Texas Insurance Agent Licensing Exam
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1. What is the primary purpose of insurance?
a) To eliminate all risks
b) To transfer risk from an individual to an insurer
c) To guarantee profits
d) To increase wealth
b) To transfer risk from an individual to an insurer
Rationale: Insurance is designed to transfer financial risk from an individual
or business to an insurance company in exchange for premiums.
2. Which of the following is considered a principle of indemnity?
a) Insurable interest must exist
b) The insured cannot profit from a loss
c) Risk pooling
d) Law of large numbers
b) The insured cannot profit from a loss
Rationale: The principle of indemnity ensures that insurance compensates for
actual loss without allowing the insured to gain financially from a claim.
3. In insurance, insurable interest must exist:
a) Only at the time of application
b) Only at the time of loss
, c) At both the time of application and loss
d) Only in life insurance
c) At both the time of application and loss
Rationale: Insurable interest is required to prevent moral hazard; it ensures
the policyholder benefits only from legitimate financial loss.
4. Which type of insurance protects against legal liability for injuries or
damages to others?
a) Life insurance
b) Health insurance
c) Liability insurance
d) Property insurance
c) Liability insurance
Rationale: Liability insurance covers claims of bodily injury or property
damage that the insured may cause to others.
5. In Texas, which department regulates insurance companies and agents?
a) Texas Department of Commerce
b) Texas Department of Insurance (TDI)
c) Texas Insurance Commission
d) Texas Department of Finance
b) Texas Department of Insurance (TDI)
Rationale: The TDI oversees licensing, regulation, and enforcement of
insurance laws in Texas.
6. What type of policy provides coverage for a specific period of time and
does not build cash value?
a) Whole life insurance
b) Term life insurance
c) Universal life insurance
d) Endowment insurance
b) Term life insurance
Rationale: Term life provides coverage for a fixed term without cash value
accumulation.
, 7. What is the primary purpose of underwriting?
a) To sell as many policies as possible
b) To evaluate risk and determine policy eligibility and premiums
c) To adjust claims
d) To market insurance products
b) To evaluate risk and determine policy eligibility and premiums
Rationale: Underwriting assesses risk to ensure the insurer charges
appropriate premiums and avoids unprofitable policies.
8. Which of the following is an example of moral hazard?
a) Driving carefully to avoid accidents
b) Inflating a claim intentionally
c) Not having insurance
d) Pooling risk with others
b) Inflating a claim intentionally
Rationale: Moral hazard refers to increased risk due to the insured's behavior
after obtaining insurance.
9. In Texas, how often must insurance agents renew their license?
a) Every year
b) Every 2 years
c) Every 3 years
d) Every 5 years
b) Every 2 years
Rationale: Texas requires insurance agents to renew their licenses biennially
and complete continuing education.
10.Which provision allows an insurer to cancel a policy at any time by
returning unearned premium?
a) Noncancellable
b) Optional renewal
c) Cancelable provision
d) Guaranteed renewable
With Actual Questions & Verified
Answers,Plus Rationales/Expert
Verified For Guaranteed Pass Graded
A+/2026 /Latest Update/Instant
Download Pdf
1. What is the primary purpose of insurance?
a) To eliminate all risks
b) To transfer risk from an individual to an insurer
c) To guarantee profits
d) To increase wealth
b) To transfer risk from an individual to an insurer
Rationale: Insurance is designed to transfer financial risk from an individual
or business to an insurance company in exchange for premiums.
2. Which of the following is considered a principle of indemnity?
a) Insurable interest must exist
b) The insured cannot profit from a loss
c) Risk pooling
d) Law of large numbers
b) The insured cannot profit from a loss
Rationale: The principle of indemnity ensures that insurance compensates for
actual loss without allowing the insured to gain financially from a claim.
3. In insurance, insurable interest must exist:
a) Only at the time of application
b) Only at the time of loss
, c) At both the time of application and loss
d) Only in life insurance
c) At both the time of application and loss
Rationale: Insurable interest is required to prevent moral hazard; it ensures
the policyholder benefits only from legitimate financial loss.
4. Which type of insurance protects against legal liability for injuries or
damages to others?
a) Life insurance
b) Health insurance
c) Liability insurance
d) Property insurance
c) Liability insurance
Rationale: Liability insurance covers claims of bodily injury or property
damage that the insured may cause to others.
5. In Texas, which department regulates insurance companies and agents?
a) Texas Department of Commerce
b) Texas Department of Insurance (TDI)
c) Texas Insurance Commission
d) Texas Department of Finance
b) Texas Department of Insurance (TDI)
Rationale: The TDI oversees licensing, regulation, and enforcement of
insurance laws in Texas.
6. What type of policy provides coverage for a specific period of time and
does not build cash value?
a) Whole life insurance
b) Term life insurance
c) Universal life insurance
d) Endowment insurance
b) Term life insurance
Rationale: Term life provides coverage for a fixed term without cash value
accumulation.
, 7. What is the primary purpose of underwriting?
a) To sell as many policies as possible
b) To evaluate risk and determine policy eligibility and premiums
c) To adjust claims
d) To market insurance products
b) To evaluate risk and determine policy eligibility and premiums
Rationale: Underwriting assesses risk to ensure the insurer charges
appropriate premiums and avoids unprofitable policies.
8. Which of the following is an example of moral hazard?
a) Driving carefully to avoid accidents
b) Inflating a claim intentionally
c) Not having insurance
d) Pooling risk with others
b) Inflating a claim intentionally
Rationale: Moral hazard refers to increased risk due to the insured's behavior
after obtaining insurance.
9. In Texas, how often must insurance agents renew their license?
a) Every year
b) Every 2 years
c) Every 3 years
d) Every 5 years
b) Every 2 years
Rationale: Texas requires insurance agents to renew their licenses biennially
and complete continuing education.
10.Which provision allows an insurer to cancel a policy at any time by
returning unearned premium?
a) Noncancellable
b) Optional renewal
c) Cancelable provision
d) Guaranteed renewable
