The Texas Property & Casualty Insurance requires a clear understanding of key concepts and the ability to apply them under pressure. This practice test is designed to help you develop both skills. As you work through the questions, focus on accuracy and reasoning. Over time, this approach will help you achieve better results.
Updated for 2026: This guide provides a structured approach to help you prepare effectively, understand key concepts, and practice real exam-level questions.
How to Use This Practice Test
- Start by reviewing key concepts before attempting questions
- Take the test in a timed environment
- Analyze your mistakes and revisit weak areas
Why This Practice Test Matters
This practice test is designed to simulate the real exam environment and help you identify knowledge gaps, improve accuracy, and build confidence.
| Exam Name | Texas Property & Casualty Insurance Licensing Practice Exam – 2026 Updated |
|---|---|
| Exam Provider | Texas Department of Insurance (TDI) & Pearson VUE |
| Certification Type | State Insurance License (Property & Casualty Lines Authority) |
| Total Practice Questions | 150 Advanced MCQs (Coverage + Texas Laws + Claims + Underwriting) |
| Exam Domains Covered | • Property Insurance (Dwelling, Commercial Property, Inland Marine) • Casualty Insurance (Liability, Auto, Workers Compensation) • Policy Structure (Declarations, Insuring Agreement, Conditions, Exclusions) • Texas Insurance Laws & Regulations (TDI Rules, Unfair Practices) • Underwriting & Risk Management • Claims Handling & Settlement Practices |
| Questions in Real Exam | • Total: ~100–150 Questions • Mix of national and Texas-specific questions • Scenario-based and definition-based questions • Strong emphasis on state regulations |
| Exam Duration | • Total Time: ~2–3 Hours • Requires strong reading comprehension • Scenario-based questions demand attention to detail |
| Passing Score | • Passing Score: ~70% • Must demonstrate understanding of both national and Texas-specific content • Accuracy is critical due to regulatory questions |
| Question Format | • Multiple Choice Questions (MCQs) • Scenario-Based Questions • Policy interpretation questions • Texas law and compliance questions |
| Difficulty Level | Moderate to Advanced (Scenario-Based + Regulation Heavy) |
| Key Focus Areas | • Policy structure and coverage interpretation • Differences between HO policies (HO-2, HO-3, HO-5) • Liability concepts (negligence, strict liability, vicarious liability) • Business income and indirect loss coverage • Inland marine and specialized coverages • Texas unfair trade practices and claim settlement rules • Underwriting and risk classification |
| Common Exam Traps | • Confusing direct vs indirect loss • Mixing liability vs property coverage • Misinterpreting exclusions (flood, war, earthquake) • Overlooking Texas-specific regulations (TDI rules) • Confusing ACV vs replacement cost • Misunderstanding claims-made vs occurrence policies • Ignoring policy conditions (duties after loss) |
| Skills Developed | • Policy analysis and coverage determination • Risk assessment and underwriting knowledge • Claims handling and investigation understanding • Regulatory compliance awareness • Insurance terminology mastery • Real-world insurance decision-making |
| Study Strategy | • Focus on understanding policy structure deeply • Memorize key Texas insurance laws and unfair practices • Practice scenario-based questions regularly • Learn key coverage differences (HO forms, liability types) • Review claims process step-by-step • Take timed mock exams to improve speed • Analyze mistakes to strengthen weak areas |
| Best For | • Aspiring insurance agents in Texas • Individuals entering property & casualty insurance field • Sales agents and insurance advisors • Professionals seeking state licensing |
| Career Benefits | • Required license to sell P&C insurance in Texas • Opens opportunities in insurance sales and underwriting • Builds strong knowledge of risk management • Enhances earning potential and career growth |
| Updated | 2026 Latest Version – Based on Current Texas Department of Insurance Guidelines |
1.
Which section of an insurance policy defines what is covered?
A. Conditions
B. Exclusions
C. Insuring Agreement
D. Declarations
Answer: C
Rationale: The insuring agreement outlines what the insurer promises to cover. It defines the scope of protection and is the foundation of the policy, distinguishing covered risks from exclusions and conditions.
2.
Which policy provides liability coverage for bodily injury and property damage?
A. HO-3
B. Personal Auto Policy
C. Commercial General Liability
D. Umbrella
Answer: C
Rationale: Commercial General Liability (CGL) policies provide coverage for third-party bodily injury and property damage claims arising from business operations, making them essential for business risk protection.
3.
Which is a named peril policy?
A. HO-3 dwelling
B. HO-2
C. HO-5
D. HO-6
Answer: B
Rationale: HO-2 policies cover only specifically listed perils, unlike open-peril policies which cover all risks except those excluded.
4.
Which term describes intentional misrepresentation to obtain insurance benefits?
A. Negligence
B. Fraud
C. Hazard
D. Loss
Answer: B
Rationale: Fraud involves deliberate deception for financial gain and is illegal.
5.
Which coverage protects against employee dishonesty?
A. Liability
B. Crime insurance
C. Property insurance
D. Inland marine
Answer: B
Rationale: Crime insurance covers losses from employee theft and dishonesty.
6.
Which is a Texas regulatory requirement for insurers?
A. Federal approval
B. Licensing by TDI
C. IRS registration
D. FDIC approval
Answer: B
Rationale: Insurers must be licensed by TDI to operate in Texas.
7.
Which policy covers damage to a business’s physical property?
A. Liability
B. Commercial property
C. Auto
D. Workers comp
Answer: B
Rationale: Commercial property insurance covers buildings, equipment, and inventory.
8.
Which is an example of a moral hazard?
A. Carelessness
B. Dishonesty
C. Poor maintenance
D. Weather
Answer: B
Rationale: Moral hazard involves intentional acts like fraud.
9.
Which is NOT a basic policy component?
A. Declarations
B. Insuring agreement
C. Exclusions
D. Premium
Answer: D
Rationale: Premium is not a structural section.
10.
Which is a deductible?
A. Premium
B. Amount insurer pays
C. Amount insured pays before coverage
D. Policy limit
Answer: C
Rationale: Deductibles reduce small claims and share risk.
11.
Which is liability coverage?
A. Property damage
B. Bodily injury to others
C. Theft
D. Fire
Answer: B
Rationale: Liability covers injury to others.
12.
Which is underwriting?
A. Claims handling
B. Risk selection
C. Sales
D. Marketing
Answer: B
Rationale: Underwriting evaluates risk.
13.
Which is a peril?
A. Risk
B. Cause of loss
C. Policy
D. Premium
Answer: B
Rationale: A peril causes loss.
14.
Which is subrogation?
A. Claim denial
B. Insurer recovery from third party
C. Policy issuance
D. Premium payment
Answer: B
Rationale: Insurers recover from responsible parties.
15.
Which is replacement cost?
A. Market value
B. Cost to replace without depreciation
C. Original cost
D. Salvage value
Answer: B
Rationale: Replacement cost excludes depreciation.
16.
Which is actual cash value?
A. Replacement cost
B. Replacement minus depreciation
C. Market value
D. Salvage
Answer: B
Rationale: ACV = replacement minus depreciation.
17.
Which policy covers personal vehicles?
A. CGL
B. PAP
C. HO-3
D. Umbrella
Answer: B
Rationale: PAP covers personal autos.
18.
Which is an exclusion?
A. Covered risk
B. Not covered risk
C. Premium
D. Limit
Answer: B
Rationale: Exclusions list what is not covered.
19.
Which is a limit of liability?
A. Premium
B. Max insurer pays
C. Deductible
D. Loss
Answer: B
Rationale: Limits cap insurer payment.
20.
Which is negligence?
A. Intentional act
B. Failure to act reasonably
C. Fraud
D. Hazard
Answer: B
Rationale: Negligence leads to liability.
21.
Which is a binder?
A. Claim
B. Temporary coverage
C. Policy
D. Premium
Answer: B
Rationale: Binder provides temporary coverage.
22.
Which is a premium?
A. Deductible
B. Policy cost
C. Claim
D. Limit
Answer: B
Rationale: Premium is the price paid.
23.
Which is insurable interest?
A. Ownership
B. Financial stake in property
C. Policy
D. Claim
Answer: B
Rationale: Required for valid policy.
24.
Which is a claim?
A. Policy
B. Request for payment
C. Premium
D. Deductible
Answer: B
Rationale: Claims request benefits.
25.
Which is reinsurance?
A. Customer insurance
B. Insurer insurance
C. Government insurance
D. Private insurance
Answer: B
Rationale: Insurers transfer risk.
26.
Which is liability limit?
A. Deductible
B. Max payout
C. Premium
D. Loss
Answer: B
Rationale: Limits cap liability.
27.
Which is underwriting factor?
A. Weather
B. Risk profile
C. Claim
D. Premium
Answer: B
Rationale: Risk determines acceptance.
28.
Which is a loss?
A. Gain
B. Damage
C. Premium
D. Policy
Answer: B
Rationale: Loss is damage.
29.
Which is a policy condition?
A. Coverage
B. Rule for policy
C. Exclusion
D. Premium
Answer: B
Rationale: Conditions define rules.
30.
Which is indemnity?
A. Profit
B. Restore to prior state
C. Gain
D. Bonus
Answer: B
Rationale: Indemnity prevents profit.
31.
A policyholder intentionally sets fire to their insured property. This is:
A. Negligence
B. Moral hazard
C. Fraud
D. Peril
Answer: C
Rationale: Intentional destruction of insured property to collect insurance proceeds is fraud. It violates policy conditions and voids coverage, and it may also result in criminal prosecution.
32.
Which coverage applies when a business is sued for advertising injury?
A. Property coverage
B. Workers compensation
C. CGL Coverage B
D. Inland marine
Answer: C
Rationale: Coverage B under a Commercial General Liability policy covers personal and advertising injury, including libel, slander, and copyright infringement.
33.
Which HO policy provides the broadest coverage?
A. HO-2
B. HO-3
C. HO-5
D. HO-8
Answer: C
Rationale: HO-5 provides open-peril coverage for both dwelling and personal property, offering the most comprehensive protection among homeowners policies.
34.
Which is an example of a physical hazard?
A. Carelessness
B. Theft
C. Faulty wiring
D. Fraud
Answer: C
Rationale: Physical hazards are tangible conditions that increase the chance of loss, such as faulty wiring or poor construction.
35.
Which policy covers business interruption losses?
A. Inland marine
B. Business income
C. Liability
D. Auto
Answer: B
Rationale: Business income insurance compensates for lost income when operations are interrupted due to a covered loss.
36.
Which is a Texas requirement for agent licensing?
A. Federal approval
B. TDI license
C. SEC registration
D. IRS approval
Answer: B
Rationale: Agents must be licensed by the Texas Department of Insurance (TDI) to sell insurance products in Texas.
37.
Which coverage applies to employee injuries on the job?
A. Liability
B. Workers compensation
C. Property
D. Auto
Answer: B
Rationale: Workers compensation provides benefits for job-related injuries or illnesses.
38.
Which is a deductible purpose?
A. Increase claims
B. Reduce insurer risk
C. Increase premium
D. Eliminate coverage
Answer: B
Rationale: Deductibles reduce the number of small claims and share risk with policyholders.
39.
Which is a peril?
A. Risk
B. Cause of loss
C. Hazard
D. Policy
Answer: B
Rationale: A peril is the direct cause of loss, such as fire or theft.
40.
Which is subrogation?
A. Insurer pays claim
B. Insurer recovers from third party
C. Policy issuance
D. Premium payment
Answer: B
Rationale: Subrogation allows insurers to recover losses from responsible third parties.
41.
Which is replacement cost coverage?
A. Market value
B. Replacement minus depreciation
C. Full replacement without depreciation
D. Salvage value
Answer: C
Rationale: Replacement cost covers the cost to replace property without depreciation deduction.
42.
Which is ACV?
A. Replacement cost
B. Replacement minus depreciation
C. Market value
D. Salvage
Answer: B
Rationale: Actual cash value accounts for depreciation.
43.
Which is a liability coverage example?
A. Fire damage
B. Theft
C. Injury to others
D. Flood
Answer: C
Rationale: Liability covers third-party injury.
44.
Which is underwriting purpose?
A. Pay claims
B. Evaluate risk
C. Market policies
D. Process payments
Answer: B
Rationale: Underwriting assesses risk before issuing policies.
45.
Which is an exclusion?
A. Covered loss
B. Non-covered loss
C. Premium
D. Limit
Answer: B
Rationale: Exclusions define what is not covered.
46.
Which is insurable interest?
A. Ownership
B. Financial stake
C. Policy
D. Claim
Answer: B
Rationale: Insurable interest ensures legitimate insurance.
47.
Which is negligence?
A. Intentional act
B. Failure to act reasonably
C. Fraud
D. Hazard
Answer: B
Rationale: Negligence leads to liability claims.
48.
Which is a binder?
A. Claim
B. Temporary coverage
C. Policy
D. Premium
Answer: B
Rationale: Binders provide temporary protection.
49.
Which is a premium?
A. Deductible
B. Policy cost
C. Claim
D. Limit
Answer: B
Rationale: Premium is payment for coverage.
50.
Which is a claim?
A. Policy
B. Request for payment
C. Premium
D. Deductible
Answer: B
Rationale: Claims request compensation.
51.
Which is reinsurance?
A. Customer insurance
B. Insurer insurance
C. Government insurance
D. Private insurance
Answer: B
Rationale: Insurers transfer risk to reinsurers.
52.
Which is a limit of liability?
A. Deductible
B. Maximum payout
C. Premium
D. Loss
Answer: B
Rationale: Limits cap insurer liability.
53.
Which is a moral hazard?
A. Faulty wiring
B. Carelessness
C. Dishonesty
D. Weather
Answer: C
Rationale: Moral hazard involves intentional wrongdoing.
54.
Which is a physical hazard?
A. Fraud
B. Carelessness
C. Faulty construction
D. Theft
Answer: C
Rationale: Physical hazards are tangible risks.
55.
Which policy covers mobile property?
A. CGL
B. Inland marine
C. Auto
D. Property
Answer: B
Rationale: Inland marine covers property in transit.
56.
Which is a policy condition?
A. Coverage
B. Rule
C. Exclusion
D. Premium
Answer: B
Rationale: Conditions define obligations.
57.
Which is indemnity principle?
A. Profit
B. Restore to prior condition
C. Gain
D. Bonus
Answer: B
Rationale: Insurance prevents profit from loss.
58.
Which is a Texas unfair practice?
A. Disclosure
B. Misrepresentation
C. Compliance
D. Licensing
Answer: B
Rationale: Misrepresentation violates TDI rules.
59.
Which is a covered peril in basic property policies?
A. Flood
B. Fire
C. Earthquake
D. War
Answer: B
Rationale: Fire is commonly covered.
60.
Which is key insurance principle?
A. Profit
B. Risk transfer
C. Gain
D. Bonus
Answer: B
Rationale: Insurance transfers risk from insured to insurer.
61.
A homeowner policy excludes flood damage. The insured wants coverage. What should they purchase?
A. HO-3 endorsement
B. Flood insurance policy
C. Umbrella policy
D. Inland marine
Answer: B
Rationale: Standard homeowners policies exclude flood damage. Coverage must be obtained through a separate flood insurance policy, typically provided under the National Flood Insurance Program (NFIP).
62.
Which type of loss is covered under liability insurance?
A. Damage to insured property
B. Injury to others
C. Wear and tear
D. Flood
Answer: B
Rationale: Liability insurance covers bodily injury or property damage to third parties caused by the insured’s actions or negligence.
63.
Which is a condition of an insurance policy?
A. Coverage
B. Exclusion
C. Duties after loss
D. Premium
Answer: C
Rationale: Conditions outline the responsibilities of both the insured and insurer, such as notifying the insurer promptly after a loss.
64.
Which policy covers leased commercial space improvements?
A. CGL
B. Business personal property
C. Builders risk
D. Inland marine
Answer: B
Rationale: Business personal property coverage includes improvements and betterments made by tenants to leased premises.
65.
Which is a speculative risk?
A. Fire
B. Theft
C. Business investment
D. Accident
Answer: C
Rationale: Speculative risks involve potential for gain or loss and are not insurable, unlike pure risks such as fire or theft.
66.
Which principle ensures the insured cannot profit from a loss?
A. Subrogation
B. Indemnity
C. Contribution
D. Utmost good faith
Answer: B
Rationale: Indemnity restores the insured to their financial position before the loss, preventing profit from insurance claims.
67.
Which is an example of vicarious liability?
A. Personal negligence
B. Employer liable for employee actions
C. Intentional fraud
D. Property damage
Answer: B
Rationale: Employers can be held liable for actions of employees performed within the scope of employment.
68.
Which is an example of direct loss?
A. Loss of income
B. Fire damage to building
C. Business interruption
D. Extra expense
Answer: B
Rationale: Direct loss refers to immediate damage caused by a peril, such as fire damage to property.
69.
Which is an example of indirect loss?
A. Fire damage
B. Theft
C. Business interruption
D. Vandalism
Answer: C
Rationale: Indirect loss results from direct damage, such as lost income after a fire.
70.
Which is a Texas requirement for policy cancellation notice?
A. Immediate
B. Written notice
C. Verbal notice
D. No notice
Answer: B
Rationale: Texas law requires written notice to the insured before policy cancellation.
71.
Which is a named insured?
A. Any covered person
B. Person listed on declarations
C. Any employee
D. Any customer
Answer: B
Rationale: Named insured is specifically listed in the declarations page.
72.
Which is an endorsement?
A. Policy
B. Amendment to policy
C. Claim
D. Premium
Answer: B
Rationale: Endorsements modify policy terms or coverage.
73.
Which is an insurer duty?
A. Pay premium
B. Investigate claims
C. Prevent losses
D. Maintain property
Answer: B
Rationale: Insurers must investigate and settle valid claims.
74.
Which is a cause of loss?
A. Hazard
B. Peril
C. Policy
D. Premium
Answer: B
Rationale: Peril directly causes damage.
75.
Which is a hazard?
A. Fire
B. Theft
C. Risk factor increasing loss
D. Policy
Answer: C
Rationale: Hazards increase likelihood of loss.
76.
Which is a policy limit?
A. Premium
B. Deductible
C. Maximum payout
D. Claim
Answer: C
Rationale: Limits cap insurer liability.
77.
Which is a deductible?
A. Premium
B. Insurer payment
C. Insured payment before coverage
D. Limit
Answer: C
Rationale: Deductibles reduce small claims.
78.
Which is a claim settlement option?
A. Cash payment
B. Policy issuance
C. Premium
D. Deductible
Answer: A
Rationale: Insurers may pay cash, repair, or replace.
79.
Which is a Texas unfair claim practice?
A. Prompt payment
B. Misrepresentation
C. Fair settlement
D. Disclosure
Answer: B
Rationale: Misrepresentation violates Texas law.
80.
Which is a personal liability coverage example?
A. Fire damage
B. Injury to guest
C. Theft
D. Flood
Answer: B
Rationale: Personal liability covers injuries to others.
81.
Which is a covered peril under HO-3 dwelling?
A. Flood
B. Fire
C. Earthquake
D. War
Answer: B
Rationale: Fire is covered.
82.
Which is NOT covered under standard property policy?
A. Fire
B. Theft
C. Flood
D. Vandalism
Answer: C
Rationale: Flood requires separate policy.
83.
Which is underwriting factor?
A. Risk exposure
B. Claim
C. Premium
D. Policy
Answer: A
Rationale: Underwriting evaluates risk.
84.
Which is insurable risk?
A. Speculative
B. Pure risk
C. Gambling
D. Investment
Answer: B
Rationale: Only pure risks are insurable.
85.
Which is a policy exclusion example?
A. Fire coverage
B. Flood damage
C. Theft
D. Liability
Answer: B
Rationale: Flood is excluded.
86.
Which is subrogation purpose?
A. Pay claim
B. Recover loss
C. Issue policy
D. Collect premium
Answer: B
Rationale: Insurer recovers from third party.
87.
Which is a binder purpose?
A. Claim
B. Temporary coverage
C. Policy
D. Premium
Answer: B
Rationale: Binder provides immediate protection.
88.
Which is replacement cost?
A. Market value
B. Replacement minus depreciation
C. Full replacement
D. Salvage
Answer: C
Rationale: No depreciation deduction.
89.
Which is ACV?
A. Replacement
B. Replacement minus depreciation
C. Market
D. Salvage
Answer: B
Rationale: ACV includes depreciation.
90.
Which is key insurance function?
A. Profit
B. Risk transfer
C. Gain
D. Bonus
Answer: B
Rationale: Insurance transfers risk.
91.
A business owner suffers loss of income due to a fire. Which policy responds?
A. CGL
B. Commercial property
C. Business income
D. Inland marine
Answer: C
Rationale: Business income insurance covers lost income when operations are interrupted due to a covered peril like fire. It helps maintain financial stability during downtime and is triggered only when direct physical loss occurs.
92.
Which policy condition requires insureds to protect property after a loss?
A. Abandonment
B. Duties after loss
C. Appraisal
D. Subrogation
Answer: B
Rationale: The “duties after loss” condition requires insureds to mitigate further damage, notify the insurer promptly, and cooperate during claim investigation.
93.
Which is an example of proximate cause?
A. Theft
B. Fire leading to smoke damage
C. Flood
D. Earthquake
Answer: B
Rationale: Proximate cause is the primary cause of loss. If fire leads to smoke damage, fire is the proximate cause, and resulting damage is typically covered.
94.
Which is a liability exposure?
A. Fire damage
B. Theft
C. Injury to customer
D. Flood
Answer: C
Rationale: Liability exposure involves legal responsibility for harm to others, such as injury to a customer.
95.
Which is coinsurance?
A. Premium sharing
B. Risk sharing between insured and insurer
C. Deductible
D. Claim
Answer: B
Rationale: Coinsurance requires the insured to carry insurance equal to a percentage of value; otherwise, they share losses proportionally.
96.
Which is an example of betterments and improvements?
A. Building structure
B. Tenant-installed upgrades
C. Inventory
D. Equipment
Answer: B
Rationale: Improvements made by tenants to leased property are covered under business personal property coverage.
97.
Which is a Texas requirement for prompt claim payment?
A. Optional
B. Required by law
C. Verbal
D. Not regulated
Answer: B
Rationale: Texas law requires insurers to handle and pay claims promptly, protecting consumers from delays.
98.
Which is a peril excluded in most policies?
A. Fire
B. Theft
C. War
D. Vandalism
Answer: C
Rationale: War is a common exclusion due to catastrophic risk.
99.
Which is a liability limit structure?
A. Deductible
B. Per occurrence limit
C. Premium
D. Claim
Answer: B
Rationale: Liability policies often include per occurrence and aggregate limits.
100.
Which is an example of strict liability?
A. Negligence
B. Intentional act
C. Liability without fault
D. Hazard
Answer: C
Rationale: Strict liability applies regardless of negligence.
101.
Which is a claim investigation step?
A. Marketing
B. Fact gathering
C. Sales
D. Lending
Answer: B
Rationale: Insurers investigate claims to verify coverage and damages.
102.
Which is a policy rider?
A. Base policy
B. Endorsement
C. Claim
D. Premium
Answer: B
Rationale: Riders modify policies.
103.
Which is an insurer obligation?
A. Pay premium
B. Investigate claims
C. Maintain property
D. Prevent loss
Answer: B
Rationale: Insurers must process claims.
104.
Which is a cause of loss?
A. Hazard
B. Peril
C. Policy
D. Premium
Answer: B
Rationale: Peril causes damage.
105.
Which is a hazard example?
A. Fire
B. Theft
C. Poor maintenance
D. Policy
Answer: C
Rationale: Hazards increase risk.
106.
Which is a policy limit?
A. Deductible
B. Premium
C. Max payout
D. Claim
Answer: C
Rationale: Limits cap insurer payment.
107.
Which is a deductible?
A. Premium
B. Insurer payment
C. Insured payment
D. Limit
Answer: C
Rationale: Deductible is paid by insured.
108.
Which is a claim settlement method?
A. Cash
B. Premium
C. Policy
D. Deductible
Answer: A
Rationale: Insurers may pay cash or repair.
109.
Which is a Texas unfair practice?
A. Prompt payment
B. Delay without reason
C. Disclosure
D. Licensing
Answer: B
Rationale: Unreasonable delays violate TDI rules.
110.
Which is personal liability coverage?
A. Fire
B. Injury to others
C. Theft
D. Flood
Answer: B
Rationale: Covers third-party injury.
111.
Which is covered peril in basic policies?
A. Flood
B. Fire
C. Earthquake
D. War
Answer: B
Rationale: Fire is standard coverage.
112.
Which is NOT covered?
A. Fire
B. Theft
C. Flood
D. Vandalism
Answer: C
Rationale: Flood excluded.
113.
Which is underwriting factor?
A. Risk
B. Claim
C. Premium
D. Policy
Answer: A
Rationale: Underwriting assesses risk.
114.
Which is insurable risk?
A. Speculative
B. Pure
C. Gambling
D. Investment
Answer: B
Rationale: Only pure risks are insurable.
115.
Which is policy exclusion?
A. Fire
B. Flood
C. Theft
D. Liability
Answer: B
Rationale: Flood excluded.
116.
Which is subrogation?
A. Pay claim
B. Recover loss
C. Issue policy
D. Collect premium
Answer: B
Rationale: Insurer recovers from third party.
117.
Which is binder?
A. Claim
B. Temporary coverage
C. Policy
D. Premium
Answer: B
Rationale: Binder provides temporary coverage.
118.
Which is replacement cost?
A. Market
B. Replacement minus depreciation
C. Full replacement
D. Salvage
Answer: C
Rationale: No depreciation deduction.
119.
Which is ACV?
A. Replacement
B. Replacement minus depreciation
C. Market
D. Salvage
Answer: B
Rationale: Includes depreciation.
120.
Which is insurance principle?
A. Profit
B. Risk transfer
C. Gain
D. Bonus
Answer: B
Rationale: Insurance transfers risk.
121.
A business suffers loss due to power outage off-premises. Coverage applies only if:
A. Always covered
B. Covered peril caused outage
C. Any outage
D. Government order
Answer: B
Rationale: Off-premises utility interruption is typically covered only if caused by a covered peril. Many policies require endorsement for utility services coverage.
122.
Which is an example of concurrent causation?
A. One cause of loss
B. Multiple causes contributing to loss
C. Policy condition
D. Deductible
Answer: B
Rationale: Concurrent causation occurs when multiple perils combine to cause a loss. Coverage depends on policy language.
123.
Which is a key feature of umbrella liability?
A. Property coverage
B. Excess liability coverage
C. Auto only
D. Workers comp
Answer: B
Rationale: Umbrella policies provide additional liability limits above underlying policies.
124.
Which is a bailee?
A. Owner
B. Custodian of property
C. Insurer
D. Broker
Answer: B
Rationale: A bailee temporarily holds property of another and may be liable for damage.
125.
Which is a coverage trigger for occurrence policies?
A. Claim date
B. Loss occurrence date
C. Policy issue date
D. Renewal date
Answer: B
Rationale: Occurrence policies respond to losses that occur during policy period regardless of when claim is made.
126.
Which is a claims-made policy trigger?
A. Loss occurrence
B. Claim reported during policy
C. Policy issuance
D. Deductible
Answer: B
Rationale: Claims-made policies require claim reporting during policy period.
127.
Which is a retroactive date?
A. Policy start
B. Earliest coverage date for claims-made
C. Renewal
D. Expiration
Answer: B
Rationale: Retroactive date limits coverage to events after that date.
128.
Which is tail coverage?
A. Extended reporting period
B. Policy limit
C. Deductible
D. Premium
Answer: A
Rationale: Tail allows claims after policy ends.
129.
Which is an example of comparative negligence?
A. Full liability
B. Shared fault
C. No liability
D. Strict liability
Answer: B
Rationale: Damages are allocated based on fault percentage.
130.
Which is a valuation method?
A. Premium
B. Replacement cost
C. Policy
D. Claim
Answer: B
Rationale: Determines payout amount.
131.
Which is an example of theft coverage?
A. Fire
B. Burglary
C. Flood
D. Earthquake
Answer: B
Rationale: Burglary is theft peril.
132.
Which is inland marine coverage?
A. Building
B. Property in transit
C. Liability
D. Auto
Answer: B
Rationale: Covers mobile property.
133.
Which is a surety bond purpose?
A. Insurance
B. Guarantee performance
C. Property coverage
D. Liability
Answer: B
Rationale: Guarantees obligations.
134.
Which is a fidelity bond?
A. Property
B. Employee dishonesty
C. Liability
D. Auto
Answer: B
Rationale: Covers employee theft.
135.
Which is a Texas licensing requirement?
A. Federal approval
B. TDI license
C. SEC
D. IRS
Answer: B
Rationale: Agents must be licensed by TDI.
136.
Which is an unfair discrimination example?
A. Risk-based pricing
B. Charging different rates without justification
C. Underwriting
D. Claims
Answer: B
Rationale: Unfair discrimination violates Texas law.
137.
Which is a premium factor?
A. Risk level
B. Claim
C. Policy
D. Deductible
Answer: A
Rationale: Higher risk = higher premium.
138.
Which is a hazard type?
A. Moral
B. Physical
C. Morale
D. All of the above
Answer: D
Rationale: All increase risk.
139.
Which is a direct loss?
A. Income loss
B. Fire damage
C. Extra expense
D. Business interruption
Answer: B
Rationale: Direct damage is immediate.
140.
Which is indirect loss?
A. Fire
B. Theft
C. Lost income
D. Vandalism
Answer: C
Rationale: Indirect follows direct loss.
141.
Which is a policy limit type?
A. Aggregate
B. Deductible
C. Premium
D. Claim
Answer: A
Rationale: Aggregate caps total payout.
142.
Which is a deductible purpose?
A. Increase claims
B. Reduce small claims
C. Increase premium
D. Eliminate risk
Answer: B
Rationale: Deductibles reduce frequency.
143.
Which is a claim denial reason?
A. Covered loss
B. Excluded peril
C. Valid claim
D. Premium paid
Answer: B
Rationale: Excluded losses are not covered.
144.
Which is insurable interest requirement?
A. Ownership
B. Financial loss potential
C. Policy
D. Claim
Answer: B
Rationale: Must suffer loss.
145.
Which is negligence?
A. Intentional act
B. Failure to act reasonably
C. Fraud
D. Hazard
Answer: B
Rationale: Leads to liability.
146.
Which is strict liability example?
A. Negligence
B. Liability without fault
C. Intentional act
D. Hazard
Answer: B
Rationale: No need to prove negligence.
147.
Which is subrogation benefit?
A. Pay claim
B. Recover loss
C. Issue policy
D. Collect premium
Answer: B
Rationale: Recovers insurer cost.
148.
Which is policy condition?
A. Coverage
B. Rule
C. Exclusion
D. Premium
Answer: B
Rationale: Defines obligations.
149.
Which is a peril?
A. Risk
B. Cause of loss
C. Hazard
D. Policy
Answer: B
Rationale: Peril causes damage.
150.
Which is insurance purpose?
A. Profit
B. Risk transfer
C. Gain
D. Bonus
Answer: B
Rationale: Transfers risk to insurer.
Frequently Asked Questions
Does this Texas Property & Casualty Insurance test reflect real exam difficulty?
Yes, this practice test is designed to reflect real exam patterns, structure, and difficulty level to help you prepare effectively.
How can I study effectively with this Texas Property & Casualty Insurance practice test?
Take the test in a timed setting, review your answers carefully, and focus on improving weak areas after each attempt.
How many times should I attempt this Texas Property & Casualty Insurance test?
Yes, repeating the test helps reinforce concepts, improve accuracy, and build confidence for the actual exam.
Is this Texas Property & Casualty Insurance suitable for beginners?
This practice test is suitable for both beginners and retakers who want to improve their understanding and performance.