18 Free Texas Homeowners Insurance Practice Questions (2026)

Answer: C

HO-4 is specifically designed for tenants/renters. It covers personal property and liability but does not cover the dwelling structure, which is the landlord's responsibility.

Answer: B

HO-3 (Special Form) covers the dwelling on an open-peril (all-risk) basis, meaning everything is covered unless specifically excluded. HO-2 (Broad Form) covers only named perils listed in the policy.

Answer: C

HO-5 (Comprehensive Form) is the broadest homeowners policy available. It covers both the dwelling and personal property on an open-peril (all-risk) basis. HO-3 only covers the dwelling on open-peril; personal property under HO-3 is covered on a named-peril basis. HO-5 is typically used for higher-value homes where broader personal property protection is desired.

Answer: C

HO-6 is specifically designed for condominium unit owners. It covers the unit owner's personal property, interior walls, fixtures, and improvements (sometimes called 'walls-in' coverage), as well as personal liability. The condo association's master policy typically covers the building's exterior structure and common areas, so HO-6 fills the gap for the individual unit owner.

Answer: C

HO-8 (Modified Coverage Form) is designed for older homes where the replacement cost far exceeds the market value. Instead of paying full replacement cost, HO-8 typically settles claims based on repair using common construction methods and materials, rather than requiring exact reproduction of original craftsmanship. This keeps premiums affordable for owners of historic or older homes.

Answer: B

HO-3 (Special Form) is unique in that it provides split coverage: the dwelling and other structures (Coverages A and B) are covered on an open-peril basis, while personal property (Coverage C) is covered on a named-peril basis (the 16 named perils). HO-5 covers BOTH dwelling and personal property on an open-peril basis. HO-2 covers everything on a named-peril basis. Understanding this split coverage on HO-3 is critical for the exam.

Answer: C

Actual Cash Value (ACV) is calculated as the replacement cost of the item minus depreciation. The current replacement cost is $1,800 and the depreciation is $600, so ACV = $1,800 - $600 = $1,200. Under ACV coverage, the insurer pays the depreciated value, not the original purchase price or the full replacement cost.

Answer: B

The coinsurance requirement is 80% of $250,000 = $200,000. The insured only carries $160,000. The coinsurance penalty formula is: (Amount carried / Amount required) x Loss = Payment. So ($160,000 / $200,000) x $50,000 = 0.80 x $50,000 = $40,000. Because the homeowner is underinsured relative to the coinsurance requirement, they bear a proportional share of the loss.

Answer: C

A percentage deductible is calculated as a percentage of the insured value of the dwelling, not the loss amount. A 2% hurricane deductible on a $300,000 home means the homeowner's deductible is $300,000 x 2% = $6,000. The insurer would pay $25,000 - $6,000 = $19,000. Percentage deductibles are common for hurricane and windstorm coverage in coastal states like Texas, and they can result in significantly higher out-of-pocket costs than flat-dollar deductibles.

Answer: B

Standard HO-3 policies exclude water damage caused by backup of sewers, drains, or sumps. This is a common exclusion that catches many homeowners off guard. Coverage for sewer/drain backup can typically be added by purchasing a specific endorsement. Note that personal property under HO-3 is covered on a named-peril basis (not open-peril), and sewer backup is not among the named perils.

Answer: B

Under HO-3, accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or household appliance is a covered cause of loss. This is different from flood damage (surface water from outside) or sewer backup, both of which are excluded. The key distinction is that the water originates from an internal system failure, not from an external source. The policy covers both the resulting water damage and the cost to tear out and replace the part of the building needed to repair the system.

Answer: B

Earth movement — including earthquakes, landslides, mudflows, sinkholes, and earth sinking/shifting — is a standard exclusion in HO-3 policies, even though the dwelling is covered on an open-peril basis. Open peril means all causes of loss are covered UNLESS specifically excluded, and earth movement is one of the most important exclusions. Earthquake coverage must be purchased as a separate endorsement or standalone policy.

Answer: B

Dwelling Fire Policies (DP-1, DP-2, DP-3) are designed for properties that don't qualify for or don't need standard homeowners policies, such as rental/investment properties or owner-occupied dwellings that don't meet HO eligibility. They primarily cover the dwelling structure; personal property coverage for the owner may be available but is limited.

Answer: B

DP-2 (Broad Form) provides named-peril coverage that is comparable to HO-2 but is designed for dwellings that do not qualify for homeowners policies, such as rental properties. DP-2 covers more perils than DP-1 (Basic Form) but is not as broad as DP-3, which covers the dwelling on an open-peril basis. DP-2 offers a good middle-ground for investors who want more protection than the basic fire and lightning coverage of DP-1.

Answer: B

DP-1 (Basic Form) is the most limited dwelling policy, covering only basic named perils such as fire and lightning. DP-3 (Special Form) is the broadest dwelling policy, covering the dwelling on an open-peril (all-risk) basis, meaning all causes of loss are covered unless specifically excluded. Neither DP-1 nor DP-3 includes liability coverage as a standard feature; liability requires a separate endorsement or policy.

Answer: B

NFIP flood insurance policies generally have a 30-day waiting period from the date of purchase before coverage becomes effective. Since the flood occurred only 20 days after purchase, the policy would not yet be in effect and the loss would not be covered. This waiting period prevents people from buying flood insurance only when a storm is imminent. Exceptions to the 30-day waiting period include when flood insurance is required in connection with a new mortgage loan.

Answer: B

Under the NFIP, maximum coverage for a residential building is $250,000, and maximum coverage for contents is $100,000. If a homeowner needs higher limits, they must purchase excess flood insurance from a private insurer. These limits apply per building for residential properties.

Answer: B

While NFIP flood policies normally have a 30-day waiting period, there are exceptions. When flood insurance is purchased in connection with the making, increasing, extending, or renewing of a mortgage loan, coverage takes effect immediately at loan closing — there is no waiting period. Other exceptions include when a flood map revision newly places a property in a high-risk zone, in which case a 1-day waiting period applies. These exceptions are frequently tested on the exam.