TEXAS PROPERTY & CASUALTY INSURANCE
| COMPREHENSIVE EXAM PREP, PRACTICE
QUESTIONS, CORRECT ANSWERS AND
STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Treating risk by purchasing insurance is an example of what transfer
type of risk management?
Robert and Carolyn live in a busy city and decide that not avoidance
owning a car is the solution to not experience having a car
stolen. What method describes this philosophy?
Dishonesty on the part of an insured is an example of what? a moral hazard
What is an example of reduction as a method of handling risk? Installing a burglar alarm
Driving too fast and not wearing a seat belt are examples of? morale hazard
The risk that involves the chance of both loss and gain is? speculative risk
Self-insurance is an example of what kind of risk treatment? Retention
If John's father transfers ownership of a house to John, can Yes because he has an insurable interest.
John buy insurance?
Fire would be an example of a what? peril
What is the actual cause of a loss? peril
What kind of risk is the stock market? speculative risk
A ____ is a condition that increases the chance of loss. hazard
Faulty wiring causes a fire that destroys a building. The faulty hazard
wiring is considered to be a(n):
A chance, possibility, or uncertainty of loss is known as? risk
Examples of perils are_____? fire, wind and lightning
Indemnity insurance will _____? restores insured to pre-loss condition
,The types of hazards are_____? moral, morale, and physical
________ is when people with a greater than average exposure to Adverse selection
loss to purchase insurance.
Methods of handling risk are avoidance, reduction, retention, Sharing (ARRTS)
transfer and _____.
Elements of insurable risk are calculable, affordable, non- Measurable (CANHAM)
catastrophic, homogenous, accidental and _____.
Myron, who is 16, signs a contract to lease a car. This would He is not competent at 16.
probably not be considered a valid contract under the law
because _____.
Ben bought an automobile four years ago for $15,000. Today it $6,000
is worth $6,000. According to the principle of indemnity, how
much should Ben receive if the car is totally demolished?
Harry Arne and his cousin each own 50% of a $160,000 $80,000
duplex. Suppose Harry purchases $160,000 of insurance on
the home. If it burns to the ground, how much would Harry
collect?
Under a unilateral contract, which parties are legally bound to Insurer only
perform under the contract?
Which part of an insurance policy describes the Conditions
responsibilities and obligations of both the insurance
company and the insured under the policy?
The insuring agreement section of a policy describes the ____ perils
you are insured against.
The elements of a valid contract are legal purpose, Offer and acceptance
consideration, competent parties, and _____.
, Both parties rely on statements made to each other when Utmost good faith
writing a contract. This is known as?
The limits of liability are found in which of the following Declarations
sections of a casualty policy?
An insurance company issued a homeowners policy that Contract of adhesion
included ambiguous language regarding how a loss was
settled. The insured sued the insurance company and won. The
judge stated that due to the ambiguous language in the
contract the decision must be made in favor of the insured.
The judge was basing this decision on which of the following
types of insurance contract?
A policy may be amended only with a(n): endorsement
The procedure for resolving a disagreement between an Conditions
insured and an insurance company about a loss is described in
which of the following parts of an insurance policy?
Who does a personal contract protect? The individual who owns the property.
Which one of the following terms indicates that an insurance Unilateral
contract contains the enforceable promises of only one
party?
The principle that restores someone to the condition he indemnity
enjoyed before a loss is_____?
Bryce owns a $50,000 lake cabin that he has insured for $5000
$40,000. He sustains a $5,000 covered loss. According to the
principle of indemnity, how much will his insurer pay?
The _____ page in an insurance contract contains information Declarations
about the risk, the effective date of coverage, deductible,
premium amounts, coinsurance percentage, and location of
the insured property.
| COMPREHENSIVE EXAM PREP, PRACTICE
QUESTIONS, CORRECT ANSWERS AND
STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Treating risk by purchasing insurance is an example of what transfer
type of risk management?
Robert and Carolyn live in a busy city and decide that not avoidance
owning a car is the solution to not experience having a car
stolen. What method describes this philosophy?
Dishonesty on the part of an insured is an example of what? a moral hazard
What is an example of reduction as a method of handling risk? Installing a burglar alarm
Driving too fast and not wearing a seat belt are examples of? morale hazard
The risk that involves the chance of both loss and gain is? speculative risk
Self-insurance is an example of what kind of risk treatment? Retention
If John's father transfers ownership of a house to John, can Yes because he has an insurable interest.
John buy insurance?
Fire would be an example of a what? peril
What is the actual cause of a loss? peril
What kind of risk is the stock market? speculative risk
A ____ is a condition that increases the chance of loss. hazard
Faulty wiring causes a fire that destroys a building. The faulty hazard
wiring is considered to be a(n):
A chance, possibility, or uncertainty of loss is known as? risk
Examples of perils are_____? fire, wind and lightning
Indemnity insurance will _____? restores insured to pre-loss condition
,The types of hazards are_____? moral, morale, and physical
________ is when people with a greater than average exposure to Adverse selection
loss to purchase insurance.
Methods of handling risk are avoidance, reduction, retention, Sharing (ARRTS)
transfer and _____.
Elements of insurable risk are calculable, affordable, non- Measurable (CANHAM)
catastrophic, homogenous, accidental and _____.
Myron, who is 16, signs a contract to lease a car. This would He is not competent at 16.
probably not be considered a valid contract under the law
because _____.
Ben bought an automobile four years ago for $15,000. Today it $6,000
is worth $6,000. According to the principle of indemnity, how
much should Ben receive if the car is totally demolished?
Harry Arne and his cousin each own 50% of a $160,000 $80,000
duplex. Suppose Harry purchases $160,000 of insurance on
the home. If it burns to the ground, how much would Harry
collect?
Under a unilateral contract, which parties are legally bound to Insurer only
perform under the contract?
Which part of an insurance policy describes the Conditions
responsibilities and obligations of both the insurance
company and the insured under the policy?
The insuring agreement section of a policy describes the ____ perils
you are insured against.
The elements of a valid contract are legal purpose, Offer and acceptance
consideration, competent parties, and _____.
, Both parties rely on statements made to each other when Utmost good faith
writing a contract. This is known as?
The limits of liability are found in which of the following Declarations
sections of a casualty policy?
An insurance company issued a homeowners policy that Contract of adhesion
included ambiguous language regarding how a loss was
settled. The insured sued the insurance company and won. The
judge stated that due to the ambiguous language in the
contract the decision must be made in favor of the insured.
The judge was basing this decision on which of the following
types of insurance contract?
A policy may be amended only with a(n): endorsement
The procedure for resolving a disagreement between an Conditions
insured and an insurance company about a loss is described in
which of the following parts of an insurance policy?
Who does a personal contract protect? The individual who owns the property.
Which one of the following terms indicates that an insurance Unilateral
contract contains the enforceable promises of only one
party?
The principle that restores someone to the condition he indemnity
enjoyed before a loss is_____?
Bryce owns a $50,000 lake cabin that he has insured for $5000
$40,000. He sustains a $5,000 covered loss. According to the
principle of indemnity, how much will his insurer pay?
The _____ page in an insurance contract contains information Declarations
about the risk, the effective date of coverage, deductible,
premium amounts, coinsurance percentage, and location of
the insured property.
