InsTX-PersPC55 – Texas Personal Lines Property & Casualty: 200
Practice Questions with Answers & Explanations LATEST
UPDATE THIS YEAR.PDF
Intro
This set provides 200 exam-style multiple-choice questions designed to match the content and difficulty of
the Texas Personal Lines Property & Casualty (InsTX-PersPC55) licensing exam. Each question includes
four answer choices, the correct answer in bold italics, and a brief explanation in italics to reinforce key
concepts and Texas-specific rules.
Coverage summary (balanced):
Insurance basics & concepts – risk, contracts, policy structure, underwriting, ratings, claims
handling, ethics, and fraud.
Homeowners policies – HO-3, HO-4, HO-6, HO-8; coverages A–D, Section II liability, common
endorsements, exclusions, and loss settlement.
Personal auto policies (PAP) – liability, PIP, medical payments, UM/UIM,
collision/comprehensive, endorsements, TAIPA, and Texas minimum limits.
Other personal lines – personal umbrella, flood, windstorm/TWIA, watercraft, identity theft, and
additional living expense.
Texas law, regulation & ethics – TDI, licensing, CE, producer appointments, unfair practices,
prompt-pay, consumer complaints, and market structures (admitted, surplus lines, residual
markets).
Q1
Which of the following best defines “risk” in insurance?
A. The written contract between insurer and insured
B. The chance of loss or uncertainty regarding an outcome
C. The amount of premium paid for coverage
D. The process of investigating claims
,B. The chance of loss or uncertainty regarding an outcome
Risk is the uncertainty concerning a loss; insurance transfers or spreads this risk.
Q2
What is the primary purpose of insurance?
A. To eliminate all risk
B. To transfer risk from the individual to the insurer
C. To guarantee investment returns
D. To regulate financial markets
B. To transfer risk from the individual to the insurer
Insurance allows individuals to shift the financial burden of potential losses to an insurance
company.
Q3
Which element is NOT required for a contract to be legally binding?
A. Offer and acceptance
B. Consideration
C. Verbal agreement only
D. Legal purpose
C. Verbal agreement only
A valid contract requires offer, acceptance, consideration, competent parties, and legal
purpose; it does not have to be verbal only.
,Q4
In an insurance contract, the premium paid by the insured is an example of:
A. Warranty
B. Condition
C. Consideration
D. Exclusion
C. Consideration
Consideration is what each party gives: the insured pays premium, the insurer promises to
pay covered losses.
Q5
Which principle states that the insured must have a financial interest in the subject of
insurance?
A. Subrogation
B. Insurable interest
C. Indemnity
D. Adhesion
B. Insurable interest_Insurable interest means the insured would suffer a financial loss if
the insured property or life is damaged or lost._
Q6
The doctrine of “utmost good faith” in insurance requires:
, A. Only the insurer to disclose all facts
B. Only the insured to disclose all facts
C. Both parties to disclose all material facts
D. No disclosure is required
C. Both parties to disclose all material facts_Utmost good faith (uberrimae fidei) requires
honest disclosure by both insurer and applicant._
Q7
Which of the following is a hazard?
A. The possibility of a fire
B. A careless act that increases the chance of loss
C. The amount of insurance written
D. The policy’s declarations page
B. A careless act that increases the chance of loss_A hazard is a condition or behavior
that increases the likelihood or severity of a loss (e.g., storing gasoline near a furnace)._
Q8
What type of hazard is demonstrated by someone who intentionally sets a fire to collect
insurance money?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard
Practice Questions with Answers & Explanations LATEST
UPDATE THIS YEAR.PDF
Intro
This set provides 200 exam-style multiple-choice questions designed to match the content and difficulty of
the Texas Personal Lines Property & Casualty (InsTX-PersPC55) licensing exam. Each question includes
four answer choices, the correct answer in bold italics, and a brief explanation in italics to reinforce key
concepts and Texas-specific rules.
Coverage summary (balanced):
Insurance basics & concepts – risk, contracts, policy structure, underwriting, ratings, claims
handling, ethics, and fraud.
Homeowners policies – HO-3, HO-4, HO-6, HO-8; coverages A–D, Section II liability, common
endorsements, exclusions, and loss settlement.
Personal auto policies (PAP) – liability, PIP, medical payments, UM/UIM,
collision/comprehensive, endorsements, TAIPA, and Texas minimum limits.
Other personal lines – personal umbrella, flood, windstorm/TWIA, watercraft, identity theft, and
additional living expense.
Texas law, regulation & ethics – TDI, licensing, CE, producer appointments, unfair practices,
prompt-pay, consumer complaints, and market structures (admitted, surplus lines, residual
markets).
Q1
Which of the following best defines “risk” in insurance?
A. The written contract between insurer and insured
B. The chance of loss or uncertainty regarding an outcome
C. The amount of premium paid for coverage
D. The process of investigating claims
,B. The chance of loss or uncertainty regarding an outcome
Risk is the uncertainty concerning a loss; insurance transfers or spreads this risk.
Q2
What is the primary purpose of insurance?
A. To eliminate all risk
B. To transfer risk from the individual to the insurer
C. To guarantee investment returns
D. To regulate financial markets
B. To transfer risk from the individual to the insurer
Insurance allows individuals to shift the financial burden of potential losses to an insurance
company.
Q3
Which element is NOT required for a contract to be legally binding?
A. Offer and acceptance
B. Consideration
C. Verbal agreement only
D. Legal purpose
C. Verbal agreement only
A valid contract requires offer, acceptance, consideration, competent parties, and legal
purpose; it does not have to be verbal only.
,Q4
In an insurance contract, the premium paid by the insured is an example of:
A. Warranty
B. Condition
C. Consideration
D. Exclusion
C. Consideration
Consideration is what each party gives: the insured pays premium, the insurer promises to
pay covered losses.
Q5
Which principle states that the insured must have a financial interest in the subject of
insurance?
A. Subrogation
B. Insurable interest
C. Indemnity
D. Adhesion
B. Insurable interest_Insurable interest means the insured would suffer a financial loss if
the insured property or life is damaged or lost._
Q6
The doctrine of “utmost good faith” in insurance requires:
, A. Only the insurer to disclose all facts
B. Only the insured to disclose all facts
C. Both parties to disclose all material facts
D. No disclosure is required
C. Both parties to disclose all material facts_Utmost good faith (uberrimae fidei) requires
honest disclosure by both insurer and applicant._
Q7
Which of the following is a hazard?
A. The possibility of a fire
B. A careless act that increases the chance of loss
C. The amount of insurance written
D. The policy’s declarations page
B. A careless act that increases the chance of loss_A hazard is a condition or behavior
that increases the likelihood or severity of a loss (e.g., storing gasoline near a furnace)._
Q8
What type of hazard is demonstrated by someone who intentionally sets a fire to collect
insurance money?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard
