1
TEXAS PROPERTY AND CASUALTY INSURANCE Comprehensive
Practice Examination – 150 Questions Original Practice
Questions with Detailed Rationales All correct answers are
highlighted in bold green.
SECTION 1: TEXAS INSURANCE REGULATION
QUESTION 1
The Texas Department of Insurance (TDI) is primarily responsible for:
A) Setting premium rates for all insurance companies
B) Regulating the insurance industry in Texas to protect consumers and ensure
fair competition
C) Selling insurance policies directly to consumers
D) Providing legal representation to policyholders
RATIONALE : The Texas Department of Insurance (TDI) is the state agency
responsible for regulating the insurance industry in Texas. Its primary mission is to
protect consumers by ensuring that insurance companies are financially solvent,
that insurance products are fairly priced and available, and that insurance laws
and regulations are enforced. TDI does not set premium rates (rates are filed by
insurers and reviewed by TDI), does not sell insurance directly, and does not
provide legal representation. The agency investigates complaints, licenses agents
and companies, reviews rate filings, and monitors insurer solvency.
QUESTION 2
A person must obtain a Texas insurance license before:
A) Working as a receptionist at an insurance agency
B) Soliciting, negotiating, or selling insurance policies in Texas
C) Answering phones at an insurance call center
D) Processing insurance claims internally
pg. 1
,2
RATIONALE : Texas Insurance Code requires that any person who solicits,
negotiates, or sells insurance products in Texas must hold a valid insurance
license issued by TDI. This includes agents, brokers, and producers. Administrative
staff, receptionists, and internal claims processors who do not sell or solicit
insurance generally do not need a license, provided their activities are limited to
clerical or administrative functions and they do not discuss policy terms,
coverage, or premiums with potential clients.
QUESTION 3
An insurance agent in Texas must complete how many hours of continuing
education (CE) every license renewal period?
A) 12 hours
B) 24 hours
C) 30 hours
D) 48 hours
RATIONALE : Texas requires licensed insurance agents to complete 24 hours of
continuing education every license renewal period (2 years). Of the 24 hours, at
least 3 hours must be in ethics or consumer protection topics. Agents must also
complete any specific product training required by TDI (such as long-term care
partnership training or flood insurance training). Failure to complete CE
requirements results in license non-renewal. Agents should keep records of
completed CE courses as TDI may audit compliance.
QUESTION 4
A Texas insurance agent's license expires if not renewed within:
A) 30 days of the expiration date
B) 90 days of the expiration date
C) 6 months of the expiration date
D) 1 year of the expiration date
pg. 2
,3
RATIONALE : A Texas insurance agent license expires if not renewed within 90
days after the expiration date. If the license is not renewed within this 90-day
grace period, the agent must reapply for a new license, which may require
retaking the licensing examination. During the grace period, the agent cannot
conduct insurance business until the license is renewed. TDI sends renewal
notices, but the ultimate responsibility for timely renewal rests with the agent.
QUESTION 5
Which of the following is considered an unfair claims practice in Texas?
A) Investigating a claim promptly
B) Misrepresenting policy provisions to a claimant
C) Paying a claim within 30 days of receiving proof of loss
D) Providing a written explanation for claim denial
RATIONALE : The Texas Insurance Code prohibits unfair claims settlement
practices, including: misrepresenting relevant facts or policy provisions to
claimants, failing to acknowledge and investigate claims promptly, failing to adopt
reasonable standards for claim investigation, refusing to pay claims without
conducting a reasonable investigation, failing to provide a reasonable explanation
for claim denial, and compelling policyholders to file lawsuits to recover amounts
due under the policy. Prompt investigation, timely payment, and providing
explanations are required, not prohibited.
QUESTION 6
The Texas FAIR Plan provides property insurance to:
A) All Texas residents at standard rates
B) Individuals who cannot obtain property insurance through the voluntary
market
C) Only commercial property owners
D) Only coastal properties in Texas
pg. 3
, 4
RATIONALE : The Texas FAIR (Fair Access to Insurance Requirements) Plan is a
residual market mechanism that provides basic property insurance to individuals
and businesses who cannot obtain coverage through the standard voluntary
insurance market. It is typically used for properties in high-risk areas (such as
coastal regions prone to hurricanes) or properties with loss history that makes
them unattractive to standard insurers. The FAIR Plan provides basic coverage at
rates higher than the voluntary market and is funded by assessments on all
property insurers in Texas.
QUESTION 7
The Texas Windstorm Insurance Association (TWIA) provides coverage for:
A) Flood damage for all Texas properties
B) Windstorm and hail damage for properties in designated catastrophe areas
along the Texas coast
C) Earthquake damage statewide
D) All natural disasters in Texas
RATIONALE : TWIA is the state-run insurer of last resort for windstorm and hail
coverage in the Texas seacoast territory (designated catastrophe areas). It
provides coverage when private insurers are unwilling to provide windstorm
coverage. Coverage includes damage from wind, hail, and wind-driven rain. TWIA
does NOT cover flood damage (that requires a separate flood policy through the
National Flood Insurance Program), earthquake damage, or all natural disasters.
The TWIA coverage territory includes Texas coastal counties and parts of adjacent
inland counties.
QUESTION 8
An insurance agent who misappropriates premium funds belonging to an insurer
or insured has committed:
A) A minor regulatory violation
B) Theft, which is grounds for license revocation and possible criminal
prosecution
pg. 4
TEXAS PROPERTY AND CASUALTY INSURANCE Comprehensive
Practice Examination – 150 Questions Original Practice
Questions with Detailed Rationales All correct answers are
highlighted in bold green.
SECTION 1: TEXAS INSURANCE REGULATION
QUESTION 1
The Texas Department of Insurance (TDI) is primarily responsible for:
A) Setting premium rates for all insurance companies
B) Regulating the insurance industry in Texas to protect consumers and ensure
fair competition
C) Selling insurance policies directly to consumers
D) Providing legal representation to policyholders
RATIONALE : The Texas Department of Insurance (TDI) is the state agency
responsible for regulating the insurance industry in Texas. Its primary mission is to
protect consumers by ensuring that insurance companies are financially solvent,
that insurance products are fairly priced and available, and that insurance laws
and regulations are enforced. TDI does not set premium rates (rates are filed by
insurers and reviewed by TDI), does not sell insurance directly, and does not
provide legal representation. The agency investigates complaints, licenses agents
and companies, reviews rate filings, and monitors insurer solvency.
QUESTION 2
A person must obtain a Texas insurance license before:
A) Working as a receptionist at an insurance agency
B) Soliciting, negotiating, or selling insurance policies in Texas
C) Answering phones at an insurance call center
D) Processing insurance claims internally
pg. 1
,2
RATIONALE : Texas Insurance Code requires that any person who solicits,
negotiates, or sells insurance products in Texas must hold a valid insurance
license issued by TDI. This includes agents, brokers, and producers. Administrative
staff, receptionists, and internal claims processors who do not sell or solicit
insurance generally do not need a license, provided their activities are limited to
clerical or administrative functions and they do not discuss policy terms,
coverage, or premiums with potential clients.
QUESTION 3
An insurance agent in Texas must complete how many hours of continuing
education (CE) every license renewal period?
A) 12 hours
B) 24 hours
C) 30 hours
D) 48 hours
RATIONALE : Texas requires licensed insurance agents to complete 24 hours of
continuing education every license renewal period (2 years). Of the 24 hours, at
least 3 hours must be in ethics or consumer protection topics. Agents must also
complete any specific product training required by TDI (such as long-term care
partnership training or flood insurance training). Failure to complete CE
requirements results in license non-renewal. Agents should keep records of
completed CE courses as TDI may audit compliance.
QUESTION 4
A Texas insurance agent's license expires if not renewed within:
A) 30 days of the expiration date
B) 90 days of the expiration date
C) 6 months of the expiration date
D) 1 year of the expiration date
pg. 2
,3
RATIONALE : A Texas insurance agent license expires if not renewed within 90
days after the expiration date. If the license is not renewed within this 90-day
grace period, the agent must reapply for a new license, which may require
retaking the licensing examination. During the grace period, the agent cannot
conduct insurance business until the license is renewed. TDI sends renewal
notices, but the ultimate responsibility for timely renewal rests with the agent.
QUESTION 5
Which of the following is considered an unfair claims practice in Texas?
A) Investigating a claim promptly
B) Misrepresenting policy provisions to a claimant
C) Paying a claim within 30 days of receiving proof of loss
D) Providing a written explanation for claim denial
RATIONALE : The Texas Insurance Code prohibits unfair claims settlement
practices, including: misrepresenting relevant facts or policy provisions to
claimants, failing to acknowledge and investigate claims promptly, failing to adopt
reasonable standards for claim investigation, refusing to pay claims without
conducting a reasonable investigation, failing to provide a reasonable explanation
for claim denial, and compelling policyholders to file lawsuits to recover amounts
due under the policy. Prompt investigation, timely payment, and providing
explanations are required, not prohibited.
QUESTION 6
The Texas FAIR Plan provides property insurance to:
A) All Texas residents at standard rates
B) Individuals who cannot obtain property insurance through the voluntary
market
C) Only commercial property owners
D) Only coastal properties in Texas
pg. 3
, 4
RATIONALE : The Texas FAIR (Fair Access to Insurance Requirements) Plan is a
residual market mechanism that provides basic property insurance to individuals
and businesses who cannot obtain coverage through the standard voluntary
insurance market. It is typically used for properties in high-risk areas (such as
coastal regions prone to hurricanes) or properties with loss history that makes
them unattractive to standard insurers. The FAIR Plan provides basic coverage at
rates higher than the voluntary market and is funded by assessments on all
property insurers in Texas.
QUESTION 7
The Texas Windstorm Insurance Association (TWIA) provides coverage for:
A) Flood damage for all Texas properties
B) Windstorm and hail damage for properties in designated catastrophe areas
along the Texas coast
C) Earthquake damage statewide
D) All natural disasters in Texas
RATIONALE : TWIA is the state-run insurer of last resort for windstorm and hail
coverage in the Texas seacoast territory (designated catastrophe areas). It
provides coverage when private insurers are unwilling to provide windstorm
coverage. Coverage includes damage from wind, hail, and wind-driven rain. TWIA
does NOT cover flood damage (that requires a separate flood policy through the
National Flood Insurance Program), earthquake damage, or all natural disasters.
The TWIA coverage territory includes Texas coastal counties and parts of adjacent
inland counties.
QUESTION 8
An insurance agent who misappropriates premium funds belonging to an insurer
or insured has committed:
A) A minor regulatory violation
B) Theft, which is grounds for license revocation and possible criminal
prosecution
pg. 4
