Texas Life Policy Disclosures and Settlement Practice Questions

An agent shows a life-policy illustration with a projected cash value based on assumed future performance. The consumer asks whether the projected figure is guaranteed. Which response is most accurate?

1. The illustration should distinguish guaranteed values from non-guaranteed projections; the policy and approved illustration rules control.
2. Every illustrated value is guaranteed once it appears in a document.
3. A buyer’s guide guarantees all future dividends and interest.
4. The agent may replace the illustration with a verbal promise.

A prospective buyer wants a general explanation of life insurance types before comparing carriers. A second person already has a proposed policy and wants a written overview of that policy’s features. Which pair of documents best fits those different needs?

1. Buyer’s guide for general information; policy summary for the specific proposed policy
2. Policy summary for general information; buyer’s guide as the full contract
3. Illustration for general legal rights; application for a guaranteed benefit statement
4. Replacement notice for both purposes

An illustration shows non-guaranteed values. The agent tells the applicant that those values cannot fall and says the printed designation is only a formality. What is the most important concern?

1. The oral explanation may misrepresent non-guaranteed values; the agent should explain the assumptions and limits accurately.
2. The statement is proper because an illustration is never reviewed by a consumer.
3. The applicant can ignore the policy and rely on an agent’s guarantee.
4. The policy becomes a group-life certificate.

An applicant plans to surrender an existing life policy to pay premiums on a newly proposed policy. Which issue should the agent recognize?

1. The transaction may be a replacement and trigger applicable duties, notices, and documentation for the agent and insurer.
2. It cannot be a replacement because the old policyowner chose the surrender.
3. It is automatically a life settlement even though no provider buys the policy.
4. It is only a dividend election on the new policy.

A policyowner transfers a life policy to a licensed settlement provider for a negotiated payment. The provider expects to pay future premiums and receive the policy’s death benefit. What kind of transaction is most directly described?

1. Life settlement
2. Ordinary policy replacement with a new insurer
3. Premium reduction dividend option
4. Group conversion

A life-settlement provider quotes a gross purchase amount. The broker’s compensation and fees have not been disclosed, and the owner does not know the net amount available. Which step is most important before evaluating the offer?

1. Review the transaction’s required disclosures, compensation, offers, and reconciliation from gross amount to net proceeds.
2. Accept immediately because the gross amount is all the owner will receive.
3. Ask the insurer to guarantee that the settlement provider will pay more later.
4. Treat broker compensation as irrelevant because no policy is involved.

A licensed professional helps an owner obtain and compare offers from potential life-settlement providers but does not purchase the policy. Which role is most likely being described?

1. Life settlement broker
2. Life settlement provider
3. Policy beneficiary
4. Insurer underwriter

An insured qualifies under a policy rider to receive part of the death benefit before death. The insured keeps ownership and does not transfer the policy to an outside buyer. Which feature best fits?

1. Accelerated death benefit
2. Life settlement
3. Replacement
4. Cash dividend

An owner asks the insurer to end a cash-value policy and pay the available contract surrender value. No third-party provider is involved. Which transaction is described?

1. Cash surrender, not a life settlement
2. Life settlement, because the owner receives money
3. Annuity period
4. Key-person coverage

A candidate finds a Pearson outline reference for a policy buyer’s guide but notices that the referenced rule’s current materials appear to address an annuity guide. What should the candidate do before stating a precise legal deadline or section citation?

1. Verify the current controlling Texas rule and TDI guidance; do not repeat an apparently mismatched citation as settled fact.
2. Assume an annuity citation always controls every life policy.
3. Invent a delivery deadline based on another state’s rule.
4. Ignore all disclosures because the outline may contain a citation issue.

An owner sells a policy and receives proceeds. The buyer takes over premium payments and is named to receive the eventual death benefit. Which consequence should the owner understand?

1. The owner has transferred policy rights and should not assume the original beneficiaries retain the future death benefit.
2. The sale leaves ownership and beneficiary designations unchanged in every case.
3. The owner continues to control the policy after transferring all rights.
4. The insurer must pay both the original beneficiary and settlement provider the full death benefit.

A consumer receives a policy summary that lists key features and values. The consumer asks whether receiving it proves that the policy is the best choice for their needs. Which answer is most accurate?

1. No. A summary provides information about a policy; suitability or a sound choice requires considering the consumer’s needs, alternatives, and applicable requirements.
2. Yes. A summary automatically guarantees the policy is best for every buyer.
3. Yes. The summary replaces all policy terms and legal disclosures.
4. No. Policy summaries are always invalid in Texas.