Texas Property And Casualty Practice
Exam With Correct Responses 2025
Which of the following is NOT a hazardCORRECT ANSWERS✔✔A fire in a waste basket
j j j j j j j j j j j j j
All of the following are characteristics of an insurable risk, exceptCORRECT ANSWERS✔✔The loss must be
j j j j j j j j j j j j j j
catastrophic
j
A risk where both profit and loss are possible is known asCORRECT ANSWERS✔✔Speculative
j j j j j j j j j j j j
An insured has fabricated a claim so that it would appear to be legitimate. This would be asCORRECT ANSWERS
j j j j j j j j j j j j j j j j j j
✔✔Moral Hazard j
Which of the following must accurately describe reinsuranceCORRECT ANSWERS✔✔When an insurance
j j j j j j j j j j
company buys insurance for some of the risks for which it has issued coverage
j j j j j j j j j j j j j j
The attempt to restore an insured to his or her financial condition before a loss occurred is best described
j j j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Indemnification
j j
,Which of the following is true regarding pure and speculative risksCORRECT ANSWERS✔✔With pure risk
j j j j j j j j j j j j j
there is only the possiblity of loss
j j j j j j j
Adverse selection occurs whenCORRECT ANSWERS✔✔The insurer experiences negative financial results
j j j j j j j j j
due to unforeseen catastrophes
j j j j
Meg has been in very good health in the past 3 years. She has been exercising, her blood pressure is at a perfect
j j j j j j j j j j j j j j j j j j j j j j
level and her cholesterol is the envy of all her friends. Because Meg is feeling so healthy, she decides to cancel
j j j j j j j j j j j j j j j j j j j j j
her health insurance policy. This is an example of which of the following risk management methodsCORRECT
j j j j j j j j j j j j j j j j
ANSWERS✔✔Risk Retention
j j
A church has had the woodwork in the building refinished and new stain and varnish has been applied. The
j j j j j j j j j j j j j j j j j j
workers placed the rags and brushes that were used to apply the varnish in a small closet and closed the door,
j j j j j j j j j j j j j j j j j j j j j
creating the possibility of spontaneous combustion. Which of the following terms best describes this
j j j j j j j j j j j j j j
conditionCORRECT ANSWERS✔✔Hazard
j j
Max lives in a large apartment complex where there is no guard station or gate. Several hundred people live in
j j j j j j j j j j j j j j j j j j j
the complex so its very easy to determine the schedules of the neighbors living around him. One morning Max
j j j j j j j j j j j j j j j j j j j
leaves for work at 6:30am as he usually does, but he forgets to lock the front door. Later that morning
j j j j j j j j j j j j j j j j j j j j
someone comes into the apartment and steals Max's computer. What was the peril in this situationCORRECT
j j j j j j j j j j j j j j j j
ANSWERS✔✔The theft of his computer
j j j j j
Which of the following is most likely to be uninsurableCORRECT ANSWERS✔✔The purchaser of a new home
j j j j j j j j j j j j j j j
wants to protect herself from a possible drop in housing prices
j j j j j j j j j j j
Which of the following is a true statement regarding the "law of large numbers"CORRECT ANSWERS✔✔The
j j j j j j j j j j j j j j
law of large numbers states that as the number of insured units increases the ability to predict losses increases
j j j j j j j j j j j j j j j j j j j
Which of the following best demonstrates a morale hazardCORRECT ANSWERS✔✔A recent purchases of
j j j j j j j j j j j j
auto insurance drives less carefully, knowing that the insurer will cover any losses that occur
j j j j j j j j j j j j j j j
,Risk is best defined asCORRECT ANSWERS✔✔An uncertainty of loss
j j j j j j j j
When a person purchases several insurance policies to provide more coverage on a risk than the value of the
j j j j j j j j j j j j j j j j j j
possible loss, it is known asCORRECT ANSWERS✔✔Overinsurance
j j j j j j j
A slipper floor is an example ofCORRECT ANSWERS✔✔Physical Hazard
j j j j j j j j
Which of the following would be an example of a moral hazardCORRECT ANSWERS✔✔Embezzlement
j j j j j j j j j j j j
A 100-year flood is an example of which of the following types of riskCORRECT ANSWERS✔✔Static Risk
j j j j j j j j j j j j j j j
Horatio is a business owner who is part of a business owners' group that is buying old commercial buildings in
j j j j j j j j j j j j j j j j j j j
their small city and refurbishing them. Horatio has bought a beautiful historical building made mostly of
j j j j j j j j j j j j j j j j
wood. He knows that he should install a sprinkler system right away to prevent a fire. What risk management
j j j j j j j j j j j j j j j j j j j
strategy is Horatio usingCORRECT ANSWERS✔✔Risk Reduction
j j j j j j
An insurance must comply with the "Principle A of Indemnity". Jarron's friend Nick accidentally destroys
j j j j j j j j j j j j j j
Jarron's laptop computer. Nick pays Jarron for the damage, but Jarron also submits a claim to his insurance
j j j j j j j j j j j j j j j j j j
company for the laptop. The claim will beCORRECT ANSWERS✔✔Denied because Jarron has already been
j j j j j j j j j j j j j j
paid for the damage
j j j j
Which of the following statement is NOT true concerning of the Law of Large NumbersCORRECT ANSWERS✔
j j j j j j j j j j j j j j j
✔The size of the sample group is not relevant to the accuracy of the result
j j j j j j j j j j j j j j
Which of the following is not a common risk management techniqueCORRECT ANSWERS✔✔Multiply the
j j j j j j j j j j j j
risk by engaging in the hazardous activities
j j j j j j j
The principle of Indemnity is illustrated by which of the followingCORRECT ANSWERS✔✔Restores an
j j j j j j j j j j j j
insured to the same condition enjoyed before a loss
j j j j j j j j j
, Which of the following is the PRIMARY source of information used by insurance companies during the
j j j j j j j j j j j j j j j
underwriting processCORRECT ANSWERS✔✔The application for insurance
j j j j j j
The giving up of a known right is calledCORRECT ANSWERS✔✔Waiver
j j j j j j j j j
Which of the following best demonstrates the meaning of "contract of adhesion"CORRECT ANSWERS✔✔
j j j j j j j j j j j j
Since the insurance company formulates the policy language, the courts usually will resolve any ambiguities
j j j j j j j j j j j j j j
in the insured's favor
j j j j
An element of a valid contract must involve an offer and an acceptance. Sebastian completes an application
j j j j j j j j j j j j j j j j
for auto insurance and submits it to Indemnify Insurance Company. Who made the offer?CORRECT ANSWERS
j j j j j j j j j j j j j j j
✔✔Sebastian's agent with the indemnify Insurance Company j j j j j j
An agent, insured, or claimant has intentionally deceived an insurer for financial gain. Such an act is known
j j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Fraud
j j
Which of the following terms is used to describe a contract where the insurance company is the only party that
j j j j j j j j j j j j j j j j j j j
is legally bound to perform its part of the agreementCORRECT ANSWERS✔✔Unilateral
j j j j j j j j j j j
An applicant fails to disclose known facts when completing an application for insurance. This act is known
j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Concealment
j j
Which of the following is a statement that is guaranteed to be the truth throughout the duration of the
j j j j j j j j j j j j j j j j j j
policyCORRECT ANSWERS✔✔A Warranty
j j j
An intentional act designed to deceive and induce another party to part with something of value is known
j j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Fraud
j j
Exam With Correct Responses 2025
Which of the following is NOT a hazardCORRECT ANSWERS✔✔A fire in a waste basket
j j j j j j j j j j j j j
All of the following are characteristics of an insurable risk, exceptCORRECT ANSWERS✔✔The loss must be
j j j j j j j j j j j j j j
catastrophic
j
A risk where both profit and loss are possible is known asCORRECT ANSWERS✔✔Speculative
j j j j j j j j j j j j
An insured has fabricated a claim so that it would appear to be legitimate. This would be asCORRECT ANSWERS
j j j j j j j j j j j j j j j j j j
✔✔Moral Hazard j
Which of the following must accurately describe reinsuranceCORRECT ANSWERS✔✔When an insurance
j j j j j j j j j j
company buys insurance for some of the risks for which it has issued coverage
j j j j j j j j j j j j j j
The attempt to restore an insured to his or her financial condition before a loss occurred is best described
j j j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Indemnification
j j
,Which of the following is true regarding pure and speculative risksCORRECT ANSWERS✔✔With pure risk
j j j j j j j j j j j j j
there is only the possiblity of loss
j j j j j j j
Adverse selection occurs whenCORRECT ANSWERS✔✔The insurer experiences negative financial results
j j j j j j j j j
due to unforeseen catastrophes
j j j j
Meg has been in very good health in the past 3 years. She has been exercising, her blood pressure is at a perfect
j j j j j j j j j j j j j j j j j j j j j j
level and her cholesterol is the envy of all her friends. Because Meg is feeling so healthy, she decides to cancel
j j j j j j j j j j j j j j j j j j j j j
her health insurance policy. This is an example of which of the following risk management methodsCORRECT
j j j j j j j j j j j j j j j j
ANSWERS✔✔Risk Retention
j j
A church has had the woodwork in the building refinished and new stain and varnish has been applied. The
j j j j j j j j j j j j j j j j j j
workers placed the rags and brushes that were used to apply the varnish in a small closet and closed the door,
j j j j j j j j j j j j j j j j j j j j j
creating the possibility of spontaneous combustion. Which of the following terms best describes this
j j j j j j j j j j j j j j
conditionCORRECT ANSWERS✔✔Hazard
j j
Max lives in a large apartment complex where there is no guard station or gate. Several hundred people live in
j j j j j j j j j j j j j j j j j j j
the complex so its very easy to determine the schedules of the neighbors living around him. One morning Max
j j j j j j j j j j j j j j j j j j j
leaves for work at 6:30am as he usually does, but he forgets to lock the front door. Later that morning
j j j j j j j j j j j j j j j j j j j j
someone comes into the apartment and steals Max's computer. What was the peril in this situationCORRECT
j j j j j j j j j j j j j j j j
ANSWERS✔✔The theft of his computer
j j j j j
Which of the following is most likely to be uninsurableCORRECT ANSWERS✔✔The purchaser of a new home
j j j j j j j j j j j j j j j
wants to protect herself from a possible drop in housing prices
j j j j j j j j j j j
Which of the following is a true statement regarding the "law of large numbers"CORRECT ANSWERS✔✔The
j j j j j j j j j j j j j j
law of large numbers states that as the number of insured units increases the ability to predict losses increases
j j j j j j j j j j j j j j j j j j j
Which of the following best demonstrates a morale hazardCORRECT ANSWERS✔✔A recent purchases of
j j j j j j j j j j j j
auto insurance drives less carefully, knowing that the insurer will cover any losses that occur
j j j j j j j j j j j j j j j
,Risk is best defined asCORRECT ANSWERS✔✔An uncertainty of loss
j j j j j j j j
When a person purchases several insurance policies to provide more coverage on a risk than the value of the
j j j j j j j j j j j j j j j j j j
possible loss, it is known asCORRECT ANSWERS✔✔Overinsurance
j j j j j j j
A slipper floor is an example ofCORRECT ANSWERS✔✔Physical Hazard
j j j j j j j j
Which of the following would be an example of a moral hazardCORRECT ANSWERS✔✔Embezzlement
j j j j j j j j j j j j
A 100-year flood is an example of which of the following types of riskCORRECT ANSWERS✔✔Static Risk
j j j j j j j j j j j j j j j
Horatio is a business owner who is part of a business owners' group that is buying old commercial buildings in
j j j j j j j j j j j j j j j j j j j
their small city and refurbishing them. Horatio has bought a beautiful historical building made mostly of
j j j j j j j j j j j j j j j j
wood. He knows that he should install a sprinkler system right away to prevent a fire. What risk management
j j j j j j j j j j j j j j j j j j j
strategy is Horatio usingCORRECT ANSWERS✔✔Risk Reduction
j j j j j j
An insurance must comply with the "Principle A of Indemnity". Jarron's friend Nick accidentally destroys
j j j j j j j j j j j j j j
Jarron's laptop computer. Nick pays Jarron for the damage, but Jarron also submits a claim to his insurance
j j j j j j j j j j j j j j j j j j
company for the laptop. The claim will beCORRECT ANSWERS✔✔Denied because Jarron has already been
j j j j j j j j j j j j j j
paid for the damage
j j j j
Which of the following statement is NOT true concerning of the Law of Large NumbersCORRECT ANSWERS✔
j j j j j j j j j j j j j j j
✔The size of the sample group is not relevant to the accuracy of the result
j j j j j j j j j j j j j j
Which of the following is not a common risk management techniqueCORRECT ANSWERS✔✔Multiply the
j j j j j j j j j j j j
risk by engaging in the hazardous activities
j j j j j j j
The principle of Indemnity is illustrated by which of the followingCORRECT ANSWERS✔✔Restores an
j j j j j j j j j j j j
insured to the same condition enjoyed before a loss
j j j j j j j j j
, Which of the following is the PRIMARY source of information used by insurance companies during the
j j j j j j j j j j j j j j j
underwriting processCORRECT ANSWERS✔✔The application for insurance
j j j j j j
The giving up of a known right is calledCORRECT ANSWERS✔✔Waiver
j j j j j j j j j
Which of the following best demonstrates the meaning of "contract of adhesion"CORRECT ANSWERS✔✔
j j j j j j j j j j j j
Since the insurance company formulates the policy language, the courts usually will resolve any ambiguities
j j j j j j j j j j j j j j
in the insured's favor
j j j j
An element of a valid contract must involve an offer and an acceptance. Sebastian completes an application
j j j j j j j j j j j j j j j j
for auto insurance and submits it to Indemnify Insurance Company. Who made the offer?CORRECT ANSWERS
j j j j j j j j j j j j j j j
✔✔Sebastian's agent with the indemnify Insurance Company j j j j j j
An agent, insured, or claimant has intentionally deceived an insurer for financial gain. Such an act is known
j j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Fraud
j j
Which of the following terms is used to describe a contract where the insurance company is the only party that
j j j j j j j j j j j j j j j j j j j
is legally bound to perform its part of the agreementCORRECT ANSWERS✔✔Unilateral
j j j j j j j j j j j
An applicant fails to disclose known facts when completing an application for insurance. This act is known
j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Concealment
j j
Which of the following is a statement that is guaranteed to be the truth throughout the duration of the
j j j j j j j j j j j j j j j j j j
policyCORRECT ANSWERS✔✔A Warranty
j j j
An intentional act designed to deceive and induce another party to part with something of value is known
j j j j j j j j j j j j j j j j j
asCORRECT ANSWERS✔✔Fraud
j j
