Texas P&C Practice Questions (2026) — Free Sample Questions with Answers

Answer: C

Both homes are covered, because NFIP coverage begins as soon as the premium is paid in full: Ignores the standard 30-day waiting period for new NFIP policies.

Neither home is covered, because every new NFIP policy must first serve a 30-day waiting period: Ignores the loan exception: there is no waiting period when coverage is bought in connection with making, increasing, extending or renewing a loan.

Only Grace's home is covered, because Ivan's new policy is still in its 30-day waiting period: Correct. A new NFIP policy normally takes effect after a 30-day waiting period, but coverage bought in connection with a loan closing takes effect at the closing.

Only Ivan's home is covered, because Grace's policy starts only once her lender accepts it: Reverses the rule; lender acceptance is not a condition, and the loan exception helps Grace, not Ivan.

NFIP: 30-day waiting period, except for coverage tied to a loan transaction (and certain flood map revisions).

Answer: B

1. Dwelling (Coverage A): insured to at least 80% of replacement cost and repaired, so pay replacement cost = $14,000.
2. Personal property (Coverage C): wind opened the roof first, so the rain damage is covered; pay actual cash value = $3,000.
3. Total covered loss = $14,000 + $3,000 = $17,000.
4. Subtract one $1,000 deductible for the occurrence: $17,000 − $1,000 = $16,000 paid.

$15,000: Applies the deductible twice, once to the dwelling and once to the furniture; one deductible applies per occurrence.

$16,000: Correct. The roof is paid at replacement cost ($14,000) because the dwelling is insured to at least 80% of replacement cost and the repair is done. The furniture is paid at ACV ($3,000). $17,000 − $1,000 deductible = $16,000.

$17,000: Forgets to subtract the $1,000 deductible.

$18,000: Pays the furniture at replacement cost; without the endorsement, HO-3 personal property is settled at actual cash value.

HO-3: dwelling at replacement cost when insured to 80% of RC; personal property at ACV unless endorsed; one deductible per occurrence.

Answer: D

HO-2: The HO-2 also insures the dwelling against named perils, but it settles at replacement cost without substituting common materials and does not confine theft to the premises with a $1,000 cap.

HO-3: The HO-3 insures the dwelling against open perils, not only named perils, and its theft coverage applies anywhere in the world.

HO-5: The HO-5 insures both the dwelling and personal property against open perils with replacement cost settlement.

HO-8: Correct. The HO-8 modified coverage form pays to repair with common construction materials and methods that are functionally equivalent to the original, and it limits theft to $1,000 per occurrence on the residence premises.

HO-8 clues: named perils on the dwelling, functional replacement with common materials, and theft limited to $1,000 on the residence premises.

Answer: A

The vandalism is not covered, because the house was vacant over 60 days: Correct. With no occupants and no contents, the house is vacant, and the HO-3 excludes vandalism and malicious mischief after more than 60 consecutive days of vacancy.

The loss is covered in full, because vandalism is a covered peril for the dwelling: The HO-3 takes away vandalism coverage once the dwelling has been vacant for more than 60 consecutive days.

The loss is covered, but the payment is reduced by 15% because the house is vacant: The 15% reduction is the commercial property vacancy rule for other perils; under the HO-3, vandalism to a dwelling vacant more than 60 days is not covered at all.

The vandalism is not covered, because the house was unoccupied for more than 30 days: With the furniture removed, the house is vacant, not merely unoccupied, and the HO-3 exclusion turns on more than 60 days of vacancy.

Vacant = no people and no contents; unoccupied = contents but no one living there. The HO-3 drops vandalism after 60+ days of vacancy.

Answer: C

The policy is void, because application statements are warranties that must be literally true: Application statements are generally representations, not warranties; they void coverage only if false and material.

The policy is void, because she concealed the true age of the roof: Concealment is intentionally withholding a material fact; an honest, immaterial error is not concealment.

The policy remains in force, because the misstatement was not material: Correct. A representation is a statement believed true to the best of the applicant's knowledge; only a material misrepresentation lets the insurer void coverage.

The claim is reduced in proportion to the premium she would have paid: Proportional adjustment is a life and health rule for a misstated age, not a property rule.

Representations must be substantially true; only a material misrepresentation or concealment can void a policy.

Answer: B

The bank receives nothing, because the insured's claim was denied: The mortgage clause protects the mortgagee even when the insured's own act or neglect voids his claim.

The bank is paid up to its interest; the insurer may then pursue Lamont: Correct. The mortgagee is paid to the extent of its interest despite the denial, and the insurer is then subrogated to the bank's rights against the insured.

The bank is paid the full Coverage A limit, because a mortgagee is a named insured: A mortgagee is paid only up to its interest in the property, not the full limit.

The bank must foreclose and sell the property before the insurer will pay it: The mortgage clause requires no foreclosure; at most, the mortgagee may have to file a proof of loss if the insured fails to.

The mortgage clause pays the mortgagee up to its interest even when the insured's claim is denied for the insured's own acts.

Answer: B

Both businesses are covered by their CGL policies: The exclusion applies to insureds in the business of manufacturing, distributing, selling, serving or furnishing alcohol, so the bar is excluded.

Abington's CGL covers its claim, but the bar needs liquor liability coverage: Correct. The liquor liability exclusion applies only to insureds in the business of making, selling, serving or furnishing alcohol; host liquor liability, as at Abington's party, stays covered.

Neither business is covered, because the CGL excludes all alcohol-related claims: The exclusion applies only to insureds in the alcohol business; host liquor exposure remains covered.

The bar's CGL covers its claim, but Abington needs host liquor coverage: Reversed: host liquor is covered by the CGL, and the bar needs a separate liquor liability policy.

The CGL liquor exclusion hits only businesses in the alcohol trade; host liquor stays covered.

Answer: A

Larkin Supply is an insured, but the employee is not while driving her own car: Correct. Her car is a non-owned auto covered for the company's liability, but an employee using a covered auto she owns is not an insured; her personal auto policy covers her.

Both are insureds, because symbol 1 covers any auto used in the business: Symbol 1 makes the employee's car a covered auto for Larkin's liability, but the business auto form does not make an employee an insured while driving a car she owns.

Neither is an insured, because Larkin Supply does not own the car: Symbol 1 includes non-owned autos, so Larkin's liability is covered.

Only the employee is an insured, because she was the driver: The company is the named insured; it is the employee who is not an insured for her own car.

Under the business auto form, the company is covered for employees' cars used on business, but the employee is not an insured for her own car.

Answer: B

1. Premises claims erode the general aggregate; completed-operations claims erode only the products-completed operations aggregate.
2. General aggregate used = $700,000 + $600,000 = $1,300,000.
3. Remaining general aggregate = $2,000,000 − $1,300,000 = $700,000.
4. Pay the lesser of the claim ($1,000,000), the each-occurrence limit ($1,000,000) and the remaining aggregate ($700,000) = $700,000.

$0: Counts the completed-operations claim against the general aggregate; it reduces only the separate products-completed operations aggregate.

$700,000: Correct. Premises claims reduce the general aggregate: $2,000,000 − $700,000 − $600,000 = $700,000 left, which is less than the each-occurrence limit, so $700,000 is paid.

$1,000,000: Applies the each-occurrence limit but ignores that only $700,000 of the general aggregate remains.

$1,100,000: Subtracts only the completed-operations claim from the general aggregate, and the answer also exceeds the $1,000,000 each-occurrence limit.

A CGL claim is paid up to the smaller of the each-occurrence limit and what remains in the applicable aggregate.

Answer: A

$85,000, because the value was fixed at inception and is not reduced for depreciation: Correct. Under agreed value, insurer and insured settle the value in advance; a total loss pays that amount regardless of current market value.

$70,000, because the insurer pays the lesser of the stated amount and actual cash value: That is the stated amount method; an agreed value policy pays the agreed amount for a total loss.

$70,000 less depreciation since the appraisal, under the actual cash value method: ACV valuation does not apply when the parties agreed on the value at inception.

The cost of a comparable restored car, up to the $85,000 limit, under replacement cost: Replacement cost is a different valuation basis and is not how agreed value settles a total loss.

Agreed (valued) value pays the amount fixed at inception for a total loss; stated amount pays the lesser of that amount and ACV.

Answer: B

It makes the general contractor an additional insured under Vance Electric's policy: Additional insured status requires an endorsement to the policy; listing the contractor as certificate holder does not add it.

It is evidence of coverage on its date and does not amend, extend or alter the policy: Correct. A certificate of insurance is evidence of the coverage in force when it is issued; it confers no rights and does not change the policy terms.

It obligates the insurer to notify the contractor if the policy is later canceled: Standard certificates state that cancellation notice is delivered according to the policy provisions; the certificate itself creates no notice duty.

It guarantees that the coverage shown remains in force for the length of the job: The policy can still be canceled or nonrenewed; the certificate is only a snapshot as of its date.

A certificate of insurance is information only: it proves coverage on a date but grants no coverage, rights or notice obligations.

Answer: B

Any of the three may cancel, and the return premium is shared among all three: Only the first named insured acts for all named insureds on cancellation and receives the refund.

Tanaka Holdings may cancel, and the return premium is sent to Tanaka Holdings: Correct. The first named insured may cancel by advance written notice to the insurer, and the insurer sends any premium refund to the first named insured.

All three must sign the request, and the refund goes to each in shares: The common conditions do not require every named insured to join in a cancellation.

Any of the three may cancel, but the refund always goes to the producing agent: The refund is sent to the first named insured, not to the agent.

In commercial lines, the first named insured is responsible for premiums, may cancel, and receives return premiums and notices.

Answer: D

Revocation of the company's certificate of authority after a contested hearing: The company has no certificate of authority to revoke, and a contested hearing is not immediate.

An administrative penalty, assessed only after a hearing on the violation: Penalties come after notice and hearing; they do not stop the activity immediately.

A consent order, which takes effect once the company agrees to its terms: A consent order needs the company's agreement, so it cannot stop an uncooperative unauthorized insurer immediately.

An emergency cease-and-desist order, with a hearing available on request: Correct. TIC Ch. 83 lets the commissioner issue an emergency cease-and-desist order, without prior notice or hearing, against unauthorized insurance activity that is fraudulent, hazardous or causing immediate harm; the person may then request a hearing.

Where unauthorized insurance threatens immediate harm, the commissioner may issue an emergency cease-and-desist order first and hold the hearing later on request.

Answer: D

Upshaw is violating Texas law, because every private employer must carry the coverage: Texas, unlike most states, lets private employers choose not to carry workers' compensation.

Upshaw's injured workers receive benefits from a state fund instead of suing the employer: Nonsubscribers' employees do not get workers' compensation benefits from a state fund; their remedy is a lawsuit.

Upshaw's workers cannot sue it, because workers' compensation is their exclusive remedy: Exclusive remedy protects employers that carry coverage; a nonsubscriber gives up that protection.

Its injured workers may sue Upshaw for negligence, and it loses its common-law defenses: Correct. A Texas private employer may elect not to carry coverage (a nonsubscriber). Injured employees may sue it for negligence, and it may not use defenses such as contributory negligence, assumption of risk or fellow-employee negligence (Labor Code 406.033).

Texas nonsubscribers lose exclusive-remedy protection and the common-law defenses, so injured employees may sue them for negligence.

Answer: B

The Texas FAIR Plan Association: The FAIR Plan provides residential property coverage for people who cannot get it in the voluntary market; coastal wind and hail is TWIA's role.

The Texas Windstorm Insurance Association (TWIA): Correct. TWIA provides windstorm and hail coverage in the designated catastrophe area along the Texas coast when it is not available in the voluntary market (TIC Ch. 2210).

The National Flood Insurance Program: The NFIP covers flood, including storm surge, but not windstorm or hail.

The homeowner's own insurer, which must add wind back on request: An insurer that excludes wind and hail in the catastrophe area is not required to add it back; TWIA exists for that gap.

TWIA = coastal wind and hail in the designated catastrophe area. FAIR Plan = residential property for those shut out of the voluntary market.

Answer: D

A diligent effort is required, and the guaranty association still protects the insured: The search requirement is right, but surplus lines insurers are not members of the guaranty association.

No search is needed because surplus lines may be used whenever the price is lower: Surplus lines is a market for risks admitted insurers will not write; lower price alone is not a basis.

The surplus lines insurer must file its rates and forms with TDI for approval: Eligible surplus lines insurers are generally exempt from Texas rate and form filing requirements.

A diligent admitted-market search is required, and no guaranty protection applies: Correct. Surplus lines coverage may be placed only when it cannot be obtained from licensed insurers after a diligent effort (TIC 981.004), and surplus lines policies are not covered by the Texas P&C guaranty association.

Surplus lines: only after a diligent effort in the admitted market, only through a surplus lines agent, and with no guaranty association backing.