Life Insurance Taxation and Retirement Practice Questions
Section IV of the general-knowledge outline · Texas General Lines Life, Accident and Health: 8 scored questions
Ten questions on retirement plans, group life and taxation, untimed, with a worked answer after each one.
Or take the full Life and Health mock examIn a third-party ownership arrangement, which statement correctly describes the relationship among the parties to the policy?
Retirement plans, group life and taxation on the exam
Outline section IV is 8 of the 100 general-knowledge questions: how life insurance is taxed, how group life and retirement plans work, and how agents size coverage for families and businesses.
- Outline
- Section IV: Third-party ownership, life settlements, group life, qualified and nonqualified plans, needs analysis, Social Security and taxation of life insurance
- Share of the exam
- Life and Health general knowledge: 8 of 100 scored questionsTexas General Lines Life, Accident and Health: 8 of 130 scored questionsTexas Life Agent: 8 of 80 scored questions
- Our drill
- 10 questions from 29 on this section, untimed, a worked answer after each; one free attempt, unlimited with a pass
What to know
- Death proceeds paid to a named beneficiary in a lump sum are generally free of federal income tax. When proceeds are paid in installments, the interest portion is taxable.
- Premiums for individual life insurance are not tax-deductible. Policy dividends are a return of premium and are not taxed until they exceed the premiums paid.
- A policy that fails the seven-pay test is a modified endowment contract (MEC): loans and withdrawals are taxed gain first, with a 10% penalty before age 59½. The death benefit stays income-tax-free.
- Employer-paid group term life is tax-free to the employee up to $50,000 of coverage; the cost of coverage above $50,000 is taxable income. An employee leaving the group can convert to an individual policy without evidence of insurability within 31 days.
- Key person insurance is owned by the business on an employee whose death would cost it money. A buy-sell agreement funded with life insurance lets surviving owners buy a deceased owner’s share.
- Qualified retirement plans meet IRS rules, may not discriminate in favor of highly paid employees, and get deductible employer contributions and tax-deferred growth. Nonqualified plans can favor selected employees but lose the immediate deduction.
Test yourself on retirement plans, group life and taxation
Ten questions on retirement plans, group life and taxation, untimed, with a worked answer after each one.
Or take the full Life and Health mock examCommon questions
How many retirement plans, group life and taxation questions are on the exam?
Section IV is 8 of the 100 scored general-knowledge questions on the Texas General Lines exam and 8 of the 50 on the Texas Life Agent exam.
Are these real exam questions?
No. No state or testing vendor does not release exam questions. These are original practice questions written to the published content outline, with a worked explanation and the source behind every answer.
More life and health sections
- Types of life policies and annuitiesdrill
- Life policy riders, provisions, options and exclusionsdrill
- Life application, underwriting and policy deliverydrill
- Types of health policiesdrill
- Health policy provisions, clauses and ridersdrill
- Social insurance and other health conceptsdrill
- Health field underwritingdrill
Outline and facts checked November 2026: Texas Insurance Content Outlines (effective September 1, 2026) · NAIC Uniform Individual Accident and Sickness Policy Provision Law · Texas Insurance Licensing Candidate Handbook.
Original independent practice questions written to the published Pearson VUE content outline. Not affiliated with or endorsed by Pearson VUE, the Texas Department of Insurance or any state insurance department.