Texas Public Adjuster License Exam (3-20) Prep – Real Practice
Questions, Answers & Detailed Rationales (Updated 2026) | Texas
Insurance Laws & TDI Regulations, Property & Casualty Claims Handling,
Policy Interpretation & Coverage Analysis, Claims Investigation &
Documentation, Loss Estimation & Settlement Negotiation, Insurance
Contracts, Ethics & Fraud Prevention, Adjuster Responsibilities & Real-
World Claims Scenarios
Question 1: Under Texas law, what is the maximum fee a public adjuster may
charge for adjusting a first-party insurance claim?
A. 20 percent of the claim settlement
B. 15 percent of the claim settlement
C. 10 percent of the claim settlement
D. 5 percent of the claim settlement
CORRECT ANSWER: C. 10 percent of the claim settlement
Rationale: Texas Insurance Code Section 4102.052 caps public adjuster fees at 10
percent of the claim settlement amount for first-party claims. Fees exceeding this
percentage are considered unlawful and subject to disciplinary action by TDI.
Question 2: Which Texas statute primarily governs the prompt payment of
insurance claims?
A. Texas Business and Commerce Code Chapter 32
B. Texas Insurance Code Chapter 542
C. Texas Occupations Code Chapter 1101
D. Texas Finance Code Chapter 301
CORRECT ANSWER: B. Texas Insurance Code Chapter 542
Rationale: Chapter 542 of the Texas Insurance Code, commonly known as the Texas
Prompt Payment of Claims Act, establishes strict timelines for insurers to acknowledge,
investigate, and pay claims, along with penalties for noncompliance.
Question 3: A public adjuster in Texas must post a surety bond in what amount to
maintain an active license?
A. $10,000
B. $15,000
C. $25,000
D. $50,000
CORRECT ANSWER: A. $10,000
Rationale: Texas law requires licensed public adjusters to maintain a $10,000 surety
bond as a financial guarantee of ethical conduct and compliance with statutory
obligations.
,Question 4: Which of the following actions is explicitly prohibited for a public
adjuster under Texas regulations?
A. Providing a detailed estimate of damages to the insured
B. Negotiating a settlement on behalf of the policyholder
C. Accepting compensation from both the insured and the insurer for the same claim
D. Reviewing policy language with the client
CORRECT ANSWER: C. Accepting compensation from both the insured and the
insurer for the same claim
Rationale: Dual compensation creates a direct conflict of interest and violates Texas
public adjuster ethics and licensing standards, which require adjusters to represent
only the policyholder's interests.
Question 5: What is the standard timeframe for an insurer to acknowledge receipt
of a claim under the Texas Prompt Payment of Claims Act?
A. 5 business days
B. 10 business days
C. 15 calendar days
D. 30 calendar days
CORRECT ANSWER: C. 15 calendar days
Rationale: Texas Insurance Code Section 542.055 requires insurers to acknowledge
receipt of a claim within 15 calendar days after receiving notification from the
policyholder or their representative.
Question 6: When a policy contains an appraisal clause, what triggers its
invocation?
A. Mutual disagreement on the amount of loss
B. Policyholder's request for a new insurer
C. Insurer's denial of coverage
D. Expiration of the policy term
CORRECT ANSWER: A. Mutual disagreement on the amount of loss
Rationale: Appraisal clauses are activated when both parties agree there is a covered
loss but disagree on the monetary value, allowing independent appraisers and an
umpire to determine the final amount.
Question 7: Which TDI form must a public adjuster provide to the insured before
executing a contract for services?
A. Notice of Right to Cancel
B. Public Adjuster Disclosure Statement
C. Claim Payment Verification Form
D. Policyholder Consent to Investigate
,CORRECT ANSWER: B. Public Adjuster Disclosure Statement
Rationale: Texas regulations mandate that public adjusters furnish a standardized
disclosure statement outlining fees, duties, and rights before signing a service
agreement, ensuring informed consent.
Question 8: Under Texas law, how many calendar days does an insurer have to
accept or reject a claim after receiving all requested information?
A. 10 days
B. 15 days
C. 20 days
D. 30 days
CORRECT ANSWER: B. 15 days
Rationale: Once the insurer receives all items reasonably requested from the claimant,
Texas Insurance Code Section 542.056 requires the insurer to accept or reject the claim
within 15 calendar days.
Question 9: What type of insurance policy typically excludes damage caused by
earth movement, including sinkholes, unless specifically endorsed?
A. HO-3 Special Form
B. Commercial General Liability
C. Personal Auto Policy
D. Workers' Compensation
CORRECT ANSWER: A. HO-3 Special Form
Rationale: The standard HO-3 homeowner's policy explicitly excludes earth movement
perils. Sinkhole coverage requires a specific endorsement or separate policy under
Texas insurance standards.
Question 10: A public adjuster's license in Texas must be renewed every:
A. 6 months
B. 1 year
C. 2 years
D. 3 years
CORRECT ANSWER: C. 2 years
Rationale: Texas public adjuster licenses operate on a two-year renewal cycle, requiring
completion of continuing education and timely fee submission to TDI.
Question 11: Which principle dictates that the insured cannot profit from a
property loss?
A. Subrogation
B. Indemnity
, C. Utmost Good Faith
D. Proximate Cause
CORRECT ANSWER: B. Indemnity
Rationale: The principle of indemnity ensures that insurance restores the insured to
their pre-loss financial position without allowing financial gain, preventing moral
hazard.
Question 12: When an insurer denies a claim in Texas, what must the denial
communication include?
A. A list of approved contractors
B. The specific policy provision or reason for denial
C. A mandatory arbitration agreement
D. An offer to reprice the policy
CORRECT ANSWER: B. The specific policy provision or reason for denial
Rationale: Texas law requires claim denials to clearly cite the policy language,
exclusion, or condition justifying the denial, along with any available appeal rights.
Question 13: What is the primary purpose of a mortgagee clause in a property
insurance policy?
A. To reduce the policyholder's premium
B. To protect the lender's financial interest in the property
C. To waive the insurer's right of subrogation
D. To allow the lender to adjust the claim
CORRECT ANSWER: B. To protect the lender's financial interest in the property
Rationale: A mortgagee clause ensures the lender receives payment or notice in the
event of a loss, safeguarding their collateral interest independent of the policyholder's
actions.
Question 14: Under Texas regulations, which of the following constitutes an unfair
claims settlement practice?
A. Requesting documentation to verify damages
B. Offering a settlement without disclosing coverage limits
C. Delaying investigation without reasonable cause
D. Refusing to negotiate after a formal appraisal
CORRECT ANSWER: C. Delaying investigation without reasonable cause
Rationale: Unjustified delays in claim investigation violate Texas Insurance Code
Chapter 541, which prohibits unfair or deceptive acts in insurance business practices.
Question 15: What does the term "actual cash value" typically mean in Texas
property insurance?
Questions, Answers & Detailed Rationales (Updated 2026) | Texas
Insurance Laws & TDI Regulations, Property & Casualty Claims Handling,
Policy Interpretation & Coverage Analysis, Claims Investigation &
Documentation, Loss Estimation & Settlement Negotiation, Insurance
Contracts, Ethics & Fraud Prevention, Adjuster Responsibilities & Real-
World Claims Scenarios
Question 1: Under Texas law, what is the maximum fee a public adjuster may
charge for adjusting a first-party insurance claim?
A. 20 percent of the claim settlement
B. 15 percent of the claim settlement
C. 10 percent of the claim settlement
D. 5 percent of the claim settlement
CORRECT ANSWER: C. 10 percent of the claim settlement
Rationale: Texas Insurance Code Section 4102.052 caps public adjuster fees at 10
percent of the claim settlement amount for first-party claims. Fees exceeding this
percentage are considered unlawful and subject to disciplinary action by TDI.
Question 2: Which Texas statute primarily governs the prompt payment of
insurance claims?
A. Texas Business and Commerce Code Chapter 32
B. Texas Insurance Code Chapter 542
C. Texas Occupations Code Chapter 1101
D. Texas Finance Code Chapter 301
CORRECT ANSWER: B. Texas Insurance Code Chapter 542
Rationale: Chapter 542 of the Texas Insurance Code, commonly known as the Texas
Prompt Payment of Claims Act, establishes strict timelines for insurers to acknowledge,
investigate, and pay claims, along with penalties for noncompliance.
Question 3: A public adjuster in Texas must post a surety bond in what amount to
maintain an active license?
A. $10,000
B. $15,000
C. $25,000
D. $50,000
CORRECT ANSWER: A. $10,000
Rationale: Texas law requires licensed public adjusters to maintain a $10,000 surety
bond as a financial guarantee of ethical conduct and compliance with statutory
obligations.
,Question 4: Which of the following actions is explicitly prohibited for a public
adjuster under Texas regulations?
A. Providing a detailed estimate of damages to the insured
B. Negotiating a settlement on behalf of the policyholder
C. Accepting compensation from both the insured and the insurer for the same claim
D. Reviewing policy language with the client
CORRECT ANSWER: C. Accepting compensation from both the insured and the
insurer for the same claim
Rationale: Dual compensation creates a direct conflict of interest and violates Texas
public adjuster ethics and licensing standards, which require adjusters to represent
only the policyholder's interests.
Question 5: What is the standard timeframe for an insurer to acknowledge receipt
of a claim under the Texas Prompt Payment of Claims Act?
A. 5 business days
B. 10 business days
C. 15 calendar days
D. 30 calendar days
CORRECT ANSWER: C. 15 calendar days
Rationale: Texas Insurance Code Section 542.055 requires insurers to acknowledge
receipt of a claim within 15 calendar days after receiving notification from the
policyholder or their representative.
Question 6: When a policy contains an appraisal clause, what triggers its
invocation?
A. Mutual disagreement on the amount of loss
B. Policyholder's request for a new insurer
C. Insurer's denial of coverage
D. Expiration of the policy term
CORRECT ANSWER: A. Mutual disagreement on the amount of loss
Rationale: Appraisal clauses are activated when both parties agree there is a covered
loss but disagree on the monetary value, allowing independent appraisers and an
umpire to determine the final amount.
Question 7: Which TDI form must a public adjuster provide to the insured before
executing a contract for services?
A. Notice of Right to Cancel
B. Public Adjuster Disclosure Statement
C. Claim Payment Verification Form
D. Policyholder Consent to Investigate
,CORRECT ANSWER: B. Public Adjuster Disclosure Statement
Rationale: Texas regulations mandate that public adjusters furnish a standardized
disclosure statement outlining fees, duties, and rights before signing a service
agreement, ensuring informed consent.
Question 8: Under Texas law, how many calendar days does an insurer have to
accept or reject a claim after receiving all requested information?
A. 10 days
B. 15 days
C. 20 days
D. 30 days
CORRECT ANSWER: B. 15 days
Rationale: Once the insurer receives all items reasonably requested from the claimant,
Texas Insurance Code Section 542.056 requires the insurer to accept or reject the claim
within 15 calendar days.
Question 9: What type of insurance policy typically excludes damage caused by
earth movement, including sinkholes, unless specifically endorsed?
A. HO-3 Special Form
B. Commercial General Liability
C. Personal Auto Policy
D. Workers' Compensation
CORRECT ANSWER: A. HO-3 Special Form
Rationale: The standard HO-3 homeowner's policy explicitly excludes earth movement
perils. Sinkhole coverage requires a specific endorsement or separate policy under
Texas insurance standards.
Question 10: A public adjuster's license in Texas must be renewed every:
A. 6 months
B. 1 year
C. 2 years
D. 3 years
CORRECT ANSWER: C. 2 years
Rationale: Texas public adjuster licenses operate on a two-year renewal cycle, requiring
completion of continuing education and timely fee submission to TDI.
Question 11: Which principle dictates that the insured cannot profit from a
property loss?
A. Subrogation
B. Indemnity
, C. Utmost Good Faith
D. Proximate Cause
CORRECT ANSWER: B. Indemnity
Rationale: The principle of indemnity ensures that insurance restores the insured to
their pre-loss financial position without allowing financial gain, preventing moral
hazard.
Question 12: When an insurer denies a claim in Texas, what must the denial
communication include?
A. A list of approved contractors
B. The specific policy provision or reason for denial
C. A mandatory arbitration agreement
D. An offer to reprice the policy
CORRECT ANSWER: B. The specific policy provision or reason for denial
Rationale: Texas law requires claim denials to clearly cite the policy language,
exclusion, or condition justifying the denial, along with any available appeal rights.
Question 13: What is the primary purpose of a mortgagee clause in a property
insurance policy?
A. To reduce the policyholder's premium
B. To protect the lender's financial interest in the property
C. To waive the insurer's right of subrogation
D. To allow the lender to adjust the claim
CORRECT ANSWER: B. To protect the lender's financial interest in the property
Rationale: A mortgagee clause ensures the lender receives payment or notice in the
event of a loss, safeguarding their collateral interest independent of the policyholder's
actions.
Question 14: Under Texas regulations, which of the following constitutes an unfair
claims settlement practice?
A. Requesting documentation to verify damages
B. Offering a settlement without disclosing coverage limits
C. Delaying investigation without reasonable cause
D. Refusing to negotiate after a formal appraisal
CORRECT ANSWER: C. Delaying investigation without reasonable cause
Rationale: Unjustified delays in claim investigation violate Texas Insurance Code
Chapter 541, which prohibits unfair or deceptive acts in insurance business practices.
Question 15: What does the term "actual cash value" typically mean in Texas
property insurance?
