Texas Insurance License Exam Prep
P&C Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is the primary purpose of property insurance in Texas?
✔✔To protect against financial loss from damage to or loss of property.
What does casualty insurance mainly cover?
✔✔Legal liability and losses caused by injury or negligence.
Who regulates property and casualty insurance in Texas?
✔✔The Texas Department of Insurance.
What principle requires the insured to be restored to their financial position before a loss?
✔✔Indemnity.
What is an insurable interest in property insurance?
✔✔A financial stake in the property being insured.
When must insurable interest exist for property coverage?
✔✔At the time of loss.
What is the policyholder’s consideration in an insurance contract?
1
,✔✔Payment of the premium.
What is the insurer’s consideration in an insurance contract?
✔✔The promise to pay covered losses.
What does a deductible represent?
✔✔The portion of loss the insured must pay.
What is actual cash value?
✔✔Replacement cost minus depreciation.
What is replacement cost coverage?
✔✔Payment to replace damaged property without depreciation.
What is a covered peril?
✔✔A cause of loss specifically insured against.
What is an exclusion in a policy?
✔✔A loss or risk not covered by the policy.
What is a named-peril policy?
✔✔A policy covering only perils listed in the contract.
2
,What is an open-peril policy?
✔✔A policy covering all risks except those excluded.
What does the declarations page show?
✔✔Key policy information such as insured name, limits, and premiums.
What is a policy endorsement?
✔✔A written change to the insurance contract.
What is a binder?
✔✔Temporary proof of insurance coverage.
What does underwriting evaluate?
✔✔The level of risk an applicant presents.
What is the purpose of underwriting guidelines?
✔✔To ensure consistent and lawful risk selection.
What is risk pooling?
✔✔Spreading losses among many policyholders.
3
, What is the standard of care in liability claims?
✔✔The level of care a reasonable person would use.
What is negligence?
✔✔Failure to act as a reasonably prudent person.
What four elements must exist to prove negligence?
✔✔Duty, breach, causation, and damages.
What is strict liability?
✔✔Liability without the need to prove negligence.
What is vicarious liability?
✔✔Responsibility for another person’s actions.
What does subrogation allow an insurer to do?
✔✔Seek recovery from a responsible third party.
What is contributory negligence?
✔✔A claimant’s own negligence contributing to loss.
What is comparative negligence?
4
P&C Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is the primary purpose of property insurance in Texas?
✔✔To protect against financial loss from damage to or loss of property.
What does casualty insurance mainly cover?
✔✔Legal liability and losses caused by injury or negligence.
Who regulates property and casualty insurance in Texas?
✔✔The Texas Department of Insurance.
What principle requires the insured to be restored to their financial position before a loss?
✔✔Indemnity.
What is an insurable interest in property insurance?
✔✔A financial stake in the property being insured.
When must insurable interest exist for property coverage?
✔✔At the time of loss.
What is the policyholder’s consideration in an insurance contract?
1
,✔✔Payment of the premium.
What is the insurer’s consideration in an insurance contract?
✔✔The promise to pay covered losses.
What does a deductible represent?
✔✔The portion of loss the insured must pay.
What is actual cash value?
✔✔Replacement cost minus depreciation.
What is replacement cost coverage?
✔✔Payment to replace damaged property without depreciation.
What is a covered peril?
✔✔A cause of loss specifically insured against.
What is an exclusion in a policy?
✔✔A loss or risk not covered by the policy.
What is a named-peril policy?
✔✔A policy covering only perils listed in the contract.
2
,What is an open-peril policy?
✔✔A policy covering all risks except those excluded.
What does the declarations page show?
✔✔Key policy information such as insured name, limits, and premiums.
What is a policy endorsement?
✔✔A written change to the insurance contract.
What is a binder?
✔✔Temporary proof of insurance coverage.
What does underwriting evaluate?
✔✔The level of risk an applicant presents.
What is the purpose of underwriting guidelines?
✔✔To ensure consistent and lawful risk selection.
What is risk pooling?
✔✔Spreading losses among many policyholders.
3
, What is the standard of care in liability claims?
✔✔The level of care a reasonable person would use.
What is negligence?
✔✔Failure to act as a reasonably prudent person.
What four elements must exist to prove negligence?
✔✔Duty, breach, causation, and damages.
What is strict liability?
✔✔Liability without the need to prove negligence.
What is vicarious liability?
✔✔Responsibility for another person’s actions.
What does subrogation allow an insurer to do?
✔✔Seek recovery from a responsible third party.
What is contributory negligence?
✔✔A claimant’s own negligence contributing to loss.
What is comparative negligence?
4
