TEXAS PROPERTY AND CASUALTY LICENSING EXAM 2025
ACTUAL EXAM COMPLETE 250 QUESTIONS WITH DETAILED
VERIFIED ANSWERS (100% CORRECT ANSWERS) / ALREADY
GRADED A+
Question 1
Which of the following describes a situation where a person faces the
possibility of loss, but no possibility of gain?
A) Speculative Risk
B) Pure Risk
C) Moral Hazard
D) Peril
E) Deductible
Correct Answer: B) Pure Risk
Rationale: Pure risk is a situation where there is only the possibility
of loss or no loss, with no chance of gain, and it is the only type of
risk that is insurable.
Question 2
What is the principle in insurance that states that the insured should be
restored to the same financial position they were in prior to the loss, without
profiting from the loss?
A) Subrogation
B) Indemnity
C) Insurable Interest
D) Adhesion
E) Utmost Good Faith
Correct Answer: B) Indemnity
Rationale: The principle of indemnity aims to put the insured back in
the financial position they were in before the loss, preventing them
from making a profit from the insurance claim.
Question 3
A sudden, fortuitous event that causes a loss, such as a fire or collision, is
,known as a:
A) Hazard
B) Risk
C) Peril
D) Exposure
E) Liability
Correct Answer: C) Peril
Rationale: A peril is the actual cause of a loss, for example, fire,
windstorm, theft, or collision.
Question 4
Which type of hazard arises from an individual's indifference or carelessness,
rather than an intent to cause a loss?
A) Moral Hazard
B) Morale Hazard
C) Physical Hazard
D) Legal Hazard
E) Financial Hazard
Correct Answer: B) Morale Hazard
Rationale: Morale hazard is an increase in the probability of loss due
to an insured's indifference to loss because of the existence of
insurance (e.g., leaving doors unlocked because "I'm insured").
Question 5
For an insurance contract to be valid, an "insurable interest" must exist at
what point in time for a property insurance policy?
A) At the time the policy is purchased.
B) At the time of the loss.
C) At the time the premium is paid.
D) At the time of policy renewal.
E) At all times during the policy period.
Correct Answer: B) At the time of the loss.
,Rationale: In property insurance, an insurable interest must exist at
the time of the loss for the policy to pay out, ensuring the insured
suffers a financial loss from the damaged property.
Question 6
What is the purpose of a "deductible" in an insurance policy?
A) To increase the insurer's liability.
B) To reduce the number of small claims and make insurance more
affordable.
C) To define the policy limits.
D) To cover additional perils not listed.
E) To accelerate the claims process.
Correct Answer: B) To reduce the number of small claims and make
insurance more affordable.
Rationale: Deductibles are the portion of a covered loss that the
insured must pay out-of-pocket before the insurer pays. They
encourage carefulness and reduce administrative costs for small
claims.
Question 7
All of the following are components of a standard insurance policy EXCEPT:
A) Declarations
B) Insuring Agreement
C) Conditions
D) Exclusions
E) Premium payments
Correct Answer: E) Premium payments
Rationale: Premium payments are the consideration paid by the
insured for the policy, but they are not a component within the
policy document itself. The declarations, insuring agreement,
conditions, and exclusions are the core parts of the policy.
, Question 8
Which part of an insurance policy specifies the named insured, policy limits,
policy period, and premium?
A) Insuring Agreement
B) Conditions
C) Exclusions
D) Declarations Page
E) Endorsements
Correct Answer: D) Declarations Page
Rationale: The declarations page is the front part of the policy that
provides individualized information about the insured, the property,
the coverage amounts, and the policy term.
Question 9
The clause in a property insurance policy that gives the insurer the right to
recover payment from a third party responsible for the loss is called:
A) Appraisal
B) Assignment
C) Subrogation
D) Arbitration
E) Severability
Correct Answer: C) Subrogation
Rationale: Subrogation allows the insurer, after paying a claim, to
step into the insured's shoes and pursue recovery from the party
who caused the loss, preventing the insured from recovering twice.
Question 10
What is "Actual Cash Value" (ACV) typically defined as in property insurance?
A) The cost to repair or replace without depreciation.
B) Replacement cost minus depreciation.
C) The market value of the property.
D) The original purchase price.
ACTUAL EXAM COMPLETE 250 QUESTIONS WITH DETAILED
VERIFIED ANSWERS (100% CORRECT ANSWERS) / ALREADY
GRADED A+
Question 1
Which of the following describes a situation where a person faces the
possibility of loss, but no possibility of gain?
A) Speculative Risk
B) Pure Risk
C) Moral Hazard
D) Peril
E) Deductible
Correct Answer: B) Pure Risk
Rationale: Pure risk is a situation where there is only the possibility
of loss or no loss, with no chance of gain, and it is the only type of
risk that is insurable.
Question 2
What is the principle in insurance that states that the insured should be
restored to the same financial position they were in prior to the loss, without
profiting from the loss?
A) Subrogation
B) Indemnity
C) Insurable Interest
D) Adhesion
E) Utmost Good Faith
Correct Answer: B) Indemnity
Rationale: The principle of indemnity aims to put the insured back in
the financial position they were in before the loss, preventing them
from making a profit from the insurance claim.
Question 3
A sudden, fortuitous event that causes a loss, such as a fire or collision, is
,known as a:
A) Hazard
B) Risk
C) Peril
D) Exposure
E) Liability
Correct Answer: C) Peril
Rationale: A peril is the actual cause of a loss, for example, fire,
windstorm, theft, or collision.
Question 4
Which type of hazard arises from an individual's indifference or carelessness,
rather than an intent to cause a loss?
A) Moral Hazard
B) Morale Hazard
C) Physical Hazard
D) Legal Hazard
E) Financial Hazard
Correct Answer: B) Morale Hazard
Rationale: Morale hazard is an increase in the probability of loss due
to an insured's indifference to loss because of the existence of
insurance (e.g., leaving doors unlocked because "I'm insured").
Question 5
For an insurance contract to be valid, an "insurable interest" must exist at
what point in time for a property insurance policy?
A) At the time the policy is purchased.
B) At the time of the loss.
C) At the time the premium is paid.
D) At the time of policy renewal.
E) At all times during the policy period.
Correct Answer: B) At the time of the loss.
,Rationale: In property insurance, an insurable interest must exist at
the time of the loss for the policy to pay out, ensuring the insured
suffers a financial loss from the damaged property.
Question 6
What is the purpose of a "deductible" in an insurance policy?
A) To increase the insurer's liability.
B) To reduce the number of small claims and make insurance more
affordable.
C) To define the policy limits.
D) To cover additional perils not listed.
E) To accelerate the claims process.
Correct Answer: B) To reduce the number of small claims and make
insurance more affordable.
Rationale: Deductibles are the portion of a covered loss that the
insured must pay out-of-pocket before the insurer pays. They
encourage carefulness and reduce administrative costs for small
claims.
Question 7
All of the following are components of a standard insurance policy EXCEPT:
A) Declarations
B) Insuring Agreement
C) Conditions
D) Exclusions
E) Premium payments
Correct Answer: E) Premium payments
Rationale: Premium payments are the consideration paid by the
insured for the policy, but they are not a component within the
policy document itself. The declarations, insuring agreement,
conditions, and exclusions are the core parts of the policy.
, Question 8
Which part of an insurance policy specifies the named insured, policy limits,
policy period, and premium?
A) Insuring Agreement
B) Conditions
C) Exclusions
D) Declarations Page
E) Endorsements
Correct Answer: D) Declarations Page
Rationale: The declarations page is the front part of the policy that
provides individualized information about the insured, the property,
the coverage amounts, and the policy term.
Question 9
The clause in a property insurance policy that gives the insurer the right to
recover payment from a third party responsible for the loss is called:
A) Appraisal
B) Assignment
C) Subrogation
D) Arbitration
E) Severability
Correct Answer: C) Subrogation
Rationale: Subrogation allows the insurer, after paying a claim, to
step into the insured's shoes and pursue recovery from the party
who caused the loss, preventing the insured from recovering twice.
Question 10
What is "Actual Cash Value" (ACV) typically defined as in property insurance?
A) The cost to repair or replace without depreciation.
B) Replacement cost minus depreciation.
C) The market value of the property.
D) The original purchase price.
