17 Free Texas Life Agent Practice Questions: Types of Life Insurance Policies (2026)
How to Use This Policy Types Set
Types of policies is the largest general-knowledge block. In the content outlines effective 1 September 2026 it is section I of the general knowledge part and carries 15 of the 50 scored questions, the same weight as riders, provisions, options and exclusions. The exam asks you to recognise a policy from a client's situation and to separate near-identical structures.
These 17 questions cover term variants, whole life variants, universal life death benefit options, joint and survivorship life, juvenile and industrial policies, variable products and the group life conversion right. Cover the answer, commit to a letter, then read the explanation.
Practice Questions 1-6: Term and Whole Life Structures
Matching a client's need to the policy structure. Decreasing term, limited pay, graded premium, industrial and renewable term each have a signature feature, and the stem usually gives it away if you read for it.
Question 1 (Chapter 2)
John recently purchased a new home with a 30-year mortgage. He wants to ensure that if he passes away prematurely, his family will have the funds to pay off the remaining mortgage balance. He is looking for a life insurance policy where the death benefit aligns with the decreasing balance of his mortgage over time. Which type of policy is most appropriate for John?
- A) Level Term Life
- B) Decreasing Term Life
- C) Increasing Term Life
- D) Return-of-Premium Term Life
Show answer & explanation
Answer: B
Decreasing Term Life insurance is specifically designed for situations like mortgages or other loans where the financial obligation decreases over time. The death benefit of a Decreasing Term policy reduces over the policy term, typically matching the amortization schedule of a loan, while the premiums usually remain level. Level Term provides a constant death benefit, Increasing Term provides a growing death benefit, and Return-of-Premium Term focuses on premium return, none of which align with John's specific need to cover a decreasing debt.
Question 2 (Chapter 2)
Mrs. Rodriguez, a successful business owner, wants to purchase a permanent life insurance policy but prefers to pay all premiums within a specific, shorter period, such as 20 years, rather than for her entire life. After this period, she wants the policy to remain in force with no further premium payments required. Which policy type would be most suitable for Mrs. Rodriguez?
- A) Limited-Pay Whole Life
- B) Straight Life
- C) Single-Premium Whole Life
- D) Graded-Premium Whole Life
Show answer & explanation
Answer: A
Limited-Pay Whole Life insurance is designed for individuals who want to pay for their entire life insurance coverage over a shorter, specified period (e.g., 10-pay, 20-pay, or paid-up at age 65). Once the premiums are paid, the policy remains in force for the insured's lifetime, and no further premiums are due. Straight Life requires premiums for life. Single-Premium Whole Life involves one large upfront payment. Graded-Premium Whole Life has lower initial premiums that increase over time.
Question 3 (Chapter 2)
Mark has a Universal Life insurance policy with Option B (Increasing Death Benefit). He understands that this option provides a death benefit equal to the policy's stated face amount plus the accumulated cash value. How does this structure typically affect the pure insurance component (net amount at risk) and the premiums compared to Option A?
- A) Option B has a decreasing net amount at risk and lower premiums than Option A.
- B) Option B has an increasing net amount at risk and lower premiums than Option A.
- C) Option B has a level net amount at risk and generally has lower premiums than Option A.
- D) Option B maintains a level net amount at risk and generally has higher premiums than Option A.
Show answer & explanation
Answer: D
Under Universal Life Option B (Increasing Death Benefit), the death benefit is the stated face amount plus the cash value. This means that as the cash value grows, the total death benefit increases. To maintain this structure, the pure insurance component (net amount at risk) must remain relatively level, as the death benefit is always the sum of the face amount (pure insurance) and the cash value. Because the insurer's net amount at risk does not decrease with cash value growth (as it does in Option A), the cost of insurance and thus the total premiums for Option B are generally higher than for Option A, especially over the long term.
Question 4 (Chapter 2)
A client, Mr. Davies, is starting a new business and wants permanent life insurance but needs to manage his cash flow carefully in the early years. He is looking for a policy where the premiums start very low and gradually increase each year for a defined period (e.g., 10-20 years) before eventually leveling off at a higher rate for the rest of his life. Which type of whole life policy fits this description?
- A) Graded-Premium Whole Life
- B) Straight Life
- C) Modified Whole Life
- D) Joint Life
Show answer & explanation
Answer: A
Graded-Premium Whole Life policies feature premiums that start very low and increase annually for a specified period (e.g., 5, 10, or 20 years), after which they level off and remain constant for the life of the policy. This allows for lower initial costs, which is suitable for someone with limited early cash flow. Straight Life (B) has level premiums from the start. Modified Whole Life (C) has lower premiums for an initial period (e.g., 3-5 years) then jumps to a higher, level premium. Joint Life (D) covers two lives and pays on the first death.
Question 5 (Chapter 2)
Mrs. Garcia, a factory worker, is looking for a small life insurance policy to cover her final expenses. She prefers to make premium payments weekly and would appreciate an agent collecting the premiums directly from her home. Which type of policy is designed to meet these specific needs, typically offering small face amounts?
- A) Industrial Life
- B) Term Life
- C) Universal Life
- D) Juvenile Life
Show answer & explanation
Answer: A
Industrial Life insurance (also known as 'Home Service' or 'Debit' insurance) is characterized by small face amounts (e.g., $1,000 - $5,000), weekly or monthly premiums, and often involves agents collecting premiums in person at the insured's home. It's designed to provide affordable coverage for final expenses to individuals who might not otherwise qualify for or be able to afford larger policies. Term Life (B) and Universal Life (C) are typically for larger amounts and have different premium payment structures. Juvenile Life (D) is for children.
Question 6 (Chapter 2)
Maria's 10-year renewable term life policy is approaching its expiration. She decides to renew it to continue her coverage. Which of the following is a correct statement regarding the renewal of her term policy?
- A) The renewed policy's premium will be based on her attained age at the time of renewal.
- B) Her new premium will be lower than the original premium due to her policy's age.
- C) She will need to provide evidence of insurability, such as a medical exam, to renew the policy.
- D) The death benefit of the renewed policy will automatically increase.
Show answer & explanation
Answer: A
A renewable term policy allows the policyowner to renew coverage at the end of the term without proving insurability. However, the premium for the renewed term will be based on the insured's 'attained age' (their age at the time of renewal), meaning it will be higher than the original premium. Option B is incorrect because premiums increase with age. Option C is incorrect because the key benefit of renewability is avoiding new evidence of insurability. Option D is incorrect; the death benefit typically remains the same unless a specific rider for increasing coverage was included.
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Practice Questions 7-12: Universal Life, Group and Survivorship
Universal life death benefit options, non-contributory group participation, survivorship life and the payor benefit on a juvenile policy. These are the questions where one word in the stem decides the answer.
Question 7 (Chapter 2)
Linda is comparing two Universal Life policies. Policy 1 has Option A (Level Death Benefit) and Policy 2 has Option B (Increasing Death Benefit). Both policies have a face amount of $250,000. After 15 years, both policies have accumulated $40,000 in cash value. Assuming the insured dies at this point, what is the death benefit paid under each policy?
- A) Policy 1 pays $290,000; Policy 2 pays $250,000
- B) Both pay $250,000
- C) Policy 1 pays $250,000; Policy 2 pays $290,000
- D) Both pay $290,000
Show answer & explanation
Answer: C
Universal Life Option A (Level Death Benefit) pays only the face amount of $250,000 regardless of cash value. The cash value is absorbed into the death benefit, keeping the total payout level. Option C (Increasing Death Benefit) pays the face amount PLUS the cash value: $250,000 + $40,000 = $290,000. This is one of the most heavily tested distinctions on the Texas exam.
Question 8 (Chapter 2)
XYZ Company pays the entire premium for its group life insurance plan; employees contribute nothing. What level of employee participation is required for this non-contributory plan?
- A) 75% of eligible employees
- B) 85% of eligible employees
- C) No minimum participation is required
- D) 100% of eligible employees
Show answer & explanation
Answer: D
Non-contributory group life plans (where the employer pays 100% of the premium) require 100% participation of all eligible employees. Because the employees pay nothing, there is no reason for an employee to decline coverage, and full participation eliminates adverse selection concerns. Contributory plans, by contrast, require 75% participation. This contributory vs. non-contributory distinction is heavily tested on the Texas exam.
Question 9 (Chapter 2)
Mr. and Mrs. Patel, both age 45, want to leave a large legacy to their grandchildren and cover estate taxes that will be due after they're both gone. They want a policy that pays out only when the SECOND spouse dies. Which policy is most appropriate?
- A) Joint Life (First-to-Die)
- B) Two separate Whole Life policies
- C) Family Policy
- D) Survivorship Life (Second-to-Die)
Show answer & explanation
Answer: D
Survivorship Life (also called Second-to-Die) covers two lives but pays the death benefit only upon the death of the LAST surviving insured. This is the standard estate planning tool for wealthy couples because federal estate taxes are typically deferred until the second spouse dies (unlimited marital deduction). Premiums are lower than a Joint Life policy because the payout is delayed. Joint Life (A) would pay at the FIRST death, which doesn't fit their estate-tax goal.
Question 10 (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) Return-of-Premium Term Life
- B) Level Term Life
- C) Decreasing Term Life
- D) Increasing Term Life
Show answer & explanation
Answer: A
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 11 (Chapter 2)
Rachel buys a Juvenile Life policy on her 5-year-old son. To ensure that if Rachel dies or becomes disabled, premiums on her son's policy will still be paid, which rider should she add?
- A) Waiver of Premium rider
- B) Accelerated Death Benefit rider
- C) Payor Benefit rider
- D) Guaranteed Insurability rider
Show answer & explanation
Answer: C
The PAYOR BENEFIT RIDER is unique to juvenile policies. It waives premiums on the child's policy if the PAYOR (typically a parent or guardian) dies or becomes disabled, until the child reaches a specified age (often 21 or 25). The Waiver of Premium rider (A) waives premiums if the INSURED — in this case the child — becomes disabled, which is far less common in juvenile policies. Payor Benefit protects the child's coverage against the adult payor's incapacity.
Question 12 (Chapter 2)
Which of the following is TRUE about the death benefit and premiums of a Decreasing Term life insurance policy?
- A) Both the death benefit and the premium decrease over time
- B) The death benefit decreases over time, but the premium typically remains level
- C) The death benefit remains level, but the premium decreases over time
- D) Both the death benefit and the premium increase over time
Show answer & explanation
Answer: B
In a Decreasing Term policy, the DEATH BENEFIT decreases over the policy term (often matching a mortgage amortization), while the PREMIUM TYPICALLY REMAINS LEVEL. This is a common trap on the exam — many students assume the premium decreases along with the benefit. Decreasing Term is typically used to cover an amortizing debt like a mortgage.
Practice Questions 13-17: Securities, Joint Life and Premium Patterns
Which products are securities, who gets paid at the first death, what happens to a group death benefit during the conversion period, and the difference between graded and modified premium patterns.
Question 13 (Chapter 2)
Which type of policy is regulated as a SECURITY by the SEC in addition to being regulated as insurance by the Texas Department of Insurance?
- A) Indexed Universal Life
- B) Variable Universal Life
- C) Modified Whole Life
- D) Limited-Pay Whole Life
Show answer & explanation
Answer: B
Variable Universal Life (VUL) — like Variable Life and Variable Annuities — is regulated as a security by the SEC because its cash value is invested in separate accounts whose performance directly determines policy values. Selling VUL requires a state insurance license PLUS a FINRA securities registration (Series 6 or 7) and a state securities license. Indexed Universal Life (A) is NOT a security — it credits interest based on an index formula but does not directly invest in securities. The other whole life variants are also NOT securities.
Question 14 (Chapter 2)
Joint Life policies are characterized by:
- A) Payment of the death benefit upon the death of the last surviving insured
- B) Payment of the death benefit upon the first death among the insureds, after which the policy terminates
- C) Two separate death benefit payments, one for each insured's death
- D) Coverage of only the primary insured plus dependents under term riders
Show answer & explanation
Answer: B
JOINT LIFE (First-to-Die) covers two or more insureds under one contract and pays the SINGLE death benefit upon the FIRST death. The policy then terminates — there is no second payment. This is the OPPOSITE of Survivorship Life (Second-to-Die), which pays upon the death of the LAST surviving insured. The mnemonic: Joint = First; Survivorship = Last.
Question 15 (Chapter 2)
Tony's employer terminates him on July 1st. By July 15th, before exercising his group life conversion right, Tony suffers a fatal heart attack. What happens to the group life death benefit?
- A) The benefit is denied because Tony did not convert in time
- B) Tony's beneficiary receives the group life death benefit because Tony died during the 31-day conversion period
- C) Only 50% of the death benefit is paid
- D) The benefit is paid only if Tony had paid the first conversion premium
Show answer & explanation
Answer: B
If a terminated insured dies during the 31-day CONVERSION PERIOD — whether or not they applied for conversion — the FULL group death benefit is payable to the beneficiary as if coverage had still been in force. This is a critical consumer protection: the conversion right operates even if the insured dies before exercising it, ensuring the family is protected during the transition period.
Question 16 (Chapter 2)
George wants permanent life insurance but is on a tight budget. He understands his income will grow steadily for the next 10 years. He wants premiums that start very low and increase a little each year for 10 years, then level off. Which policy structure fits?
- A) Single-Premium Whole Life
- B) Graded-Premium Whole Life
- C) Modified Whole Life
- D) Straight Whole Life
Show answer & explanation
Answer: B
GRADED-PREMIUM Whole Life features premiums that start very low and INCREASE ANNUALLY for a specified period (typically 5-10 years or longer), after which they level off for the remainder of the policy. MODIFIED Whole Life (C) has lower premiums for an initial 3-5 year period followed by a SINGLE jump to a higher level premium — no annual increases. Memory aid: Modified = one step up; Graded = gradual annual climb.
Question 17 (Chapter 2)
Which of the following statements accurately distinguishes the primary purpose and characteristics of Term Life insurance compared to Whole Life insurance?
- A) Term Life is designed for temporary needs and offers pure death benefit protection without cash value, whereas Whole Life is permanent coverage with guaranteed cash value accumulation.
- B) Term Life provides lifelong coverage and builds cash value, while Whole Life provides coverage for a specific period with no cash value.
- C) Term Life has flexible premiums and an adjustable death benefit, while Whole Life has fixed premiums and a fixed death benefit.
- D) Term Life policies are considered securities and require a securities license to sell, while Whole Life policies are not.
Show answer & explanation
Answer: A
Term Life insurance is temporary coverage, providing a death benefit for a specific period (the 'term') and does not accumulate cash value; it's pure protection. Whole Life insurance is permanent coverage, lasting for the insured's entire life, and includes a guaranteed cash value component that grows over time. Option B incorrectly swaps the characteristics. Option C describes Universal Life for the first part and Whole Life for the second. Option D is incorrect; Variable Life and Variable Universal Life are considered securities, not standard Term Life.
The Mistakes That Cost Marks
Mixing up the universal life options. Option A pays the face amount; Option B pays the face amount plus the cash value. Read the option label in the stem before you read the answers, and be careful with explanations that appear to swap the labels.
Assuming a decreasing term premium decreases. The death benefit falls; the premium typically stays level.
Joint versus survivorship. Joint life pays at the first death and then ends. Survivorship life pays at the last death, which is why it suits estate planning.
Graded versus modified. Graded premiums climb gradually for a period and then level off. Modified whole life steps up once.
Forgetting that variable products are securities. A variable universal life policy needs a securities registration in addition to an insurance license; an indexed policy does not.
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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