TEXAS PROPERTY & CASUALTY LICENSE Actual
EXAM 2026 Newest Practice | Detailed Answers
with Texas Law & Policy Citations
SECTION I – GENERAL INSURANCE CONCEPTS (Q 1-20)
Q1 Per the Texas Insurance Code, which of the following best describes an agent’s
fiduciary duty with respect to return premiums received from an insurer?
A. The funds may be deposited in the agency’s general checking account until the client
cashes the check.
B. The funds must be held in a separate fiduciary (trust) account and remitted to the
client within 15 days.
C. The funds are the agent’s property once the insurer issues the check.
D. Fiduciary duty applies only to original premiums, not return premiums.
Correct Answer: B
Citation: TIC §4001.157; 28 TAC §19.1007. Return premiums are “fiduciary funds” and
must be held in a segregated account; 15-day rule mirrors TDI enforcement policy.
Q2 The principle of indemnity is most accurately reflected when:
A. An insured with a $300,000 dwelling receives $350,000 after a total loss.
,B. An insured with a $300,000 ACV basis policy receives the cost to rebuild minus
depreciation.
C. The insurer pays pain-and-suffering damages under Part B Medical Payments.
D. A policy is written on a valued basis for antique jewelry.
Correct Answer: B
Rationale: Indemnity places the insured back in the same financial position—no better,
no worse. ACV satisfies indemnity; valued policies (D) are an exception.
Q3 (Multiple-Select) Which of the following are considered “hazards” rather than
“perils”? (Select three.)
1. A defective electrical panel.
2. A hailstorm.
3. A homeowner’s careless storage of flammable liquids.
4. A ruptured water-bed.
5. An applicant’s misstatement of prior claims on an application.
Correct: 1, 3, 5
Rationale: Hazards increase the likelihood or severity of loss; perils are the
immediate cause. Hailstorm (2) and ruptured water-bed (4) are perils.
Q4 Under Texas law, an insurer that knowingly waives a policy condition during a claim
investigation is thereafter:
A. Subject to treble damages under the DTPA.
B. Prohibited from asserting that condition as a defense under the doctrine of estoppel.
C. Required to issue a written endorsement within 30 days.
D. Automatically liable for bad-faith penalties.
Correct Answer: B
,Citation: TIC §541.060; common-law estoppel.
Q5 Which element is NOT required for an insurable interest to exist under Texas
common law?
A. Valid written contract.
B. Potential for financial loss.
C. Lawful economic stake.
D. Interest must exist at inception.
Correct Answer: A
Rationale: Insurable interest need not be embodied in a written contract; oral or
equitable interests suffice.
Q6 (Multiple-Select) Transactions that absolutely require a surplus-lines license in Texas
include: (Select two.)
1. Placing a Homeowners policy with an admitted carrier.
2. Placing a $4 million cyber-risk policy with an eligible surplus-lines insurer.
3. Binding a BOP with an admitted insurer’s managing general agent.
4. Renewing a coastal wind-only risk through TWIA.
5. Binding commercial earthquake coverage with an eligible surplus-lines insurer.
Correct: 2, 5
Citation: TIC §981.003; admitted placement (1, 3) and TWIA (4) are exempt.
Q7 The Texas Property & Casualty Insurance Guaranty Association (TP&CIGA) will pay
covered claims up to:
A. $300,000 per claimant, per policy.
B. $500,000 per occurrence, regardless of number of claimants.
, C. $250,000 per claimant, with no deductible.
D. The full policy limit for any covered claim.
Correct Answer: A
Citation: TIC §462.204; cap adjusted biennially—2026 figure is $300k.
Q8 An agent offers a gift card to any client who purchases a policy. The offer is made to
the general public and disclosed in advertising. Under TIC §541.061 this is:
A. An unlawful rebate.
B. Permissible as long as the value is under $25.
C. Not a rebate because it is not a “sharing of commission.”
D. A deceptive trade practice regardless of value.
Correct Answer: C
Rationale: A rebate requires sharing the agent’s commission; promotional gifts to the
public are treated as advertising, not rebates.
Q9 Replacement-cost coverage on a dwelling is best described as:
A. Payment equal to the market value of the home.
B. Payment necessary to repair/replace with like kind/quality at today’s cost, without
deduction for depreciation.
C. Payment limited to the policy face amount even if cost exceeds that figure.
D. Payment only if the insured actually completes repairs.
EXAM 2026 Newest Practice | Detailed Answers
with Texas Law & Policy Citations
SECTION I – GENERAL INSURANCE CONCEPTS (Q 1-20)
Q1 Per the Texas Insurance Code, which of the following best describes an agent’s
fiduciary duty with respect to return premiums received from an insurer?
A. The funds may be deposited in the agency’s general checking account until the client
cashes the check.
B. The funds must be held in a separate fiduciary (trust) account and remitted to the
client within 15 days.
C. The funds are the agent’s property once the insurer issues the check.
D. Fiduciary duty applies only to original premiums, not return premiums.
Correct Answer: B
Citation: TIC §4001.157; 28 TAC §19.1007. Return premiums are “fiduciary funds” and
must be held in a segregated account; 15-day rule mirrors TDI enforcement policy.
Q2 The principle of indemnity is most accurately reflected when:
A. An insured with a $300,000 dwelling receives $350,000 after a total loss.
,B. An insured with a $300,000 ACV basis policy receives the cost to rebuild minus
depreciation.
C. The insurer pays pain-and-suffering damages under Part B Medical Payments.
D. A policy is written on a valued basis for antique jewelry.
Correct Answer: B
Rationale: Indemnity places the insured back in the same financial position—no better,
no worse. ACV satisfies indemnity; valued policies (D) are an exception.
Q3 (Multiple-Select) Which of the following are considered “hazards” rather than
“perils”? (Select three.)
1. A defective electrical panel.
2. A hailstorm.
3. A homeowner’s careless storage of flammable liquids.
4. A ruptured water-bed.
5. An applicant’s misstatement of prior claims on an application.
Correct: 1, 3, 5
Rationale: Hazards increase the likelihood or severity of loss; perils are the
immediate cause. Hailstorm (2) and ruptured water-bed (4) are perils.
Q4 Under Texas law, an insurer that knowingly waives a policy condition during a claim
investigation is thereafter:
A. Subject to treble damages under the DTPA.
B. Prohibited from asserting that condition as a defense under the doctrine of estoppel.
C. Required to issue a written endorsement within 30 days.
D. Automatically liable for bad-faith penalties.
Correct Answer: B
,Citation: TIC §541.060; common-law estoppel.
Q5 Which element is NOT required for an insurable interest to exist under Texas
common law?
A. Valid written contract.
B. Potential for financial loss.
C. Lawful economic stake.
D. Interest must exist at inception.
Correct Answer: A
Rationale: Insurable interest need not be embodied in a written contract; oral or
equitable interests suffice.
Q6 (Multiple-Select) Transactions that absolutely require a surplus-lines license in Texas
include: (Select two.)
1. Placing a Homeowners policy with an admitted carrier.
2. Placing a $4 million cyber-risk policy with an eligible surplus-lines insurer.
3. Binding a BOP with an admitted insurer’s managing general agent.
4. Renewing a coastal wind-only risk through TWIA.
5. Binding commercial earthquake coverage with an eligible surplus-lines insurer.
Correct: 2, 5
Citation: TIC §981.003; admitted placement (1, 3) and TWIA (4) are exempt.
Q7 The Texas Property & Casualty Insurance Guaranty Association (TP&CIGA) will pay
covered claims up to:
A. $300,000 per claimant, per policy.
B. $500,000 per occurrence, regardless of number of claimants.
, C. $250,000 per claimant, with no deductible.
D. The full policy limit for any covered claim.
Correct Answer: A
Citation: TIC §462.204; cap adjusted biennially—2026 figure is $300k.
Q8 An agent offers a gift card to any client who purchases a policy. The offer is made to
the general public and disclosed in advertising. Under TIC §541.061 this is:
A. An unlawful rebate.
B. Permissible as long as the value is under $25.
C. Not a rebate because it is not a “sharing of commission.”
D. A deceptive trade practice regardless of value.
Correct Answer: C
Rationale: A rebate requires sharing the agent’s commission; promotional gifts to the
public are treated as advertising, not rebates.
Q9 Replacement-cost coverage on a dwelling is best described as:
A. Payment equal to the market value of the home.
B. Payment necessary to repair/replace with like kind/quality at today’s cost, without
deduction for depreciation.
C. Payment limited to the policy face amount even if cost exceeds that figure.
D. Payment only if the insured actually completes repairs.
