TEXAS PROPERTY AND CASUALTY INSURANCE
EXAM QUESTIONS AND CORRECT ANSWERS
(VRIFIED ANSWERS) Q&A 2026/2027 |INSTANT
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1. What is the primary purpose of property and casualty
insurance?
A. To increase investment income
B. To protect against financial losses from risks
C. To eliminate all risks permanently
D. To provide retirement benefits
Correct Answer: B. To protect against financial losses from risks
Rationale: Property and casualty insurance provides financial
protection against losses involving property damage, liability,
and other covered risks.
2. Which organization regulates insurance companies in
Texas?
A. Texas Department of Motor Vehicles
B. Texas Department of Insurance
C. Federal Reserve
D. Department of Labor
Correct Answer: B. Texas Department of Insurance
,Rationale: The Texas Department of Insurance (TDI) regulates
insurance companies, agents, and insurance practices within
Texas.
3. An insurance contract is considered a contract of adhesion
because:
A. Both parties negotiate every term
B. The insured writes the policy
C. The insurer prepares the contract and the insured accepts it
D. It cannot be canceled
Correct Answer: C. The insurer prepares the contract and the
insured accepts it
Rationale: Insurance policies are prepared by insurers, and
insureds generally accept the terms as written.
4. Which insurance principle requires the insured to have a
financial interest in the property being insured?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Correct Answer: B. Insurable interest
,Rationale: Insurable interest means the insured would suffer
financial loss if the insured property were damaged or
destroyed.
5. The principle of indemnity means that insurance should:
A. Allow the insured to profit from a loss
B. Restore the insured financially to the position before the loss
C. Increase the value of property
D. Remove all policy exclusions
Correct Answer: B. Restore the insured financially to the
position before the loss
Rationale: Indemnity prevents insureds from making a profit
from insurance claims.
6. Which of the following is an example of a pure risk?
A. Gambling
B. Investing in stocks
C. Fire damaging a home
D. Starting a business
Correct Answer: C. Fire damaging a home
Rationale: Pure risks involve only the possibility of loss and are
typically insurable.
, 7. A peril is best defined as:
A. The cause of a loss
B. A policy premium
C. A type of insurance company
D. A financial reward
Correct Answer: A. The cause of a loss
Rationale: A peril is the direct cause of damage, such as fire,
theft, or windstorm.
8. A hazard that increases the chance of loss due to a person’s
attitude is called:
A. Physical hazard
B. Moral hazard
C. Legal hazard
D. Property hazard
Correct Answer: B. Moral hazard
Rationale: Moral hazards involve dishonesty or intentional
actions that increase risk.
9. Which type of hazard involves unsafe physical conditions?
A. Moral hazard
B. Physical hazard
EXAM QUESTIONS AND CORRECT ANSWERS
(VRIFIED ANSWERS) Q&A 2026/2027 |INSTANT
DOWNLOAD PDF
1. What is the primary purpose of property and casualty
insurance?
A. To increase investment income
B. To protect against financial losses from risks
C. To eliminate all risks permanently
D. To provide retirement benefits
Correct Answer: B. To protect against financial losses from risks
Rationale: Property and casualty insurance provides financial
protection against losses involving property damage, liability,
and other covered risks.
2. Which organization regulates insurance companies in
Texas?
A. Texas Department of Motor Vehicles
B. Texas Department of Insurance
C. Federal Reserve
D. Department of Labor
Correct Answer: B. Texas Department of Insurance
,Rationale: The Texas Department of Insurance (TDI) regulates
insurance companies, agents, and insurance practices within
Texas.
3. An insurance contract is considered a contract of adhesion
because:
A. Both parties negotiate every term
B. The insured writes the policy
C. The insurer prepares the contract and the insured accepts it
D. It cannot be canceled
Correct Answer: C. The insurer prepares the contract and the
insured accepts it
Rationale: Insurance policies are prepared by insurers, and
insureds generally accept the terms as written.
4. Which insurance principle requires the insured to have a
financial interest in the property being insured?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Correct Answer: B. Insurable interest
,Rationale: Insurable interest means the insured would suffer
financial loss if the insured property were damaged or
destroyed.
5. The principle of indemnity means that insurance should:
A. Allow the insured to profit from a loss
B. Restore the insured financially to the position before the loss
C. Increase the value of property
D. Remove all policy exclusions
Correct Answer: B. Restore the insured financially to the
position before the loss
Rationale: Indemnity prevents insureds from making a profit
from insurance claims.
6. Which of the following is an example of a pure risk?
A. Gambling
B. Investing in stocks
C. Fire damaging a home
D. Starting a business
Correct Answer: C. Fire damaging a home
Rationale: Pure risks involve only the possibility of loss and are
typically insurable.
, 7. A peril is best defined as:
A. The cause of a loss
B. A policy premium
C. A type of insurance company
D. A financial reward
Correct Answer: A. The cause of a loss
Rationale: A peril is the direct cause of damage, such as fire,
theft, or windstorm.
8. A hazard that increases the chance of loss due to a person’s
attitude is called:
A. Physical hazard
B. Moral hazard
C. Legal hazard
D. Property hazard
Correct Answer: B. Moral hazard
Rationale: Moral hazards involve dishonesty or intentional
actions that increase risk.
9. Which type of hazard involves unsafe physical conditions?
A. Moral hazard
B. Physical hazard
