Texas Public Adjuster License Exam (3-20)
2026/2027 Study Guide | Texas Public Insurance
Adjuster Exam Prep | TDI 3-20 Adjuster License
Test Review, Practice Questions & Answers,
Detailed Rationales, Texas Insurance Code,
Property & Casualty Claims, Policy Interpretation,
Claims Investigation & Adjuster Regulations
Question 1: Under the Texas Insurance Code, which of the following best
defines the primary role of a public insurance adjuster?
A. To represent the insurance company in the investigation and settlement of claims.
B. To act as an independent arbitrator between the insured and the insurer.
C. To act on behalf of the insured in negotiating for or effecting the settlement of a
claim.
D. To serve as a legal counsel for policyholders in coverage disputes.
CORRECT ANSWER: C. To act on behalf of the insured in negotiating for or
effecting the settlement of a claim.
Rationale: According to the Texas Insurance Code Chapter 4102, a public insurance
adjuster is defined as a person who, for compensation, acts on behalf of an insured in
negotiating for or effecting the settlement of a claim for loss or damage under an
insurance policy . Options A and B describe the roles of company or independent
adjusters and arbitrators, respectively, while D describes the role of an attorney.
Question 2: Under Texas law, what is the maximum allowable fee a public
adjuster can charge a client for services rendered on a claim?
A. 5% of the total claim settlement.
B. 10% of the total claim settlement.
C. 15% of the total claim settlement.
D. 20% of the total claim settlement.
CORRECT ANSWER: B. 10% of the total claim settlement.
Rationale: The Texas Insurance Code specifically limits the compensation a public
adjuster may receive to a maximum of 10% of the total amount of the claim settlement .
Any contract exceeding this percentage is a violation of state law.
Question 3: According to the Texas Administrative Code and Insurance Code,
which of the following is a strict requirement for a corporation to obtain a
public insurance adjuster license?
A. The corporation must be organized under the laws of Texas only.
B. The corporation must have at least one officer or active partner who is individually
licensed.
C. The corporation must have its principal place of business in Texas.
D. The corporation must be publicly traded on a major stock exchange.
,CORRECT ANSWER: B. The corporation must have at least one officer or active
partner who is individually licensed.
Rationale: Under 28 TAC § 19.704, for a corporation or partnership to be licensed, at
least one officer or partner and all other persons performing acts of a public adjuster
must be individually licensed by the department . Option A is incorrect as they can be
organized under the laws of any state or territory, provided they are admitted to conduct
business in Texas.
Question 4: What is the fundamental principle that prevents an insured from
profiting from an insurance loss and ensures they are restored to their
approximate financial condition before the loss?
A. Subrogation.
B. Indemnity.
C. Estoppel.
D. Utmost Good Faith.
CORRECT ANSWER: B. Indemnity.
Rationale: The principle of indemnity is a foundational concept in property and casualty
insurance. Its purpose is to compensate the insured for the actual loss suffered,
returning them to the financial position they were in immediately before the loss,
without allowing them to profit from the claim .
Question 5: A public adjuster is preparing a claim for a property that suffered
fire damage. Which of the following policy coverages is designed to help pay
for the additional costs of demolition and rebuilding to meet current building
codes?
A. Replacement Cost Coverage.
B. Ordinance or Law Coverage.
C. Actual Cash Value Coverage.
D. Inland Marine Coverage.
CORRECT ANSWER: B. Ordinance or Law Coverage.
Rationale: Ordinance or Law Coverage is an additional coverage that pays for the
increased cost of construction, demolition, and other expenses associated with
enforcing building codes or ordinances when repairing or rebuilding a damaged
property. This coverage is typically excluded under a standard property policy and must
be specifically purchased .
Question 6: A contractor offers to waive a homeowner's insurance deductible
to secure a roofing contract in Texas. Which statement accurately reflects the
legality of this action?
A. This is a legal marketing strategy as long as it is disclosed in the contract.
B. This is illegal in Texas under the Insurance Code and Business and Commerce Code.
,C. This is only legal if the homeowner signs a waiver form.
D. This is legal if the contractor is also a licensed public adjuster.
CORRECT ANSWER: B. This is illegal in Texas under the Insurance Code and
Business and Commerce Code.
Rationale: Texas Insurance Code Chapter 707 and Business and Commerce Code 27.02
expressly prohibit contractors from waiving, rebating, or absorbing a property
policyholder's deductible. This is considered an illegal inducement and a violation of
Texas law .
Question 7: A homeowner hires a public adjuster to handle a claim. What is
the adjuster's primary professional responsibility regarding the documentation
of the loss?
A. To rely solely on the homeowner's memory of damaged items.
B. To prepare an accurate and documented inventory and estimate of the damages.
C. To submit the claim immediately without investigation to expedite payment.
D. To accept the insurer's initial estimate without review.
CORRECT ANSWER: B. To prepare an accurate and documented inventory and
estimate of the damages.
Rationale: The first and most critical responsibility of a public adjuster is to thoroughly
investigate the loss, document the damage with photographs, inventories, and receipts,
and prepare a detailed and accurate estimate of the loss before negotiations with the
insurer begin .
Question 8: Which of the following actions by a public adjuster would
constitute a conflict of interest and is explicitly prohibited by Texas law?
A. Representing a policyholder whose claim is against the adjuster's former employer.
B. Providing contracting services for a property on which the adjuster is handling a
claim.
C. Charging a fee that is less than the maximum 10% allowed by law.
D. Refusing to accept a client whose claim is for a small amount.
CORRECT ANSWER: B. Providing contracting services for a property on which
the adjuster is handling a claim.
Rationale: Texas Insurance Code § 4102.163 and court rulings (e.g., Texas Dep't of Ins.
v. Stonewater Roofing) strictly prohibit a person from serving in a dual role as both a
contractor and a public adjuster on the same property. This is deemed an impermissible
conflict of interest .
Question 9: What is the term for the portion of a covered loss that the insured
is responsible for paying before the insurance company pays the remaining
amount?
, A. Premium.
B. Coinsurance.
C. Deductible.
D. Endorsement.
CORRECT ANSWER: C. Deductible.
Rationale: The deductible is a common policy provision that requires the insured to pay
a specified portion of the covered loss before the insurer's obligation to pay the
remaining balance begins .
Question 10: Which of the following is an accurate statement regarding the
status of the Texas public adjuster licensing laws following the Texas Supreme
Court ruling in Texas Department of Insurance v. Stonewater Roofing, Ltd.,
Co.?
A. The laws were struck down as unconstitutional violations of free speech.
B. The laws were upheld as a valid regulation of professional conduct, not speech.
C. The laws were deemed unconstitutionally vague and unenforceable.
D. The laws were overturned, allowing contractors to act as adjusters on their own
projects.
CORRECT ANSWER: B. The laws were upheld as a valid regulation of
professional conduct, not speech.
Rationale: In the 2024 Stonewater Roofing case, the Texas Supreme Court upheld the
constitutionality of Chapters 4102.051(a) and 4102.163(a). The court ruled that the
licensing and dual-capacity prohibitions regulate non-expressive commercial conduct,
not protected speech under the First Amendment .
Question 11: Under the Texas Insurance Code, if an insurer is acting in "bad
faith" in handling a claim, what is the primary legal framework that addresses
this unfair practice?
A. The Deceptive Trade Practices Act (DTPA).
B. The Texas Business and Commerce Code only.
C. Insurance Code Chapter 541 (Unfair Settlement Practices).
D. The Texas Penal Code.
CORRECT ANSWER: C. Insurance Code Chapter 541 (Unfair Settlement
Practices).
Rationale: While the DTPA (A) may also apply, Chapter 541 of the Texas Insurance Code
is the specific statutory framework that defines and prohibits unfair methods of
competition and unfair or deceptive acts or practices in the business of insurance,
including unfair claim settlement practices .
Question 12: How long does a corporation or partnership licensed as a public
adjuster have to notify the Texas Department of Insurance (TDI) of a change in
its officers, directors, or partners?
2026/2027 Study Guide | Texas Public Insurance
Adjuster Exam Prep | TDI 3-20 Adjuster License
Test Review, Practice Questions & Answers,
Detailed Rationales, Texas Insurance Code,
Property & Casualty Claims, Policy Interpretation,
Claims Investigation & Adjuster Regulations
Question 1: Under the Texas Insurance Code, which of the following best
defines the primary role of a public insurance adjuster?
A. To represent the insurance company in the investigation and settlement of claims.
B. To act as an independent arbitrator between the insured and the insurer.
C. To act on behalf of the insured in negotiating for or effecting the settlement of a
claim.
D. To serve as a legal counsel for policyholders in coverage disputes.
CORRECT ANSWER: C. To act on behalf of the insured in negotiating for or
effecting the settlement of a claim.
Rationale: According to the Texas Insurance Code Chapter 4102, a public insurance
adjuster is defined as a person who, for compensation, acts on behalf of an insured in
negotiating for or effecting the settlement of a claim for loss or damage under an
insurance policy . Options A and B describe the roles of company or independent
adjusters and arbitrators, respectively, while D describes the role of an attorney.
Question 2: Under Texas law, what is the maximum allowable fee a public
adjuster can charge a client for services rendered on a claim?
A. 5% of the total claim settlement.
B. 10% of the total claim settlement.
C. 15% of the total claim settlement.
D. 20% of the total claim settlement.
CORRECT ANSWER: B. 10% of the total claim settlement.
Rationale: The Texas Insurance Code specifically limits the compensation a public
adjuster may receive to a maximum of 10% of the total amount of the claim settlement .
Any contract exceeding this percentage is a violation of state law.
Question 3: According to the Texas Administrative Code and Insurance Code,
which of the following is a strict requirement for a corporation to obtain a
public insurance adjuster license?
A. The corporation must be organized under the laws of Texas only.
B. The corporation must have at least one officer or active partner who is individually
licensed.
C. The corporation must have its principal place of business in Texas.
D. The corporation must be publicly traded on a major stock exchange.
,CORRECT ANSWER: B. The corporation must have at least one officer or active
partner who is individually licensed.
Rationale: Under 28 TAC § 19.704, for a corporation or partnership to be licensed, at
least one officer or partner and all other persons performing acts of a public adjuster
must be individually licensed by the department . Option A is incorrect as they can be
organized under the laws of any state or territory, provided they are admitted to conduct
business in Texas.
Question 4: What is the fundamental principle that prevents an insured from
profiting from an insurance loss and ensures they are restored to their
approximate financial condition before the loss?
A. Subrogation.
B. Indemnity.
C. Estoppel.
D. Utmost Good Faith.
CORRECT ANSWER: B. Indemnity.
Rationale: The principle of indemnity is a foundational concept in property and casualty
insurance. Its purpose is to compensate the insured for the actual loss suffered,
returning them to the financial position they were in immediately before the loss,
without allowing them to profit from the claim .
Question 5: A public adjuster is preparing a claim for a property that suffered
fire damage. Which of the following policy coverages is designed to help pay
for the additional costs of demolition and rebuilding to meet current building
codes?
A. Replacement Cost Coverage.
B. Ordinance or Law Coverage.
C. Actual Cash Value Coverage.
D. Inland Marine Coverage.
CORRECT ANSWER: B. Ordinance or Law Coverage.
Rationale: Ordinance or Law Coverage is an additional coverage that pays for the
increased cost of construction, demolition, and other expenses associated with
enforcing building codes or ordinances when repairing or rebuilding a damaged
property. This coverage is typically excluded under a standard property policy and must
be specifically purchased .
Question 6: A contractor offers to waive a homeowner's insurance deductible
to secure a roofing contract in Texas. Which statement accurately reflects the
legality of this action?
A. This is a legal marketing strategy as long as it is disclosed in the contract.
B. This is illegal in Texas under the Insurance Code and Business and Commerce Code.
,C. This is only legal if the homeowner signs a waiver form.
D. This is legal if the contractor is also a licensed public adjuster.
CORRECT ANSWER: B. This is illegal in Texas under the Insurance Code and
Business and Commerce Code.
Rationale: Texas Insurance Code Chapter 707 and Business and Commerce Code 27.02
expressly prohibit contractors from waiving, rebating, or absorbing a property
policyholder's deductible. This is considered an illegal inducement and a violation of
Texas law .
Question 7: A homeowner hires a public adjuster to handle a claim. What is
the adjuster's primary professional responsibility regarding the documentation
of the loss?
A. To rely solely on the homeowner's memory of damaged items.
B. To prepare an accurate and documented inventory and estimate of the damages.
C. To submit the claim immediately without investigation to expedite payment.
D. To accept the insurer's initial estimate without review.
CORRECT ANSWER: B. To prepare an accurate and documented inventory and
estimate of the damages.
Rationale: The first and most critical responsibility of a public adjuster is to thoroughly
investigate the loss, document the damage with photographs, inventories, and receipts,
and prepare a detailed and accurate estimate of the loss before negotiations with the
insurer begin .
Question 8: Which of the following actions by a public adjuster would
constitute a conflict of interest and is explicitly prohibited by Texas law?
A. Representing a policyholder whose claim is against the adjuster's former employer.
B. Providing contracting services for a property on which the adjuster is handling a
claim.
C. Charging a fee that is less than the maximum 10% allowed by law.
D. Refusing to accept a client whose claim is for a small amount.
CORRECT ANSWER: B. Providing contracting services for a property on which
the adjuster is handling a claim.
Rationale: Texas Insurance Code § 4102.163 and court rulings (e.g., Texas Dep't of Ins.
v. Stonewater Roofing) strictly prohibit a person from serving in a dual role as both a
contractor and a public adjuster on the same property. This is deemed an impermissible
conflict of interest .
Question 9: What is the term for the portion of a covered loss that the insured
is responsible for paying before the insurance company pays the remaining
amount?
, A. Premium.
B. Coinsurance.
C. Deductible.
D. Endorsement.
CORRECT ANSWER: C. Deductible.
Rationale: The deductible is a common policy provision that requires the insured to pay
a specified portion of the covered loss before the insurer's obligation to pay the
remaining balance begins .
Question 10: Which of the following is an accurate statement regarding the
status of the Texas public adjuster licensing laws following the Texas Supreme
Court ruling in Texas Department of Insurance v. Stonewater Roofing, Ltd.,
Co.?
A. The laws were struck down as unconstitutional violations of free speech.
B. The laws were upheld as a valid regulation of professional conduct, not speech.
C. The laws were deemed unconstitutionally vague and unenforceable.
D. The laws were overturned, allowing contractors to act as adjusters on their own
projects.
CORRECT ANSWER: B. The laws were upheld as a valid regulation of
professional conduct, not speech.
Rationale: In the 2024 Stonewater Roofing case, the Texas Supreme Court upheld the
constitutionality of Chapters 4102.051(a) and 4102.163(a). The court ruled that the
licensing and dual-capacity prohibitions regulate non-expressive commercial conduct,
not protected speech under the First Amendment .
Question 11: Under the Texas Insurance Code, if an insurer is acting in "bad
faith" in handling a claim, what is the primary legal framework that addresses
this unfair practice?
A. The Deceptive Trade Practices Act (DTPA).
B. The Texas Business and Commerce Code only.
C. Insurance Code Chapter 541 (Unfair Settlement Practices).
D. The Texas Penal Code.
CORRECT ANSWER: C. Insurance Code Chapter 541 (Unfair Settlement
Practices).
Rationale: While the DTPA (A) may also apply, Chapter 541 of the Texas Insurance Code
is the specific statutory framework that defines and prohibits unfair methods of
competition and unfair or deceptive acts or practices in the business of insurance,
including unfair claim settlement practices .
Question 12: How long does a corporation or partnership licensed as a public
adjuster have to notify the Texas Department of Insurance (TDI) of a change in
its officers, directors, or partners?
