Texas Life Agent Practice Exam

Sharing commissions is legal if:

1. Both parties are licensed for the same lines of insurance

2. One party is a legal assistant

3. Only one party holds the license

4. The transaction is under $500

The correct answer is: Both parties are licensed for the same lines of insurance

Sharing commissions is permissible when both parties hold licenses for the same lines of insurance. This requirement is grounded in regulatory standards that ensure professional conduct and the safeguarding of client interests. By mandating that both parties are licensed, the law helps maintain a level of competence and accountability, ensuring that both individuals involved in the commission-sharing arrangement are qualified and adhere to industry regulations. In scenarios where only one party holds a license, or when one party is merely a legal assistant without a relevant license, the regulatory framework would not support the division of commissions, as it could lead to unqualified individuals profiting from insurance transactions. Moreover, the monetary threshold of $500 does not have relevance regarding the legality of sharing commissions, as regulations typically focus on licensure and not on financial limits. Thus, the emphasis on licensure is critical for both ethical practices in the industry and the protection of consumers.