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Texas Life Practice Exam

20 exam-style questions drawn from the same bank as our full Texas Life course (Texas Life Agent — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. Which annuity settlement option produces the largest periodic income payment for a given premium?
Life only (straight life)Life with 20-year period certainInstallment refundJoint and 100% survivor
2. Which of the following must an agent possess to sell variable annuities?
Only the FINRA Series 7 general securities registration with no state-level life producer licenseA state life license plus FINRA Series 6 or 7 and a state securities registrationA state property and casualty producer license with a personal-lines variable-products endorsementA state life producer license alone, issued by the agent's resident state insurance department
3. How does Modified Endowment Contract status affect the income-tax treatment of the death benefit paid to the named beneficiary at the insured's death?
The death benefit remains income-tax-free under IRC §101(a) — MEC status changes living-benefit taxation, not death-benefit treatment.MEC status converts the death benefit from §101(a)-excluded proceeds to long-term capital gain at preferential capital-gains rates under §1221Only the gain over the policy's investment-in-the-contract basis is taxable as ordinary income; the remaining basis portion is excluded under §101(a)The death benefit paid to the named beneficiary becomes fully taxable as ordinary income at the marginal federal rate on the receipt year's return
4. An insured with a $500,000 policy and a chronic illness ADB rider elects to accelerate $200,000 over two years for chronic-care needs. The policy's cash value at the time of acceleration is $40,000, and total premiums paid are $35,000. How are the accelerated payments most likely treated for federal income tax?
Fully tax-free as a §101(g) chronic-illness acceleration, subject to per-diem limits set annually by the IRSTax-free only up to $40,000 — the policy's cash-value amount at the time of acceleration — and ordinary income thereafterFully taxable as ordinary income because the accelerated amounts received by the insured exceed cumulative premiums paidTaxable as a partial surrender to the extent the accelerated payments exceed the policy's investment-in-the-contract basis
5. The rider allowing more coverage at set ages or events without proof of insurability is
Guaranteed insurabilityTerm conversionCost of livingReturn of premium
6. An insurer chooses to qualify a permanent life policy under the Cash Value Accumulation Test rather than the GPT. Which statement best describes the operating rule of the CVAT?
Premiums paid into the contract in the first seven contract years may not exceed the cumulative 7-pay limit prescribed by IRC §7702A for MEC purposes.Cash value at any time may not exceed the net single premium that would fund the future benefits, computed using §7702 statutory assumptions.The contract's death benefit must always equal at least 250% of accumulated cash value through age 40, then declining gradually under the §7702(d) corridor tableCumulative premiums paid into the contract may never exceed the GPT guideline single premium or the cumulative guideline level premium, whichever is greater, throughout the policy's lifetime.
7. The part of the application where the agent gives impressions of the applicant is the
Agent's reportStatement of good healthDelivery receiptMedical history
8. Why does IRC §7702 matter for universal life policy design?
It controls participating-policy dividend crediting and prescribes which of the five standard dividend options each insurer must make available on every whole life and UL formIt caps the maximum policy-loan interest rate insurers may charge on universal life cash-value loans, displacing state-law standards on permanent-contract loan pricingIt defines the limits a contract must satisfy to be treated as life insurance for federal tax purposes, preserving the inside buildup and the income-tax-free death benefitIt mandates a federally uniform 10-day free-look on every individual UL contract delivered or issued for delivery, overriding shorter state-law minimums under state insurance codes
9. Under TIC Chapter 4001 and TDI rules, before TDI will issue a permanent Texas Life Agent license, an applicant generally must:
Hold a securities registration in addition to the licensePass the licensing exam and submit fingerprints for a checkComplete forty hours of pre-licensing classroom studyShow three years of prior insurance agency experience
10. The single contract issued to an employer for group life coverage is the
BinderMaster policyRiderCertificate
11. A charge for withdrawing more than allowed during the early years of an annuity is a
Surrender chargeAnnual feePremium taxMortality charge
12. An exclusion for death caused by acts of war is the
Suicide clauseWar exclusionAviation exclusionHazard exclusion
13. An IRA funded with possibly deductible contributions and taxable withdrawals is a
Traditional IRARoth IRASEP IRASIMPLE IRA
14. An applicant with better than average health and habits is rated
StandardSubstandardPreferredRated
15. During payout, variable annuity income is measured in
Accumulation unitsShare unitsPayout unitsAnnuity units
16. Whole life with a lower premium for the first few years, then a higher level premium, is
Straight lifeModified lifeGraded premiumLimited pay
17. A 55-year-old client wants to systematically save for retirement over the next 10 years using after-tax dollars and would like to vary contribution amounts year to year. Which annuity funding type is most appropriate?
FPDASPDASPIAPeriod-certain immediate annuity
18. Which nonforfeiture option, available on a whole life policy, uses the existing cash value as a single premium to buy a smaller amount of fully paid-up whole life?
Cash surrenderExtended term insuranceAutomatic premium loanReduced paid-up insurance
19. A payout that returns any unpaid premium in a lump sum at death is
Life onlyPeriod certainCash refundInstallment refund
20. An IUL policy has a cap of 10%, a participation rate of 90%, and a floor of 0%. The chosen index returns 15% during the crediting period. What rate is credited to the cash value?
13.5%10%9%0%

Want a different set? Refresh the page for 20 new questions — the full course has 500+, each with a complete explanation, plus full-length timed exam simulations and an AI tutor.