General knowledge · Practice sample
Texas life insurance exam practice test
Unofficial, original sample questions on general-knowledge topics for the Texas Life producer exam (InsTX-Life01), based on the outline effective September 1, 2026. Not actual exam questions. Not a prelicensing course. Not the exam vendor, an insurance department, or a licensing association.
Free sample questions
Studying for the Texas Life exam and want to test yourself? Below are free sample questions on general life insurance concepts: policy types, riders and provisions, underwriting and delivery, annuities, and retirement and tax basics. Each question has the answer and a short explanation.
How to use this sample
Try each question first, then tap Show answer to check it and read why.
Read the explanation even when you get it right. The reason is what carries over to a new question.
If a question trips you up, revisit that topic in the study notes linked below, then come back.
This sample covers general insurance concepts only. It does not cover Texas law.
This sample shows how practice works. It does not measure how prepared you are or predict your exam result.
1. Matching a policy to a shrinking debt
A client wants coverage only until a home loan is paid off. The client wants the death benefit to fall as the loan balance falls, at the lowest cost. Which policy fits best?
A. Level term
B. Decreasing term
C. Whole life
D. Universal life
Show answer
Answer: B. Decreasing term.
Decreasing term lowers the death benefit over the policy period on a set schedule, which roughly follows a debt that shrinks with each payment. Level term keeps the same face amount, so it costs more than this need requires. Whole life and universal life are permanent policies with cash value, which is more coverage and cost than a temporary, declining need calls for.
2. Who carries the investment risk
In a variable life policy, who bears the investment risk on the cash value held in the separate account?
A. The insurer
B. The policyowner
C. The beneficiary
D. The agent who sold the policy
Show answer
Answer: B. The policyowner.
In variable life, the policyowner chooses among separate account subaccounts, and the cash value (and often the death benefit above a stated minimum) rises or falls with those investments. With traditional whole life, the insurer carries the investment risk and credits the contract's stated values instead.
3. When the insured cannot work
An insured becomes totally disabled as defined in the policy and can no longer earn income to pay premiums. Which rider keeps the policy in force without premium payments while the qualifying disability lasts?
A. Accidental death benefit rider
B. Waiver of premium rider
C. Other-insured (family) term rider
D. Cost of living rider
Show answer
Answer: B. Waiver of premium rider.
Waiver of premium excuses premiums while the insured meets the rider's definition of total disability, after the waiting period stated in the rider. Coverage continues as if premiums were paid. An accidental death rider adds a benefit for death by accident. It does not pay premiums.
4. Stopping premiums on whole life
A whole life policyowner stops paying premiums. The owner wants to keep the full original face amount in force for as long as possible, without paying anything more. Which nonforfeiture option does this?
A. Cash surrender
B. Reduced paid-up insurance
C. Extended term insurance
D. Paying dividends in cash
Show answer
Answer: C. Extended term insurance.
Extended term uses the policy's cash value to buy term coverage for the full face amount. It lasts for as long as that value will pay for it. Reduced paid-up keeps permanent coverage but at a lower face amount. Cash surrender ends the coverage. Dividend options are not nonforfeiture options.
5. When insurable interest must exist
For an individual life insurance policy, when must the policyowner have an insurable interest in the insured's life?
A. Only at the insured's death
B. At the time of application and issue
C. At every premium due date
D. Only if the beneficiary is not a relative
Show answer
Answer: B. At the time of application and issue.
Insurable interest must exist when the policy is applied for and issued. It does not have to continue until the insured dies. This is what separates a legitimate policy from a wager on a stranger's life. A later change in relationship, such as a divorce, does not void a policy that was valid at issue.
6. Paying with the application
An applicant pays the first premium with the application and receives a conditional receipt. The applicant is later found insurable exactly as applied for. When does coverage typically begin?
A. On the date of the application or the medical exam, whichever is later
B. On the date the policy is delivered
C. On the first policy anniversary
D. When the second premium is paid
Show answer
Answer: A. On the date of the application or the medical exam, whichever is later.
A conditional receipt makes coverage effective as of the application or medical exam date, whichever comes later, as long as the applicant qualifies as applied for. If the applicant does not qualify on those terms, coverage does not start under the receipt.
7. A policy issued on different terms
The insurer issues a policy at a higher premium than the applicant applied for because of a health finding. How is this treated, and what happens at delivery?
A. It is an acceptance, so coverage is in force when the policy is mailed
B. It is a counteroffer, so coverage begins only after the applicant accepts it, typically by signing and paying any added premium
C. It is a rejection, so the applicant must start a new application
D. It is a policy loan, so the added premium is charged against cash value
Show answer
Answer: B. It is a counteroffer.
When an insurer issues coverage on terms other than those applied for, it is making a counteroffer. The applicant has to accept the new terms before the contract is formed. At delivery, the agent usually collects any added premium and the applicant's signed acceptance.
8. The highest income per premium dollar
An annuitant wants income for as long as they live, at the largest periodic amount a given sum can buy. The annuitant has no need to leave money to anyone. Which payout option fits?
A. Life with period certain
B. Joint and survivor
C. Straight life (life only)
D. Joint and survivor with period certain
Show answer
Answer: C. Straight life (life only).
A straight life annuity pays income only while the annuitant is living and nothing to a beneficiary after death. Because the insurer makes no promise past the annuitant's death, it pays the highest periodic amount. Period certain and joint and survivor options add a promise to someone else, so each periodic payment is smaller.
9. A policy funded too fast
A life insurance policy fails the seven-pay test and becomes a modified endowment contract (MEC). What changes?
A. The death benefit becomes fully taxable to the beneficiary
B. Withdrawals and loans taken while the insured is living are taxed gain-first, and may face an added federal tax if taken early
C. The policy loses all cash value
D. The policy can return to non-MEC status once premiums slow down
Show answer
Answer: B. Living withdrawals and loans are taxed gain-first.
MEC status changes how money taken out while the insured is living is taxed: gain comes out first and is taxable, and early distributions may face an added tax. The death benefit is still generally income-tax-free to the beneficiary. Once a policy is a MEC, it stays a MEC.
10. Qualified vs nonqualified plans
Which statement describes a nonqualified deferred compensation plan?
A. It must cover all eligible employees on a nondiscriminatory basis
B. It can be offered to selected executives or key employees instead of all eligible employees
C. It has the same contribution limits as a 401(k)
D. Employer contributions are always deductible in the year they are made
Show answer
Answer: B. It can be offered to selected executives or key employees.
Nonqualified plans do not meet the federal tax rules for qualified plans, so they can favor selected people. The trade-off is that they do not get the qualified-plan tax treatment. Broad nondiscrimination rules and plan contribution limits belong to qualified plans such as 401(k)s. Employers often fund these promises informally with life insurance or an annuity. That does not make the plan qualified.
Study the topics behind these questions
- Types of life insurance policies: term, whole life, universal life, and variable life
- Policy riders: waiver of premium, accidental death, and other riders
- Application and underwriting: insurable interest, receipts, and policy delivery
- Annuities: accumulation, payout options, and how annuity income works
Unofficial study aid. Not affiliated with Pearson VUE or the Texas Department of Insurance. Passing is not guaranteed.