Texas Life Policy Provision Practice Questions

Updated 29 September 202613 min read

Key takeaway

Policy-provision questions depend on contract wording and timing.

Texas individual life policies generally provide at least a one-month grace period after the first premium, a two-year incontestability period subject to exceptions, and an adjustment for understated age.
Reinstatement has separate conditions; suicide limitations depend on policy terms and applicable Texas rules.

On this page9 sections

Question 1: death during a grace period
Question 2: reinstatement after lapse
Question 3: identify what the incontestability provision addresses
Question 4: suicide provision versus incontestability
Question 5: adjust for an understated age
Question 6: distinguish policy exclusions and Texas limits
Compare the provisions before selecting an answer
A fast solving routine
What to remember for the Texas Life Agent exam

A life-policy provision is easier to apply when you mark the date, event, and contractual condition in the question. A premium due date raises a grace-period issue. A lapsed policy and a request to restore it raise reinstatement. A challenge after the policy has been in force for a period raises incontestability. A death described as suicide raises the contract’s suicide provision. An incorrect age may adjust the amount payable rather than automatically voiding the contract.

The Texas Life Agent outline specifically names grace period, reinstatement, incontestability, suicide, misstatement of age, and policy exclusions. The scenarios below are original study questions, not Pearson VUE items. Some rules depend on the issued policy and narrow statutory conditions. Apply the facts the stem supplies and do not extend a rule to products or circumstances the source does not cover.

Question 1: death during a grace period

Premium due date and policy status

A policyowner has paid the first premium and all later premiums on time until this month. The current premium is due, and the policy provides a 31-day grace period. The insured dies on day 18 after the due date, before the premium is paid. Which answer best applies the stated provision?

A. The policy remains in force during the stated grace period, and the overdue premium may be deducted from the settlement if the policy provides for that deduction.
B. Coverage ended immediately on the premium due date, so no death benefit can be paid.
C. The grace period applies only to the first premium.
D. The beneficiary receives the full benefit and the insurer may never account for the unpaid premium.

Answer: A. Texas Insurance Code §1101.005 requires a covered life policy to provide at least one month of grace for each premium after the first, during which the policy remains in force. It may provide for an interest charge on a late premium or deduction of the overdue premium from a settlement if the insured dies during the grace period. The question also gives a 31-day contract period, so day 18 is within the stated period. The actual deduction depends on the policy provision.

The important timeline is: premium due, grace period begins under the contract, insured dies while the stated grace is still open. Do not confuse a grace period with a free-look period or assume the grace rule covers the first premium; the statute refers to premiums after the first. Also do not automatically say the entire face amount is paid without accounting for the late premium. The policy may allow that deduction from the claim settlement.

Question 2: reinstatement after lapse

Reinstatement conditions

A whole life policy with nonforfeiture benefits lapsed after premium default. Its accumulated value was applied to extended-term insurance, which is still in force. The owner has not surrendered the original policy. Two years after default, the owner asks to reinstate and is willing to provide satisfactory evidence of insurability and pay overdue premiums with interest. Which statement best fits the Texas rule described in 28 TAC §4.611?

A. Reinstatement can never be requested once extended-term insurance begins.
B. The policy may provide for reinstatement within three years, or longer if the insurer allows, subject to the specified insurability, payment, and status conditions.
C. The owner can reinstate without paying overdue premiums or interest because the value bought insurance.
D. Any policy can be reinstated indefinitely without evidence of insurability.

Answer: B. The rule for policies with nonforfeiture benefits provides for possible reinstatement within three years after default, or a longer period at the insurer’s option, when the other insurance purchased with the policy value remains in force, the original policy has not been surrendered and canceled, evidence of insurability satisfactory to the insurer is provided, and arrears are paid with interest. The facts line up with those conditions, but the exact contract and the insurer’s provision still matter. It is not an unconditional right to restore every policy indefinitely.

A common trap is to treat lapse and reinstatement as if reinstatement simply reverses time. It does not. The policy and applicable rule may require evidence of insurability and payment of overdue amounts. The status of extended-term insurance or another value-based option also matters. The stem provides these facts because the candidate must check them, not because a policy’s original coverage automatically continued unchanged during every day after default.

Reinstatement is not the same as renewal

Renewal generally continues a term policy for another period under its renewal provision. Reinstatement concerns restoring a policy after it lapsed, subject to conditions. A question that says ‘the owner pays the next renewal premium’ is not automatically a reinstatement problem. Look for the prior lapse and the requested restoration. TDI’s consumer guide notes that reinstatement may require overdue premiums with interest and health information; the exact policy and applicable rule govern.

Question 3: identify what the incontestability provision addresses

Two-year period and nonpayment exception

A standard individual life policy has been in force for more than two years from its issue date during the insured’s lifetime. Premiums are current. The insurer says it may contest the policy solely because it now wishes to re-evaluate the risk. Which statement best reflects the ordinary Texas incontestability provision?

A. Texas requires the policy to become incontestable after two years, except for nonpayment of premiums and the stated military-service condition if the policy includes it.
B. The insurer may contest at any time simply because it changed its underwriting view.
C. The two-year rule applies only to annuities, not life insurance.
D. The policy becomes incontestable after one month.

Answer: A. Texas Insurance Code §1101.006 requires the policy to provide that a policy in force for two years from its issue date during the insured’s lifetime is incontestable, except for nonpayment of premiums. At the company’s option, it may also provide a contest exception for violation of policy conditions relating to naval or military service in a time of war. The question supplies current premiums and more than two years in force, so a mere change in the insurer’s view is not the stated exception. Actual claim disputes may involve additional law and the policy’s facts.

The words ‘during the lifetime of the insured’ and ‘except for nonpayment’ are important. The provision is not simply a two-year warranty that every possible dispute disappears. It is a contract clause with a defined period and exceptions. Do not use it to erase a policy lapse for unpaid premium, and do not confuse the incontestability period with the grace period. One concerns contesting validity after time in force; the other gives a window to pay a premium after its due date.

TDI’s consumer guidance says a claim during the first two years may lead the company to review the application and that a policy has a new contestable period after reinstatement. For a real dispute, that guide does not replace legal advice or the contract. For the exam, answer the rule identified by the question and avoid making a broad statement about every ground for contesting a claim.

Question 4: suicide provision versus incontestability

Apply the contract’s suicide terms

A life policy expressly states that it will not pay its ordinary death benefit for suicide within two years after issue and will return premiums as described in the contract. The insured dies by suicide 14 months after the policy is issued. Which answer best follows the stated facts?

A. Apply the suicide provision described in the policy; do not treat the separate two-year incontestability clause as automatically erasing it.
B. Pay the full face amount because the insured lived more than one year.
C. Deny all claims under the policy forever, regardless of the contract.
D. Treat suicide as nonpayment of premium.

Answer: A. The stem explicitly supplies a suicide provision and a death inside its stated two-year period. TDI explains that life policies usually do not pay the death benefit when suicide occurs in the first two years and that premiums are returned if the company does not pay, but the policy’s exact language controls the facts. Suicide limitations and incontestability are related timing concepts, but they are not interchangeable. The answer should not make the exclusion permanent or relabel it as nonpayment.

Do not assume that every contract uses identical suicide language or that the Texas statute sets a universal two-year suicide clause in the same way it requires an incontestability provision. The question gives a specific policy term. Apply that term, then keep the return-of-premium treatment within the wording provided. If the question did not state what happens to premiums, do not invent an amount or refund formula.

Question 5: adjust for an understated age

Misstatement of age and benefit amount

The insured’s age was understated on an individual life application. The policy’s premium was $80 per month. At the insured’s correct age, that same premium would have purchased $90,000 of coverage, while the policy face amount shown is $110,000. Under Texas Insurance Code §1101.008, which amount does the required adjustment provision use in this simplified example?

A. $110,000, because the printed face amount can never change.
B. $90,000, the amount the premium paid would have purchased at the correctly stated age.
C. $0, because any age error automatically voids the policy.
D. A refund of every premium, regardless of the policy terms.

Answer: B. Section 1101.008 says that if the insured’s age was understated, the amount payable is the amount the premium paid would have purchased if the age had been stated correctly. The question supplies that amount as $90,000, so it is the answer. The statute does not say every age error voids the policy, and it does not preserve the misstated face amount regardless of the premium calculation. This example addresses an understatement; do not expand that exact statutory wording to a different scenario without checking the applicable provision.

This is a useful example of how a simple amount can test a provision rather than arithmetic skill. The controlling information is not only the printed face amount; it is what the premium would have bought at the correct age. The exam outline includes misstatement of age and gender among policy provisions, but the Texas code provision cited here specifically states the adjustment for an understated age. Use the exact facts and source in the question.

Question 6: distinguish policy exclusions and Texas limits

Texas rules for specified exclusions

A policy question asks which statement about exclusions best fits the Texas Life Agent outline and Texas policy requirements. Which is the best answer?

A. Every exclusion listed in a general life-insurance textbook is automatically permitted in every Texas policy.
B. The outline names war, aviation, and dangerous occupation as exclusion topics, but Texas requirements limit which provisions may be included; TDI says declared or undeclared war exclusions are not allowed, while specified hazardous-occupation and aviation provisions are addressed by statute and policy conditions.
C. A policy can exclude any cause of death if the insurer prints it in bold type.
D. Any exclusion automatically applies to accidental-death benefits as well as the base policy.

Answer: B. The Pearson outline includes war, aviation, and dangerous-occupation exclusions as concepts candidates should recognize. Texas Insurance Code §1101.055 addresses limited circumstances where settlement may be less than the face amount, including death caused by a hazardous occupation stated in the policy or aviation activity under specified conditions approved by the department. TDI’s Life Exclusions Checklist says declared and undeclared war exclusions are not allowed and notes that the permitted life exclusions or limitations do not apply to additional amounts such as accidental-death benefits. A general list is not permission to use every exclusion in Texas.

This is a high-value scope trap. The exam outline tells you a topic may be tested; it does not mean every example in a generic textbook is valid in Texas. For legal effect, use the state rule and applicable approved policy form. Do not assume that writing a clause into a policy makes it lawful, and do not extend an exclusion from the base life benefit to a separate rider when the Texas checklist says otherwise.

Compare the provisions before selecting an answer

Provision	Trigger in a question	Do not confuse it with
Grace period	A premium after the first is overdue but the stated grace window is open.	Incontestability or reinstatement.
Reinstatement	A policy lapsed and the owner asks to restore coverage under stated conditions.	Renewal of a term policy or automatic continuation of coverage.
Incontestability	The policy has been in force for a stated period and validity is being challenged.	A grace period for a late premium or a suicide clause.
Suicide provision	Death by suicide occurs within a period stated in the contract.	A universal statutory rule identical to the incontestability clause.
Misstatement of age	The insured’s age was reported incorrectly, including an understatement addressed by §1101.008.	Automatic rescission or a beneficiary change.
Exclusion or limitation	A stated cause, activity, or rider limitation affects the payable amount.	A general permission to exclude any risk in any Texas policy.

A fast solving routine

Identify the event: missed premium, lapse, contest, suicide, incorrect age, or a stated cause of death.
Mark the date and period: days after due date, years from issue, or years after default.
Find the provision or rule that matches that event. Do not answer from a similar-sounding clause.
Check the policy wording and any Texas-specific limitation supplied in the question.
State the consequence narrowly: coverage remains during grace; reinstatement may be available subject to conditions; the correct-age amount is used; or the stated limitation applies.
If a key fact is missing, do not invent it. Real claims can involve facts and laws beyond a short exam scenario.

What to remember for the Texas Life Agent exam

Grace keeps a policy in force during the contract’s premium-payment window after the first premium. Reinstatement is a separate process with conditions. Incontestability is a two-year provision with exceptions, not a substitute for paying premiums. Suicide treatment depends on the policy wording and timing. An understated age changes the amount payable to what the premium would have purchased at the correct age. Texas also limits life exclusions; do not assume the outline’s generic list makes every exclusion enforceable.

For policy loans, assignments, and other separate rule scenarios, see the Texas policy-loan practice questions and beneficiary and assignment practice questions. Sitonce’s Texas Life Agent exam prep page has current product information.

Common questions

How long is the Texas life insurance grace period?

Texas Insurance Code §1101.005 requires at least one month for each premium after the first. The issued policy states the actual period; TDI’s checklist says that if expressed in days, at least 31 days must be granted for individual term and whole life policies.

Can a lapsed life policy be reinstated in Texas?

A policy with nonforfeiture benefits may provide for reinstatement within three years, or longer at the insurer’s option, subject to conditions such as satisfactory evidence of insurability, payment of premium arrears with interest, and the policy’s status.

What does an incontestability clause do?

Texas law requires a covered life policy to provide that it becomes incontestable after two years from issue during the insured’s lifetime, except for nonpayment of premiums and a stated optional military-service exception.

What happens if the insured’s age was understated?

The policy must provide for the amount payable to equal the amount the premium paid would have purchased at the correctly stated age, under Texas Insurance Code §1101.008. It adjusts the benefit to the premium actually paid, rather than automatically voiding coverage.

Are war exclusions allowed in Texas life insurance?

TDI’s Life Exclusions Checklist says declared and undeclared war exclusions are not allowed. Texas separately addresses specified hazardous-occupation and aviation provisions, so consult the current statute and approved policy language.