TEXAS PROPERTY AND CASUALTY INSURANCE
COMPREHENSIVE EXAM 2026 QUESTIONS
AND SOLUTIONS GRADED A+
◉ The purpose of insurance is to: Answer: transfer risk
◉ Which hazard can be described as a careless attitude or general
indifference on the part of the insured toward the occurrence of loss?
Answer: morale
◉ Which risk is insurable? Answer: pure
◉ With regard to insurance, risk can be defined as: Answer: uncertainty
regarding loss
◉ Treating risk by purchasing insurance is an example of what type of
risk management? Answer: transfer
◉ Robert and Carolyn live in a busy city and decide that not owning a
car is the solution to not experience having a car stolen. What method
describes this philosophy? Answer: avoidance
,◉ Dishonesty on the part of an insured is an example of what? Answer:
a moral hazard
◉ What is an example of reduction as a method of handling risk?
Answer: Installing a burglar alarm
◉ Driving too fast and not wearing a seat belt are examples of? Answer:
morale hazard
◉ The risk that involves the chance of both loss and gain is? Answer:
speculative risk
◉ Self-insurance is an example of what kind of risk treatment? Answer:
Retention
◉ If John's father transfers ownership of a house to John, can John buy
insurance? Answer: Yes because he has an insurable interest.
◉ Fire would be an example of a what? Answer: peril
◉ What is the actual cause of a loss? Answer: peril
◉ What kind of risk is the stock market? Answer: speculative risk
,◉ A ____ is a condition that increases the chance of loss. Answer:
hazard
◉ Faulty wiring causes a fire that destroys a building. The faulty wiring
is considered to be a(n): Answer: hazard
◉ A chance, possibility, or uncertainty of loss is known as? Answer: risk
◉ Examples of perils are_____? Answer: fire, wind and lightning
◉ Indemnity insurance will _____? Answer: restores insured to pre-loss
condition
◉ The types of hazards are_____? Answer: moral, morale, and physical
◉ ________ is when people with a greater than average exposure to loss
to purchase insurance. Answer: Adverse selection
◉ Methods of handling risk are avoidance, reduction, retention, transfer
and _____. Answer: Sharing (ARRTS)
, ◉ Elements of insurable risk are calculable, affordable, non-
catastrophic, homogenous, accidental and _____. Answer: Measurable
(CANHAM)
◉ Myron, who is 16, signs a contract to lease a car. This would probably
not be considered a valid contract under the law because _____. Answer:
He is not competent at 16.
◉ Ben bought an automobile four years ago for $15,000. Today it is
worth $6,000. According to the principle of indemnity, how much should
Ben receive if the car is totally demolished? Answer: $6,000
◉ Harry Arne and his cousin each own 50% of a $160,000 duplex.
Suppose Harry purchases $160,000 of insurance on the home. If it burns
to the ground, how much would Harry collect? Answer: $80,000
◉ Under a unilateral contract, which parties are legally bound to
perform under the contract? Answer: Insurer only
◉ Which part of an insurance policy describes the responsibilities and
obligations of both the insurance company and the insured under the
policy? Answer: Conditions
◉ The insuring agreement section of a policy describes the ____ you are
insured against. Answer: perils
COMPREHENSIVE EXAM 2026 QUESTIONS
AND SOLUTIONS GRADED A+
◉ The purpose of insurance is to: Answer: transfer risk
◉ Which hazard can be described as a careless attitude or general
indifference on the part of the insured toward the occurrence of loss?
Answer: morale
◉ Which risk is insurable? Answer: pure
◉ With regard to insurance, risk can be defined as: Answer: uncertainty
regarding loss
◉ Treating risk by purchasing insurance is an example of what type of
risk management? Answer: transfer
◉ Robert and Carolyn live in a busy city and decide that not owning a
car is the solution to not experience having a car stolen. What method
describes this philosophy? Answer: avoidance
,◉ Dishonesty on the part of an insured is an example of what? Answer:
a moral hazard
◉ What is an example of reduction as a method of handling risk?
Answer: Installing a burglar alarm
◉ Driving too fast and not wearing a seat belt are examples of? Answer:
morale hazard
◉ The risk that involves the chance of both loss and gain is? Answer:
speculative risk
◉ Self-insurance is an example of what kind of risk treatment? Answer:
Retention
◉ If John's father transfers ownership of a house to John, can John buy
insurance? Answer: Yes because he has an insurable interest.
◉ Fire would be an example of a what? Answer: peril
◉ What is the actual cause of a loss? Answer: peril
◉ What kind of risk is the stock market? Answer: speculative risk
,◉ A ____ is a condition that increases the chance of loss. Answer:
hazard
◉ Faulty wiring causes a fire that destroys a building. The faulty wiring
is considered to be a(n): Answer: hazard
◉ A chance, possibility, or uncertainty of loss is known as? Answer: risk
◉ Examples of perils are_____? Answer: fire, wind and lightning
◉ Indemnity insurance will _____? Answer: restores insured to pre-loss
condition
◉ The types of hazards are_____? Answer: moral, morale, and physical
◉ ________ is when people with a greater than average exposure to loss
to purchase insurance. Answer: Adverse selection
◉ Methods of handling risk are avoidance, reduction, retention, transfer
and _____. Answer: Sharing (ARRTS)
, ◉ Elements of insurable risk are calculable, affordable, non-
catastrophic, homogenous, accidental and _____. Answer: Measurable
(CANHAM)
◉ Myron, who is 16, signs a contract to lease a car. This would probably
not be considered a valid contract under the law because _____. Answer:
He is not competent at 16.
◉ Ben bought an automobile four years ago for $15,000. Today it is
worth $6,000. According to the principle of indemnity, how much should
Ben receive if the car is totally demolished? Answer: $6,000
◉ Harry Arne and his cousin each own 50% of a $160,000 duplex.
Suppose Harry purchases $160,000 of insurance on the home. If it burns
to the ground, how much would Harry collect? Answer: $80,000
◉ Under a unilateral contract, which parties are legally bound to
perform under the contract? Answer: Insurer only
◉ Which part of an insurance policy describes the responsibilities and
obligations of both the insurance company and the insured under the
policy? Answer: Conditions
◉ The insuring agreement section of a policy describes the ____ you are
insured against. Answer: perils
