Texas Life & Health: Types of Life Insurance Policies

Correct

The answer is D: Convertible Feature

A Convertible Feature allows the policyowner to convert a term policy into a permanent life insurance policy (such as Whole Life or Universal Life) without providing new evidence of insurability. This is crucial for David as he wants to avoid proving insurability when transitioning to permanent coverage. The Renewable Feature allows renewal of the term policy, not conversion to permanent. Accelerated Death Benefit is a rider for terminal illness, and Return-of-Premium is a type of term policy that returns premiums if the insured outlives the term.

Reviewed in our October 2026 Texas fact-check.

Correct

The answer is A: Yes, both FIA and IUL are insurance products, not securities

Both Fixed Indexed Annuities (FIA) and Indexed Universal Life (IUL) are insurance products, not securities, and neither requires a securities license. Although their interest crediting is LINKED to an index, the policy itself does not directly invest in the market. The insurer credits interest using formulas with caps, floors, and participation rates. Therefore, no securities registration is needed. Her life license covers both products; for annuities, Texas also requires the one-time four-credit annuity course and the insurer's product training (Insurance Code §1115.056). This contrasts sharply with Variable Life and VUL, which DO require a securities license because the cash value is directly invested in separate accounts.

Source: Insurance Code §1115.056

Correct

The answer is A: 100% of eligible employees

A Texas group life policy issued to an employer, under which employees pay no part of the premium, must insure all eligible employees, except any whose evidence of insurability the insurer finds unsatisfactory (Insurance Code §1131.204(c)). Because employees pay nothing, there is no reason for anyone to decline, and covering everyone removes the adverse selection that voluntary enrollment would invite. Texas no longer sets a participation minimum for a private employer's contributory plan. The 75% contributory rule survives only for certain other groups, such as a city's employees (§1131.304(b)).

Source: Insurance Code §1131.204(c) · Insurance Code §1131.304(b)

Correct

The answer is A: The insured may convert to an individual policy without proof of insurability

The conversion privilege applies not only to terminated employees but also to insureds whose group coverage ends because the EMPLOYER terminates the master policy without replacement. When the master policy ends, Texas gives this right only to an insured covered under it for at least five years, and the policy may cap the new individual policy at $2,000 (Insurance Code §1131.111). The insured has 31 days to convert to an individual permanent policy without proof of insurability, with premiums based on attained age. This protects insureds from losing coverage due to events outside their control.

Source: Insurance Code §1131.111

Correct

The answer is D: The beneficiary is paid because Tony died in the conversion period

If a terminated insured dies during the 31-day CONVERSION PERIOD, whether or not they applied for conversion, the FULL group death benefit is payable to the beneficiary as if coverage had still been in force. Tony died on July 15, within the 31-day period. This is a critical consumer protection: the conversion right operates even if the insured dies before exercising it, ensuring the family is protected during the transition period.

Reviewed in our October 2026 Texas fact-check.