18 Free Texas Life Policy Provisions & Riders Practice Questions (2026)
How to Use This Policy Provisions Set
Life Insurance Policy Provisions, Riders and Options is 20 of the scored questions on the Texas Life, Accident & Health exam, and it is the block where the policy type barely matters. The answer turns on a clause: whether the insurer can still contest a claim, what a lapsed policy's cash value becomes, who receives the money and in what shape.
Most questions are dated on purpose. A policy issued on one day, a death or a discovery on another, and the whole answer depends on whether two years have run. If you skim past the dates you will pick a defensible answer to a different question.
These 18 questions come from LanePrep's Texas L&H quiz bank and follow the three groups the exam uses: the standard provisions every policy must contain, the options for cash value and dividends, and the beneficiary, settlement and rider choices that decide how the benefit is finally paid.
Check the dates first. Incontestability, the suicide clause and the grace period are all clocks, and the scenario gives you the numbers you need to read them.
Practice Questions 1-6: Standard Provisions and Their Clocks
The clauses every life policy must carry, several of them set by state law. Incontestability and the suicide clause both run two years and are routinely confused; grace period, free look and reinstatement each have their own window, and Texas sets the free look period itself.
Question 1 (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 2 (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 3 (Chapter 3)
A life insurance policy was issued on March 1, 2021. The application contained a material misrepresentation regarding the insured's health history. The insured died on April 15, 2023, and the insurer discovered the misrepresentation during the claims process. What will the insurer most likely do, according to the Incontestability Clause?
- A) Void the policy and return the premiums paid, as there was a material misrepresentation.
- B) Pay the full death benefit, as the incontestability period has expired.
- C) Reduce the death benefit to reflect the correct health history.
- D) Delay payment until a full investigation of the misrepresentation is complete, regardless of the time elapsed.
Show answer & explanation
Answer: B
The Incontestability Clause typically states that after a policy has been in force for a specific period (usually two years from the issue date in Texas), the insurer cannot dispute the validity of the contract, even if there was a material misrepresentation on the application. In this scenario, the policy was issued on March 1, 2021, and the insured died on April 15, 2023, which is more than two years later. Therefore, the incontestability period has expired, and the insurer must pay the full death benefit, even if a material misrepresentation is discovered.
Question 4 (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 5 (Chapter 3)
An agent in Texas delivers a new life insurance policy to a client on June 3rd. The client decides on June 12th that the policy is not suitable and wants a full refund. The policy is a standard whole life policy and does not replace any existing coverage. What is the outcome?
- A) The client is entitled to a full refund of all premiums paid because the return falls within the 10-day free look period.
- B) The client receives only the cash value, not a full premium refund, because more than 7 days have passed.
- C) The free look has expired; the client may only surrender the policy for its cash value.
- D) The client is entitled to a 50% refund because the return is outside the 7-day window but within 14 days.
Show answer & explanation
Answer: A
In Texas, the standard free look period for a new (non-replacement) life insurance policy is 10 days from the date of delivery. From June 3rd, the client has until June 13th to return the policy for a full refund of all premiums paid. June 12th is within that 10-day window, so the client receives a full refund.
Question 6 (Chapter 3)
Jamal allows his whole life policy to lapse after missing premiums for over a year. He now wants to reinstate it rather than buy a new policy. Which of the following is the insurer MOST likely to require?
- A) Only the next premium payment, since the grace period covers prior amounts.
- B) Payment of all back premiums with interest, evidence of insurability, and repayment of any outstanding policy loans with interest.
- C) A new application and a new policy issue date with new contestability and suicide periods running from the original issue date.
- D) Only a statement of good health; back premiums are waived upon reinstatement.
Show answer & explanation
Answer: B
To reinstate a lapsed policy, the insurer typically requires the policyowner to pay all back premiums with interest, provide evidence of insurability (such as a statement of good health or medical exam), and repay any outstanding policy loans with interest. The original policy is restored, but the contestable and suicide periods generally restart from the reinstatement date.
Practice Questions 7-12: Nonforfeiture, Dividends and Policy Loans
What the cash value can do when premiums stop, and what dividends can do while they continue. Nonforfeiture options keep coverage alive without further payments, and the dividend options differ in whether they buy more insurance, earn interest or simply come back as cash.
Question 7 (Chapter 3)
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) Reduced Paid-Up Insurance
- D) Automatic Premium Loan
Show answer & explanation
Answer: C
The Reduced Paid-Up Insurance option allows the policyowner to use the policy's cash value to purchase a new, smaller, fully paid-up whole life policy. This means no further premiums are due, and coverage continues for life, albeit at a reduced face amount. Cash Surrender Value would terminate the policy and pay out the cash value. Extended Term Insurance would provide the same face amount for a limited period, not for life. Automatic Premium Loan uses the cash value to pay overdue premiums, which is not what the policyowner wants if they can no longer afford premiums at all.
Question 8 (Chapter 3)
Sarah has a whole life insurance policy with a substantial cash value. She can no longer afford to pay the premiums but wants to maintain the maximum possible death benefit for the longest period of time without paying any more premiums. Which nonforfeiture option should she select?
- A) Cash Surrender Value
- B) Reduced Paid-Up Insurance
- C) Extended Term Insurance
- D) Automatic Premium Loan
Show answer & explanation
Answer: C
Extended Term Insurance uses the policy's cash value to purchase a single-premium term policy for the same face amount as the original policy, for as long a period as the cash value will buy. This provides the maximum death benefit for the longest duration without further premium payments. Cash Surrender Value (A) would terminate the policy and pay out the cash. Reduced Paid-Up Insurance (B) would provide a lower death benefit for the remainder of the insured's life. Automatic Premium Loan (D) would use the cash value to pay premiums, but it's a loan and would reduce the cash value, eventually leading to lapse if not repaid.
Question 9 (Chapter 3)
A policyowner has a participating whole life insurance policy and wants to use the annual dividends to increase the policy's death benefit without undergoing additional underwriting. Which dividend option should they choose?
- A) Cash Payout
- B) Reduction of Premium
- C) Paid-Up Additions
- D) Accumulate at Interest
Show answer & explanation
Answer: C
The Paid-Up Additions dividend option uses the dividends to purchase small, single-premium, paid-up whole life policies. These additions increase the policy's death benefit and cash value, and typically do not require additional underwriting. Cash Payout provides the dividend in cash. Reduction of Premium uses the dividend to offset the next premium payment. Accumulate at Interest leaves the dividends with the insurer to earn interest, but does not increase the death benefit directly.
Question 10 (Chapter 3)
Mark owns a participating whole life insurance policy and receives annual dividends. He wants to use these dividends in a way that allows them to grow over time, potentially tax-deferred, and remain accessible within the policy, without increasing the death benefit or reducing his current premium payments. Which dividend option should Mark choose?
- A) Cash Payout
- B) Reduction of Premium
- C) Accumulate at Interest
- D) Paid-Up Additions
Show answer & explanation
Answer: C
The Accumulate at Interest option allows the dividends to remain with the insurer and earn interest. The dividends themselves are not taxable, but the interest earned on them is taxable in the year it's credited, though it can grow tax-deferred if not withdrawn. This meets Mark's desire for growth and accessibility without affecting his death benefit or premiums. Cash Payout (A) would give him the money directly. Reduction of Premium (B) would lower his premium payments. Paid-Up Additions (D) would use dividends to purchase small, single-premium whole life policies, thereby increasing the death benefit and cash value.
Question 11 (Chapter 3)
Maria has a whole life insurance policy with a significant cash value. She decides to take a policy loan against her cash value to cover an unexpected expense. If Maria dies before repaying the loan and any accrued interest, what will be the impact on the death benefit paid to her beneficiary?
- A) The policy will terminate, and no death benefit will be paid.
- B) The death benefit will be reduced by the amount of the outstanding loan plus any accrued interest.
- C) The beneficiary will be responsible for repaying the outstanding loan and interest.
- D) The loan will be forgiven, and the full death benefit will be paid to the beneficiary.
Show answer & explanation
Answer: B
If a policyowner dies with an outstanding policy loan, the amount of the loan plus any accrued interest is deducted from the death benefit paid to the beneficiary. The policy does not terminate (A) as long as the cash value supports the loan, nor is the beneficiary responsible for repayment (C). The loan is not forgiven (D).
Question 12 (Chapter 3)
A policyowner wants to ensure their life insurance policy will not lapse due to an accidental oversight in paying a premium. They have sufficient cash value in the policy. Which policy provision or option would best prevent an unintentional lapse?
- A) Grace Period
- B) Reinstatement Provision
- C) Automatic Premium Loan (APL) provision
- D) Extended Term Insurance
Show answer & explanation
Answer: C
The Automatic Premium Loan (APL) provision is a rider that, if elected, automatically borrows from the policy's cash value to pay a premium that is due, preventing the policy from lapsing. The Grace Period provides a short window after the due date but doesn't pay the premium. The Reinstatement Provision allows a lapsed policy to be restored, but the goal is to prevent the lapse in the first place. Extended Term Insurance is a nonforfeiture option used when premiums are stopped entirely, not for preventing an accidental lapse.
Practice Questions 13-18: Beneficiaries, Settlement Options and Riders
Who gets paid, in what form, and what the riders add. Primary against contingent, per stirpes against per capita, a lump sum against installments or interest only — plus the two riders that come up most, waiver of premium and the accelerated death benefit.
Question 13 (Chapter 3)
An insured purchased a life insurance policy and named his wife, Sarah, as the primary beneficiary and his son, David, as the contingent beneficiary. Five years later, Sarah passed away. Two years after Sarah's death, the insured passed away. Who will receive the death benefit from the policy?
- A) The insured's estate, as Sarah is no longer alive.
- B) David, as the contingent beneficiary.
- C) Sarah's estate, as she was the primary beneficiary.
- D) The death benefit will be split equally between David and the insured's estate.
Show answer & explanation
Answer: B
In this scenario, the primary beneficiary (Sarah) predeceased the insured. When the primary beneficiary is no longer alive at the time of the insured's death, the death benefit passes to the contingent beneficiary. David, as the contingent beneficiary, will receive the entire death benefit. The insured's estate would only receive the benefit if both the primary and contingent beneficiaries were deceased or if no beneficiaries were named.
Question 14 (Chapter 3)
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) Per Stirpes
- D) Irrevocable
Show answer & explanation
Answer: C
Per Stirpes (meaning 'by the branch' or 'by roots') ensures that if a named beneficiary predeceases the insured, that beneficiary's share will pass to their living descendants (e.g., grandchildren). Per Capita (meaning 'by the head') would distribute the death benefit only among the surviving named beneficiaries, excluding the descendants of any deceased beneficiaries. Revocable and Irrevocable refer to the ability to change the beneficiary, not the distribution method.
Question 15 (Chapter 3)
Upon the death of the insured, the beneficiary wants to receive the death benefit in regular, equal installments for a specific period of 15 years, regardless of how long they live. Which settlement option should the beneficiary choose?
- A) Lump Sum
- B) Interest Only
- C) Fixed Period Installments
- D) Life Income with Period Certain
Show answer & explanation
Answer: C
The Fixed Period Installments (or Period Certain) settlement option pays the death benefit, including interest, in equal installments over a specified period of time. The amount of each installment is determined by the death benefit amount and the chosen period. Lump Sum is a single payment. Interest Only leaves the principal with the insurer and pays out only the interest. Life Income with Period Certain provides income for the beneficiary's life, with a guarantee for a minimum period, which is different from a fixed period regardless of life expectancy.
Question 16 (Chapter 3)
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) Interest Only Option
- D) Life Income with Period Certain Option
Show answer & explanation
Answer: C
The Interest Only Option allows the death benefit proceeds to be held by the insurer, accumulating interest. The beneficiary receives regular payments of this interest, while the principal remains untouched and can be paid out at a later date, often to a secondary beneficiary. The Fixed Period Option (A) and Fixed Amount Option (B) both liquidate the principal over time. The Life Income with Period Certain Option (D) provides income for the beneficiary's lifetime, also liquidating the principal.
Question 17 (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 18 (Chapter 3)
An insured has a life insurance policy with an Accelerated Death Benefit rider. She is diagnosed with a terminal illness and given less than 12 months to live. What does this rider allow her to do?
- A) Increase her policy's death benefit without further underwriting.
- B) Receive a portion of her policy's death benefit while still living.
- C) Convert her term life policy to a whole life policy.
- D) Waive future premium payments due to her illness.
Show answer & explanation
Answer: B
The Accelerated Death Benefit rider allows an insured who is diagnosed with a terminal illness (or sometimes other qualifying conditions like critical or chronic illness) to receive a portion of their policy's death benefit while they are still alive. This provides financial relief during a difficult time. Option A describes a Guaranteed Insurability rider or Paid-Up Additions. Option C describes a Conversion privilege. Option D describes a Waiver of Premium rider.
The Provisions Mistakes That Cost Marks
Treating incontestability and the suicide clause as one rule. Both usually run two years, and they do different things. After incontestability expires the insurer cannot void the policy for a misstatement at all; the suicide clause, once expired, means suicide is simply a covered death. A question about a misstatement discovered in year three has nothing to do with suicide.
Confusing extended term with reduced paid-up. Extended term keeps the full death benefit for a shorter time; reduced paid-up keeps coverage for life at a smaller amount. The scenario tells you whether the client wants the amount or the duration protected.
Misreading per stirpes. Per stirpes passes a deceased beneficiary's share down to that person's own descendants; per capita redistributes it among the surviving named beneficiaries. The question always kills off one beneficiary to make you choose.
Forgetting that a policy loan reduces the death benefit. An unpaid loan and its interest come off the proceeds. Candidates answer as though the loan were external borrowing, which is exactly the misconception being tested.
All nine chapters are audio lessons too — chapter 1 is free, no signup. The other two heavy blocks have their own sets: 18 life policy types questions and 18 health insurance questions.
Question counts and content weighting come from the Pearson VUE Texas examination content outline. Read September 2026.
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