Texas Life and Health Insurance Quiz

Mason is considering purchasing a life insurance policy. Which of the following is a characteristic of a term life insurance policy?

• It provides coverage for the insured's entire life.

• It accumulates cash value over time.

• It offers coverage for a specified period.

• It requires a single premium payment.

Answer explanation

A term life insurance policy offers coverage for a specified period, unlike whole life insurance, which covers the insured's entire life and accumulates cash value. It does not require a single premium payment.

Abigail is considering purchasing life insurance and wants to understand the difference between whole life insurance and term life insurance in terms of policy benefits and duration.

• Whole life insurance provides temporary coverage, while term life insurance offers permanent coverage.

• Whole life insurance accumulates cash value and provides lifelong coverage, whereas term life insurance offers coverage for a specific period without cash value.

• Both whole life and term life insurance provide lifelong coverage with cash value accumulation.

• Term life insurance accumulates cash value, while whole life insurance does not.

Answer explanation

Whole life insurance provides lifelong coverage and accumulates cash value, while term life insurance is for a specific period and does not build cash value.

Scarlett wants to ensure that her life insurance policy will pay out a death benefit regardless of when she dies. Which type of policy should she choose?

• Term life insurance

• Whole life insurance

• Universal life insurance

• Variable life insurance

Answer explanation

Whole life insurance guarantees a death benefit payout regardless of when the policyholder dies, making it the best choice for ensuring coverage at any time. Term life insurance only pays out if death occurs within a specified term.

Priya is considering different health insurance policies and wants to understand how deductibles play a role in these policies and their impact on her out-of-pocket expenses.

• Deductibles increase the premium but decrease out-of-pocket expenses.

• Deductibles decrease the premium and increase out-of-pocket expenses until the deductible is met.

• Deductibles have no impact on premiums or out-of-pocket expenses.

• Deductibles are only applicable to life insurance policies.

Answer explanation

Deductibles are amounts policyholders must pay out-of-pocket before insurance kicks in. Higher deductibles lower premiums but increase initial out-of-pocket costs until the deductible is met, making the correct choice accurate.

Samuel is considering purchasing an insurance policy and wants to understand the primary purpose of risk management in insurance. What should he know?

• To eliminate all risks associated with insurance policies.

• To minimize the financial impact of risks on the insurer and insured.

• To increase the likelihood of claims being filed.

• To ensure that all policyholders pay the same premium.

Answer explanation

The primary purpose of risk management in insurance is to minimize the financial impact of risks on both the insurer and the insured, ensuring stability and protection against potential losses.

Charlotte is considering different strategies for managing risk in her new insurance company. Evaluate the effectiveness of using risk pooling as a strategy in insurance risk management.

• Risk pooling increases the risk for individual policyholders.

• Risk pooling decreases the overall risk for the insurer by spreading it across many policyholders.

• Risk pooling is ineffective in managing risk.

• Risk pooling only benefits high-risk policyholders.

Answer explanation

Risk pooling effectively decreases the overall risk for the insurer by distributing it among many policyholders, which helps to stabilize losses and manage uncertainty.

Emma is applying for a new health insurance policy. What is the primary function of underwriting in this scenario?

• To process claims efficiently.

• To determine the eligibility and pricing of insurance applicants.

• To provide customer service to policyholders.

• To sell insurance policies to new customers.

Answer explanation

The primary function of underwriting in the insurance industry is to determine the eligibility and pricing of insurance applicants, assessing risk to set appropriate premiums.

Sophia is applying for a life insurance policy. Analyze how the underwriter assesses the risk associated with her application.

• By reviewing Sophia's driving record and credit score.

• By evaluating Sophia's health history, lifestyle, and occupation.

• By considering Sophia's education level and marital status.

• By examining Sophia's social media activity.

Answer explanation

An underwriter assesses risk by evaluating the applicant's health history, lifestyle, and occupation, as these factors directly impact life expectancy and potential claims.

Scarlett is studying the insurance industry for her economics class. She wants to know which regulatory body oversees the insurance industry in the United States. Can you help her?

• Federal Reserve

• Securities and Exchange Commission (SEC)

• National Association of Insurance Commissioners (NAIC)

• Department of Homeland Security

Answer explanation

The National Association of Insurance Commissioners (NAIC) is the primary regulatory body overseeing the insurance industry in the U.S., coordinating regulation among states, unlike the other options listed.

Avery is starting a new insurance company and is learning about the importance of regulatory compliance. Why is regulatory compliance crucial for Avery's insurance business?

• It ensures that insurance companies can operate without any restrictions.

• It protects consumers by ensuring that insurance companies adhere to laws and regulations.

• It allows insurance companies to set their own rules and guidelines.

• It is only important for health insurance providers.

Answer explanation

Regulatory compliance is crucial in the insurance industry as it protects consumers by ensuring that companies follow laws and regulations, promoting fairness and accountability in the market.