young adults to stay on their parents' health insurance plans until they turn 26 years old. This applies regardless of whether they are married, living with their parents, financially dependent on their parents, or students. Options A, C, and D describe rules that existed prior to or are not consistent with the ACA's dependent coverage provision.
Question 21 (Chapter 7)
Producer Lisa convinces client Mark to drop his existing policy with Insurer X and buy a new policy from Insurer Y, even though the replacement is materially worse for Mark. Which unfair trade practice has Lisa committed?
- A) Churning
- B) Twisting
- C) Defamation
- D) Unfair discrimination
Show answer & explanation
Answer: B
Twisting is misrepresentation that induces a policyholder to lapse, forfeit, or surrender an existing policy to purchase a new one from a DIFFERENT insurer to the policyholder's detriment. Churning is the same conduct within the SAME insurer.
Question 22 (Chapter 7)
Carla is shopping on the ACA marketplace and wants a plan that covers approximately 70% of expected healthcare costs, with moderate premiums and moderate out-of-pocket costs. Which metal tier should she choose?
- A) Bronze
- B) Silver
- C) Gold
- D) Platinum
Show answer & explanation
Answer: B
ACA metal tiers reflect the average percentage of healthcare costs the plan covers: Bronze ~60%, Silver ~70%, Gold ~80%, Platinum ~90%. Silver fits Carla's 70% target.
Question 23 (Chapter 8)
A family in Texas has two children and earns too much to qualify for Medicaid, but cannot afford private health insurance. Which Texas-specific program is designed to provide low-cost health coverage for children in this situation?
- A) Texas Health Insurance Risk Pool
- B) Children's Health Insurance Program (CHIP)
- C) Texas Medicaid
- D) Affordable Care Act (ACA) Marketplace
Show answer & explanation
Answer: B
The Children's Health Insurance Program (CHIP), administered by the Texas Health and Human Services Commission (HHSC), provides low-cost health coverage for children in families who earn too much to qualify for Medicaid but cannot afford private insurance. Option A (Risk Pool) is largely historical. Option C (Medicaid) is for lower income thresholds. Option D (ACA Marketplace) offers subsidies but CHIP is specifically for children in this income gap.
Question 24 (Chapter 8)
A Texas insurance producer, Kevin, offers to share a portion of his commission with a prospective client, Sarah, if she purchases a life insurance policy through him. Under Texas Insurance Code, what is Kevin's action considered?
- A) A permissible sales incentive, as long as it's disclosed.
- B) An illegal act of rebating.
- C) A legal discount, if offered to all clients equally.
- D) A form of premium financing, which is regulated but not illegal.
Show answer & explanation
Answer: B
Under the Texas Insurance Code, offering a portion of a producer's commission or any other valuable consideration not specified in the policy as an inducement to purchase insurance is considered rebating, which is an illegal practice. Options A and C are incorrect because rebating is specifically prohibited, regardless of disclosure or equal offering. Option D is incorrect as rebating is not a form of premium financing.
Question 25 (Chapter 8)
A licensed Texas producer, Sarah, is recommending that her client, Mr. Chen, replace his existing annuity with a new annuity product. According to TDI rules regarding annuity replacement, what is a specific responsibility of Producer Sarah in this situation?
- A) To guarantee Mr. Chen will receive higher returns with the new annuity.
- B) To ensure the new annuity has a lower surrender charge than the old one.
- C) To provide Mr. Chen with a 'Notice Regarding Replacement of Annuity' form and obtain his signature.
- D) To only recommend replacement if the new annuity's benefits outweigh the old one's benefits by at least 25%.
Show answer & explanation
Answer: C
Under TDI rules for annuity replacement, producers have specific disclosure responsibilities. A key duty is to provide the client with a 'Notice Regarding Replacement of Annuity' form, explain its contents, and obtain the client's signature acknowledging receipt. Options A and B are not guaranteed duties and could be misleading or impossible to fulfill. Option D is an arbitrary percentage not specified in regulations.
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