TEXAS PROPERTY AND CASUALTY EXAM
AND PRACTICE (LATEST 2026/2027
UPDATE), QUESTIONS & VERIFIED
ANSWERS | 100% CORRECT | GRADE A
TEXAS PROPERTY AND CASUALTY
Texas Property and Casualty Exam | Questions
1. What is the primary function of property insurance?
A. To provide health benefits
B. To safeguard against financial loss from property damage
C. To offer investment opportunities
D. To cover employee wages
Rationale: Property insurance is designed to protect policyholders from financial
losses resulting from damage, theft, or destruction of property. This coverage ensures
that homeowners, renters, and business owners can recover financially after a covered
loss. It does not provide health benefits, investment returns, or employee wage
coverage, which are handled by other types of insurance.
2. What is the minimum age requirement to apply for a Texas
property and casualty license?
A. 17
B. 18
C. 19
D. 21
Rationale: The Texas Department of Insurance requires that applicants be at least 18
years old to obtain a property and casualty insurance license. This age ensures legal
capacity and responsibility to enter into contracts and handle client funds. Applicants
under 18 cannot be held legally accountable for insurance duties.
,3. Which coverage is a standard feature of a homeowners insurance
policy?
A. Personal injury protection
B. Personal property coverage
C. Business income loss
D. Long-term care
Rationale: Homeowners insurance typically covers the insured’s personal belongings
within the home. This includes furniture, electronics, and clothing. Personal injury
protection and long-term care are unrelated, while business income loss applies to
commercial policies.
4. What does liability coverage in a business policy primarily
address?
A. Damage to the business’s own property
B. Injuries or damage to third parties caused by the business
C. Employee health benefits
D. Natural disaster losses
Rationale: Liability coverage protects businesses from claims brought by third parties
for bodily injury or property damage resulting from business operations. This does not
cover the business’s own property, employee benefits, or natural disasters, which are
handled by other policy types.
5. Which entity regulates insurance practices in Texas?
A. Texas Insurance Commission
B. Texas Department of Insurance
C. Federal Insurance Office
D. Texas State Board of Insurance
Rationale: The Texas Department of Insurance (TDI) oversees licensing, regulation,
and consumer protection for insurers and agents operating in Texas. It ensures
compliance with state laws, investigates complaints, and provides guidance on
insurance practices. The other entities listed do not have primary regulatory authority
in Texas.
,6. What is the main role of underwriting in property and casualty
insurance?
A. To settle claims
B. To evaluate and categorize risk
C. To market insurance products
D. To manage policy renewals
Rationale: Underwriting assesses the risk profile of applicants and insured properties.
This allows insurers to set appropriate premiums and decide on coverage eligibility.
Underwriters do not settle claims or market products; those are handled by claims
adjusters and sales agents, respectively.
7. Which peril is generally excluded from a basic homeowners policy
in Texas?
A. Windstorm
B. Earthquake
C. Fire
D. Theft
Rationale: Basic homeowners policies in Texas commonly exclude earthquake
damage. Policyholders must purchase a separate endorsement or specialized policy
for earthquake coverage. Fire, theft, and windstorm (unless specifically excluded) are
typically covered.
8. What does a policy deductible represent?
A. The total coverage limit
B. The amount the insured pays before insurance coverage begins
C. The annual premium cost
D. The insurer’s profit margin
Rationale: A deductible is the portion of a claim that the insured must pay out-of-
pocket before the insurer contributes. It helps manage small claims and reduces
premiums. The deductible is not the policy limit, premium, or insurer profit.
9. Which insurance type protects a business’s physical structures?
A. Errors and omissions
B. Commercial property
, C. General liability
D. Workers’ compensation
Rationale: Commercial property insurance covers damage to business-owned
buildings, equipment, and inventory from covered perils. General liability addresses
third-party claims, while workers’ compensation covers employee injuries, and errors
and omissions cover professional negligence.
10. How long must insurance companies in Texas retain records of
claims?
A. 2 years
B. 3 years
C. 5 years
D. 7 years
Rationale: Texas law mandates insurers to retain claims files for 5 years from the
date of final disposition. This ensures documentation is available for audits, regulatory
review, and legal purposes. Shorter retention periods could hinder investigations,
while longer retention is not required by law.
11. What is the purpose of an insurance binder?
A. To terminate a policy
B. To offer temporary insurance coverage
C. To finalize the policy terms
D. To increase the coverage limit
Rationale: An insurance binder is a temporary contract providing immediate
coverage until a formal policy is issued. It protects the insured in the interim. It does
not finalize terms, terminate coverage, or increase limits.
12. Which factor is considered during the underwriting process?
A. The insured’s favorite color
B. The insured’s credit history
C. The insured’s social media activity
D. The insured’s hobbies
AND PRACTICE (LATEST 2026/2027
UPDATE), QUESTIONS & VERIFIED
ANSWERS | 100% CORRECT | GRADE A
TEXAS PROPERTY AND CASUALTY
Texas Property and Casualty Exam | Questions
1. What is the primary function of property insurance?
A. To provide health benefits
B. To safeguard against financial loss from property damage
C. To offer investment opportunities
D. To cover employee wages
Rationale: Property insurance is designed to protect policyholders from financial
losses resulting from damage, theft, or destruction of property. This coverage ensures
that homeowners, renters, and business owners can recover financially after a covered
loss. It does not provide health benefits, investment returns, or employee wage
coverage, which are handled by other types of insurance.
2. What is the minimum age requirement to apply for a Texas
property and casualty license?
A. 17
B. 18
C. 19
D. 21
Rationale: The Texas Department of Insurance requires that applicants be at least 18
years old to obtain a property and casualty insurance license. This age ensures legal
capacity and responsibility to enter into contracts and handle client funds. Applicants
under 18 cannot be held legally accountable for insurance duties.
,3. Which coverage is a standard feature of a homeowners insurance
policy?
A. Personal injury protection
B. Personal property coverage
C. Business income loss
D. Long-term care
Rationale: Homeowners insurance typically covers the insured’s personal belongings
within the home. This includes furniture, electronics, and clothing. Personal injury
protection and long-term care are unrelated, while business income loss applies to
commercial policies.
4. What does liability coverage in a business policy primarily
address?
A. Damage to the business’s own property
B. Injuries or damage to third parties caused by the business
C. Employee health benefits
D. Natural disaster losses
Rationale: Liability coverage protects businesses from claims brought by third parties
for bodily injury or property damage resulting from business operations. This does not
cover the business’s own property, employee benefits, or natural disasters, which are
handled by other policy types.
5. Which entity regulates insurance practices in Texas?
A. Texas Insurance Commission
B. Texas Department of Insurance
C. Federal Insurance Office
D. Texas State Board of Insurance
Rationale: The Texas Department of Insurance (TDI) oversees licensing, regulation,
and consumer protection for insurers and agents operating in Texas. It ensures
compliance with state laws, investigates complaints, and provides guidance on
insurance practices. The other entities listed do not have primary regulatory authority
in Texas.
,6. What is the main role of underwriting in property and casualty
insurance?
A. To settle claims
B. To evaluate and categorize risk
C. To market insurance products
D. To manage policy renewals
Rationale: Underwriting assesses the risk profile of applicants and insured properties.
This allows insurers to set appropriate premiums and decide on coverage eligibility.
Underwriters do not settle claims or market products; those are handled by claims
adjusters and sales agents, respectively.
7. Which peril is generally excluded from a basic homeowners policy
in Texas?
A. Windstorm
B. Earthquake
C. Fire
D. Theft
Rationale: Basic homeowners policies in Texas commonly exclude earthquake
damage. Policyholders must purchase a separate endorsement or specialized policy
for earthquake coverage. Fire, theft, and windstorm (unless specifically excluded) are
typically covered.
8. What does a policy deductible represent?
A. The total coverage limit
B. The amount the insured pays before insurance coverage begins
C. The annual premium cost
D. The insurer’s profit margin
Rationale: A deductible is the portion of a claim that the insured must pay out-of-
pocket before the insurer contributes. It helps manage small claims and reduces
premiums. The deductible is not the policy limit, premium, or insurer profit.
9. Which insurance type protects a business’s physical structures?
A. Errors and omissions
B. Commercial property
, C. General liability
D. Workers’ compensation
Rationale: Commercial property insurance covers damage to business-owned
buildings, equipment, and inventory from covered perils. General liability addresses
third-party claims, while workers’ compensation covers employee injuries, and errors
and omissions cover professional negligence.
10. How long must insurance companies in Texas retain records of
claims?
A. 2 years
B. 3 years
C. 5 years
D. 7 years
Rationale: Texas law mandates insurers to retain claims files for 5 years from the
date of final disposition. This ensures documentation is available for audits, regulatory
review, and legal purposes. Shorter retention periods could hinder investigations,
while longer retention is not required by law.
11. What is the purpose of an insurance binder?
A. To terminate a policy
B. To offer temporary insurance coverage
C. To finalize the policy terms
D. To increase the coverage limit
Rationale: An insurance binder is a temporary contract providing immediate
coverage until a formal policy is issued. It protects the insured in the interim. It does
not finalize terms, terminate coverage, or increase limits.
12. Which factor is considered during the underwriting process?
A. The insured’s favorite color
B. The insured’s credit history
C. The insured’s social media activity
D. The insured’s hobbies
