Texas Property & Casualty (P&C) Insurance Licensing Exam |
questions, answers & Rationales | 2025/2026 | New Update |
Instant Download !!
1. Which of the following best describes the principle of indemnity?
a. Insured profits from a loss
b. Insured is restored to the same financial position as before the loss (correct answer)
c. Insurance company guarantees full replacement cost
d. Insurer pays double the loss
Rationale: Indemnity ensures the insured does not profit but is restored to pre-loss financial status.
2. Which Texas insurance regulation governs unfair claims settlement practices?
a. Texas Property Code
b. Texas Administrative Code
c. Texas Insurance Code – Unfair Claims Practices Act (correct answer)
d. Texas Penal Code
Rationale: The Texas Insurance Code specifies unfair claims settlement practices.
3. A homeowner’s policy covers which of the following perils automatically?
a. Earthquake
b. Flood
c. Fire (correct answer)
d. Termite damage
Rationale: Fire is a standard covered peril in basic homeowner policies; earthquake/flood usually
require endorsements.
,4. Which is an example of a liability coverage in a commercial policy?
a. Building coverage
b. General liability (correct answer)
c. Equipment coverage
d. Business income
Rationale: General liability covers bodily injury and property damage caused by the insured.
5. A commercial property policy has a $1,000 deductible and a $50,000 loss. How much will the
insurer pay?
a. $48,000
b. $49,000
c. $49,000 (correct answer)
d. $50,000
Rationale: Insurer pays loss minus deductible: 50,000 – 1,000 = 49,000.
6. Which of the following is considered moral hazard?
a. Earthquake
b. Dishonest claims (correct answer)
c. Fire caused by lightning
d. Flood
Rationale: Moral hazards involve intentional or dishonest actions increasing loss likelihood.
7. In Texas, how often must a property & casualty agent renew their license?
a. Every year
b. Every 2 years (correct answer)
c. Every 3 years
,d. Every 5 years
Rationale: Texas requires P&C license renewal every 2 years with continuing education.
8. Which of the following statements is true regarding coinsurance?
a. The insured receives full coverage regardless of underinsurance
b. Deductible is ignored
c. Insured must carry a certain percentage of property value to avoid penalty (correct answer)
d. Coinsurance only applies to liability coverage
Rationale: Coinsurance encourages adequate insurance; underinsuring reduces claim payout
proportionally.
9. A Texas auto policy covers collision and liability. The vehicle is totaled. Actual cash value =
$20,000. Deductible = $500. Payout?
a. $19,500
b. $19,500 (correct answer)
c. $20,000
d. $20,500
Rationale: Collision coverage pays ACV minus deductible: 20,000 – 500 = 19,500.
10. Which of the following is NOT required for a valid insurance contract?
a. Offer and acceptance
b. Consideration
c. Legal purpose (correct answer)
d. Competent parties
Rationale: Insurance contracts must have offer, acceptance, consideration, legal purpose, and
competent parties. [Correction: actually, legal purpose IS required; adjust correct answer.] ✅
Correct answer should be None – all are required.
, 11. Which peril is typically excluded under a standard commercial property policy?
a. Fire
b. Windstorm
c. Flood (correct answer)
d. Theft
Rationale: Flood usually requires separate coverage via the National Flood Insurance Program.
12. In Texas, which of the following is a legal requirement for auto liability insurance?
a. $25,000 per person bodily injury, $50,000 per accident, $25,000 property damage (correct answer)
b. $20,000 per person bodily injury only
c. $50,000 collision coverage
d. No minimum coverage required
Rationale: Texas law mandates minimum liability coverage to legally operate a vehicle.
13. Which insurance principle states that losses must be random and uncertain?
a. Indemnity
b. Insurable interest (correct answer)
c. Subrogation
d. Proximate cause
Rationale: Insurable interest ensures only owners of property or those with a financial interest may
insure it.
14. A policyholder fails to disclose a previous claim intentionally. This is an example of:
a. Warranty
b. Representation
c. Fraud (correct answer)
questions, answers & Rationales | 2025/2026 | New Update |
Instant Download !!
1. Which of the following best describes the principle of indemnity?
a. Insured profits from a loss
b. Insured is restored to the same financial position as before the loss (correct answer)
c. Insurance company guarantees full replacement cost
d. Insurer pays double the loss
Rationale: Indemnity ensures the insured does not profit but is restored to pre-loss financial status.
2. Which Texas insurance regulation governs unfair claims settlement practices?
a. Texas Property Code
b. Texas Administrative Code
c. Texas Insurance Code – Unfair Claims Practices Act (correct answer)
d. Texas Penal Code
Rationale: The Texas Insurance Code specifies unfair claims settlement practices.
3. A homeowner’s policy covers which of the following perils automatically?
a. Earthquake
b. Flood
c. Fire (correct answer)
d. Termite damage
Rationale: Fire is a standard covered peril in basic homeowner policies; earthquake/flood usually
require endorsements.
,4. Which is an example of a liability coverage in a commercial policy?
a. Building coverage
b. General liability (correct answer)
c. Equipment coverage
d. Business income
Rationale: General liability covers bodily injury and property damage caused by the insured.
5. A commercial property policy has a $1,000 deductible and a $50,000 loss. How much will the
insurer pay?
a. $48,000
b. $49,000
c. $49,000 (correct answer)
d. $50,000
Rationale: Insurer pays loss minus deductible: 50,000 – 1,000 = 49,000.
6. Which of the following is considered moral hazard?
a. Earthquake
b. Dishonest claims (correct answer)
c. Fire caused by lightning
d. Flood
Rationale: Moral hazards involve intentional or dishonest actions increasing loss likelihood.
7. In Texas, how often must a property & casualty agent renew their license?
a. Every year
b. Every 2 years (correct answer)
c. Every 3 years
,d. Every 5 years
Rationale: Texas requires P&C license renewal every 2 years with continuing education.
8. Which of the following statements is true regarding coinsurance?
a. The insured receives full coverage regardless of underinsurance
b. Deductible is ignored
c. Insured must carry a certain percentage of property value to avoid penalty (correct answer)
d. Coinsurance only applies to liability coverage
Rationale: Coinsurance encourages adequate insurance; underinsuring reduces claim payout
proportionally.
9. A Texas auto policy covers collision and liability. The vehicle is totaled. Actual cash value =
$20,000. Deductible = $500. Payout?
a. $19,500
b. $19,500 (correct answer)
c. $20,000
d. $20,500
Rationale: Collision coverage pays ACV minus deductible: 20,000 – 500 = 19,500.
10. Which of the following is NOT required for a valid insurance contract?
a. Offer and acceptance
b. Consideration
c. Legal purpose (correct answer)
d. Competent parties
Rationale: Insurance contracts must have offer, acceptance, consideration, legal purpose, and
competent parties. [Correction: actually, legal purpose IS required; adjust correct answer.] ✅
Correct answer should be None – all are required.
, 11. Which peril is typically excluded under a standard commercial property policy?
a. Fire
b. Windstorm
c. Flood (correct answer)
d. Theft
Rationale: Flood usually requires separate coverage via the National Flood Insurance Program.
12. In Texas, which of the following is a legal requirement for auto liability insurance?
a. $25,000 per person bodily injury, $50,000 per accident, $25,000 property damage (correct answer)
b. $20,000 per person bodily injury only
c. $50,000 collision coverage
d. No minimum coverage required
Rationale: Texas law mandates minimum liability coverage to legally operate a vehicle.
13. Which insurance principle states that losses must be random and uncertain?
a. Indemnity
b. Insurable interest (correct answer)
c. Subrogation
d. Proximate cause
Rationale: Insurable interest ensures only owners of property or those with a financial interest may
insure it.
14. A policyholder fails to disclose a previous claim intentionally. This is an example of:
a. Warranty
b. Representation
c. Fraud (correct answer)
