18 Free Texas Life & Health Insurance Law Practice Questions (2026)
How to Use This Texas Insurance Law Set
Texas Statutes specific to Life and Health is 18 of the scored questions, and it is the block where studying with national material costs you marks you will never see coming. Contract theory travels between states. Free look periods, replacement procedures, group eligibility percentages and the name of the agency that runs CHIP do not.
A national question bank will hand you another state's number with complete confidence, and nothing in the wording warns you. That is the whole reason this section exists as a separate content area on the Texas outline.
These 18 questions come from LanePrep's Texas L&H quiz bank and follow the three ways the exam uses state law: what a Texas policy must contain, what a producer must do when replacing coverage or recommending an annuity, and the group and public programmes Texas runs itself.
Watch for numbers. Days, percentages and months are what this block tests. If an answer feels familiar from a national course, that is a reason to check it rather than to trust it.
Practice Questions 1-6: What a Texas Policy Must Contain
What Texas requires inside the policy. Insurable interest at issue, the incontestability and suicide clocks, and the free look window that differs by product — a Medicare Supplement is not treated the same as an individual life policy.
Question 1 (Chapter 8)
John applies for a life insurance policy on his neighbor, Mark, who owes him a significant sum of money. John hopes to recover the debt if Mark passes away. Under Texas insurable-interest law, which of the following statements is true?
- A) John has an insurable interest in Mark's life, but only to the extent of the outstanding debt plus reasonable collection costs.
- B) John does not have an insurable interest because insurable interest is limited to family relationships.
- C) John does not have an insurable interest because a creditor-debtor relationship alone does not establish it in Texas.
- D) An insurable interest is not required at the time of application, only at the time of claim.
Show answer & explanation
Answer: A
Insurable interest in Texas life insurance is grounded primarily in TIC Chapter 1103 and Texas common law (see McAllen State Bank v. Texas Bank & Trust Co.) — NOT Chapter 1101, which governs required policy provisions (grace, incontestability, suicide, etc.). A creditor has an insurable interest in the debtor's life, but only to the extent of the outstanding debt plus reasonable interest/collection costs. Options B and C are wrong because Texas law recognizes creditor-debtor insurable interest beyond family ties. Option D is wrong because insurable interest must exist at the time of application.
Question 2 (Chapter 8)
Sarah purchased a life insurance policy in Texas two and a half years ago. Six months after the policy was issued, she was diagnosed with a serious illness that she had intentionally failed to disclose on her application. She recently passed away. Based on the Texas Insurance Code, what is the likely outcome regarding the insurer's ability to deny the claim?
- A) The insurer can deny the claim because Texas law preserves the misrepresentation defense beyond 2 years when the misstatement was both material and intentional.
- B) The insurer must pay the death benefit because the policy has been in force beyond the incontestability period.
- C) The insurer can only refund the premiums paid, as the misrepresentation was intentional.
- D) The insurer can contest the policy's validity indefinitely if fraud can be proven.
Show answer & explanation
Answer: A
Texas is one of the few states that does NOT impose absolute incontestability after 2 years. Tex. Ins. Code §705.104 expressly preserves the insurer's misrepresentation defense beyond the 2-year period if the insurer can prove at trial that the misstatement was BOTH (a) material to the risk AND (b) intentionally made. Sarah's deliberate concealment of a serious illness satisfies both prongs, so the insurer may contest the claim. Option B is wrong because it states the general NAIC-model rule and ignores Texas's §705.104 carve-out — a high-yield exam trap. Option C is wrong because the remedy on a successful contest is denial of the death benefit (not just premium refund). Option D is wrong because the §705.104 defense requires proof of both materiality AND intent — not unlimited contest power.
Question 3 (Chapter 8)
David purchased a life insurance policy in Texas. Eighteen months later, he tragically died by suicide. His beneficiary filed a claim for the death benefit. According to the standard suicide clause provisions under Texas Insurance Code Chapter 1101, what will the insurer most likely do?
- A) Pay the full death benefit as suicide is always covered after the policy is issued.
- B) Pay the full death benefit, but only if the suicide was not premeditated.
- C) Refund the premiums paid, as the death occurred within the suicide exclusion period.
- D) Deny the claim entirely, as suicide is never covered by life insurance.
Show answer & explanation
Answer: C
The standard suicide clause in Texas life insurance policies typically states that if the insured commits suicide within the first two years of the policy, the death benefit will not be paid; instead, only the premiums paid will be refunded. Since David's death occurred within 18 months (less than two years) of policy issuance, the insurer will refund the premiums. Options A, B, and D are incorrect because they misrepresent the application of the suicide clause.
Question 4 (Chapter 8)
Maria's husband, Carlos, died from suicide 23 months after his Texas life insurance policy was issued. The policy contains the standard 2-year suicide clause required under Texas Insurance Code Chapter 1101. What outcome should Maria expect?
- A) She receives the full death benefit since the policy has been in force more than 18 months.
- B) She receives nothing because suicide is excluded from all life policies.
- C) She receives a refund of premiums paid; the death benefit is not payable.
- D) She receives half the face amount as a compromise settlement.
Show answer & explanation
Answer: C
Under the standard suicide clause in Texas (TIC Chapter 1101), if the insured commits suicide within the first 2 years of the policy, the insurer is only required to refund premiums paid — not the death benefit. Since Carlos died at 23 months (less than 2 years), Maria receives only a premium refund.
Question 5 (Chapter 8)
Maria purchased a new individual life insurance policy in Texas. After reviewing the policy documents, she decided she no longer wants the policy. What is the minimum free-look period Maria is entitled to for her new life insurance policy under Texas regulations?
- A) 5 days
- B) 10 days
- C) 20 days
- D) 30 days
Show answer & explanation
Answer: B
In Texas, individual life insurance policies are generally required to have a minimum free-look period of 10 days. This period allows the policyholder to review the policy and return it for a full refund of premiums if they are not satisfied. Options A, C, and D represent incorrect free-look periods for individual life insurance in Texas.
Question 6 (Chapter 8)
Anthony purchased a new individual life insurance policy in Texas. The policy was delivered to him on April 1st. He decides on April 9th that he doesn't want the policy. Under Texas law, what is the minimum free-look period for a standard (non-replacement) life insurance policy?
- A) 7 days
- B) 10 days
- C) 20 days
- D) 30 days
Show answer & explanation
Answer: B
Texas requires a minimum 10-day free-look period for standard individual life insurance policies, measured from the date the policy is delivered to the policyholder. Anthony returning on April 9th (8 days after delivery) is well within the free-look window, and he is entitled to a full refund of premiums.
Practice Questions 7-12: Replacement, Suitability and Producer Conduct
Producer conduct, and the rules that exist because the incentives point the wrong way. Replacement procedures, annuity suitability for older clients, and rebating — sharing commission with a client — which is prohibited in Texas however willing both parties are.
Question 7 (Chapter 8)
A Texas producer is assisting a client, Mr. Henderson, in replacing an existing life insurance policy with a new one from a different insurer. Under Texas replacement regulations for life insurance, what is a key duty of the *replacing insurer* in this scenario?
- A) To notify the existing insurer of the proposed replacement.
- B) To provide the applicant with a copy of the Notice Regarding Replacement within 3 days of application.
- C) To obtain a signed statement from the applicant acknowledging the replacement.
- D) To ensure the producer completes a 'Notice Regarding Replacement' form and submits it to the existing insurer.
Show answer & explanation
Answer: A
Under Texas replacement regulations for life insurance, the replacing insurer has a duty to notify the existing insurer of the proposed replacement. The producer's duties include providing the applicant with the 'Notice Regarding Replacement' and obtaining their signed acknowledgment, then submitting these to the replacing insurer. Options B, C, and D describe duties primarily belonging to the producer, not directly the replacing insurer's duty to initiate notification to the existing insurer.
Question 8 (Chapter 8)
Producer David is replacing his client's existing life insurance policy with a new one from a different insurer. Under Texas replacement regulations, which document must David provide to the applicant?
- A) A 'Notice Regarding Replacement' form.
- B) A copy of his producer license.
- C) A market analysis showing the new policy is superior.
- D) A signed waiver from the existing insurer.
Show answer & explanation
Answer: A
Under Texas replacement regulations, the producer must provide the applicant with a 'Notice Regarding Replacement' form, which explains potential disadvantages of replacement (such as new contestability periods, new suicide clauses, and potentially higher premiums due to age). The producer must also submit copies to the replacing and existing insurers.
Question 9 (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.
Question 10 (Chapter 8)
A Texas producer is recommending an annuity product to an elderly client, Mrs. Rodriguez, who expresses a need for immediate liquidity and has a short-term financial goal. Under TDI rules for annuity suitability and disclosure, what is the producer's primary responsibility in this situation?
- A) To recommend the annuity with the highest commission for the producer.
- B) To ensure the annuity recommendation is suitable based on Mrs. Rodriguez's financial situation, needs, and objectives.
- C) To persuade Mrs. Rodriguez that annuities are always the best investment for seniors.
- D) To only disclose the potential growth of the annuity, not any surrender charges.
Show answer & explanation
Answer: B
TDI rules emphasize annuity suitability, especially for senior consumers. Producers have a primary responsibility to make recommendations that are suitable based on the client's financial situation, insurance needs, and stated objectives. Given Mrs. Rodriguez's need for immediate liquidity and short-term goals, an annuity (which typically involves surrender charges for early withdrawals) might not be suitable, and the producer must assess this. Options A, C, and D represent unethical or illegal practices contrary to suitability and disclosure requirements.
Question 11 (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 12 (Chapter 8)
Producer Brenda incorrectly tells her client that life insurance contract requirements in Texas are governed by 'Chapter 1601 of the Texas Insurance Code.' Which chapter ACTUALLY governs Life Insurance contract requirements in Texas?
- A) Chapter 1601
- B) Chapter 1131
- C) Chapter 1101
- D) Chapter 4001
Show answer & explanation
Answer: C
Texas Insurance Code Chapter 1101 governs Life Insurance contract requirements — required policy provisions such as the suicide clause, incontestability, grace period, settlement, loans, and reinstatement. (Note: insurable-interest doctrine sits primarily in Chapter 1103 and Texas common law, NOT in Chapter 1101.) Chapter 1131 governs Group Life Insurance. Chapter 1601 governs state employee benefits (a common distractor). Chapter 4001 governs producer licensing.
Practice Questions 13-18: Group Coverage and Texas Programmes
Group coverage and the programmes Texas administers. Participation thresholds differ between contributory and non-contributory plans, conversion rights follow an employee who leaves, and the Long-Term Care Partnership changes what Medicaid may later count.
Question 13 (Chapter 8)
Jennifer, a Dallas employee, leaves her employer where she was covered under a group life policy issued pursuant to Texas Insurance Code Chapter 1131. She wants to convert her group coverage to an individual whole life policy without proving insurability. How many days does she have from the date of termination to exercise this conversion right?
- A) 10 days
- B) 20 days
- C) 31 days
- D) 60 days
Show answer & explanation
Answer: C
Under Texas Insurance Code Chapter 1131, a terminating group member has 31 days from the date of leaving the group to convert their group life coverage to an individual policy (typically whole life) without evidence of insurability. Note: 30 days is a common distractor — the correct number is 31.
Question 14 (Chapter 8)
Thompson Manufacturing in Austin offers a contributory group life insurance plan to its 200 eligible employees. To prevent adverse selection and maintain the group policy, what minimum percentage of eligible employees must participate?
- A) 50%
- B) 60%
- C) 75%
- D) 100%
Show answer & explanation
Answer: C
For contributory group life plans in Texas (where employees pay a portion of the premium), 75% of eligible employees must participate to prevent adverse selection. For non-contributory plans (employer pays 100% of premium), 100% of eligible employees must be covered.
Question 15 (Chapter 8)
Westbrook Industries in San Antonio pays 100% of the premiums for its group life insurance — a non-contributory plan. What percentage of eligible employees must be covered under this arrangement?
- A) 50%
- B) 75%
- C) 90%
- D) 100%
Show answer & explanation
Answer: D
For non-contributory group life plans (where the employer pays 100% of the premium), 100% of eligible employees must be covered. The 75% participation threshold only applies to contributory plans where employees contribute to the premium.
Question 16 (Chapter 8)
Mrs. Garcia, a Texas resident, is considering purchasing a Long-Term Care (LTC) insurance policy that participates in the Texas Long-Term Care Partnership Program. What is a primary benefit of purchasing an LTC policy through the Texas Long-Term Care Partnership Program?
- A) It guarantees that Medicaid will cover all her LTC costs regardless of her assets.
- B) It provides asset protection, allowing her to keep more assets if she later needs to qualify for Medicaid.
- C) It eliminates the need for any deductibles or co-payments for LTC services.
- D) It ensures her LTC policy premiums will never increase.
Show answer & explanation
Answer: B
The Texas Long-Term Care Partnership Program is designed to encourage individuals to purchase private LTC insurance by offering asset protection. For every dollar of benefits paid out by a Partnership policy, a corresponding dollar of assets is disregarded when determining Medicaid eligibility, allowing individuals to keep more of their assets if they eventually need to qualify for Medicaid. Options A, C, and D are incorrect; the program does not guarantee full Medicaid coverage regardless of assets, eliminate deductibles, or prevent premium increases.
Question 17 (Chapter 8)
A new client asks producer Susan about the Children's Health Insurance Program (CHIP) in Texas. Which agency administers CHIP in Texas?
- A) Texas Department of Insurance (TDI)
- B) Texas Health and Human Services Commission (HHSC)
- C) Texas Healthy Kids Corporation
- D) Centers for Medicare and Medicaid Services (CMS)
Show answer & explanation
Answer: B
CHIP in Texas is administered by the Texas Health and Human Services Commission (HHSC) through its Medicaid and CHIP Services division. 'Texas Healthy Kids Corporation' is a fictitious entity and a common distractor (similar-sounding to Florida's program). TDI regulates insurance, while CMS oversees federal Medicare/Medicaid policy at the national level.
Question 18 (Chapter 8)
An insurance company operating in Texas consistently delays processing claims and fails to provide timely explanations for claim denials, leading to numerous consumer complaints. Which area of TDI's regulatory oversight is primarily concerned with addressing such practices by insurers?
- A) Producer Licensing and Education
- B) Company Solvency and Financial Examinations
- C) Market Conduct and Consumer Protection
- D) Rate and Form Filing Approval
Show answer & explanation
Answer: C
The Texas Department of Insurance (TDI) regulates insurers through various means. 'Market Conduct and Consumer Protection' specifically addresses how insurers interact with consumers, including practices related to sales, advertising, underwriting, and most importantly in this scenario, claims handling. Consistently delayed claims and inadequate explanations for denials fall under poor market conduct. Options A, B, and D relate to other aspects of regulation (producer qualifications, financial stability, and product approval) but not directly to the operational behavior impacting consumers in this manner.
The Texas Law Mistakes That Cost Marks
Using a national free look period. Texas sets its own, and it is not the same for every product. Medicare Supplement policies get their own window, and the exam asks about both.
Treating rebating as a grey area. Offering a client part of your commission is prohibited regardless of consent, benefit or intent. Questions in this family always make the arrangement sound reasonable.
Mixing up the two group participation thresholds. Contributory and non-contributory plans require different percentages of eligible employees, for the obvious reason that nobody declines free coverage. Both numbers get asked.
Guessing which agency runs which programme. CHIP, Medicaid and the Texas Department of Insurance each own different things, and the exam tests the boundary rather than the concept.
The statutes common to both licences are covered in the Texas Life & Health statutes guide. All nine chapters are audio lessons too — chapter 1 is free, no signup. The other heavy blocks have their own sets: life policy types, health insurance and policy provisions.
Question counts and content weighting come from the Pearson VUE Texas examination content outline; statute references were verified against the Texas Insurance Code. Read September 2026.
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