25 Free Texas P&C Exam Practice Questions (2026)
How to Use These Practice Questions
These 25 questions are drawn from the same content outline (Pearson VUE #124401) that drives the real Texas Property & Casualty Insurance License Exam. Each question includes the correct answer and a short explanation so you learn why, not just what.
Work through them without looking at the answers first. Keep score. If you miss more than 30%, you need more study time before exam day. If you get 80%+, you are on track to pass.
Tip: The real exam is 150 questions in 2.5 hours — roughly 60 seconds per question. Practice timing yourself: give yourself 25 minutes for these 25 questions.
Practice Questions 1-6: Property Policies & Insurance Terms
Question 1 (Chapter 1)
A Dwelling Fire Policy (DP-1) would be most appropriate for which of the following?
- A) A primary residence in a suburban neighborhood
- B) A rental property owned by an investor
- C) A condominium unit
- D) A mobile home used as a primary residence
Show answer & explanation
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.
Question 2 (Chapter 1)
A homeowner has an HO-3 policy with Coverage A (Dwelling) at $250,000. Coverage B (Other Structures) is typically set at what percentage of Coverage A?
- A) 5% of Coverage A
- B) 10% of Coverage A
- C) 20% of Coverage A
- D) 50% of Coverage A
Show answer & explanation
Answer: B
Under standard HO-3 policies, Coverage B (Other Structures) is automatically set at 10% of the Coverage A (Dwelling) limit. For a home insured at $250,000, Coverage B would be $25,000. Other Structures covers detached garages, fences, sheds, and other structures not attached to the dwelling. Similarly, Coverage C (Personal Property) is typically 50% of Coverage A, and Coverage D (Loss of Use) is typically 20% of Coverage A. These default percentages can usually be increased by endorsement for an additional premium.
Question 3 (Chapter 1)
A commercial property owner has a vacancy provision in her policy. The building has been vacant for 75 days when a water pipe bursts, causing $20,000 in damage. How does the vacancy provision affect the claim?
- A) The claim is paid in full — water damage is exempt from the vacancy provision
- B) The claim is denied entirely — water damage is one of the causes of loss excluded after 60 days of vacancy
- C) The claim payment is reduced by 15% — the insurer pays $17,000
- D) The claim payment is reduced by 50% after 60 days of vacancy
Show answer & explanation
Answer: B
Under the standard commercial property vacancy provision, if a building has been vacant for more than 60 consecutive days, the insurer will not pay for losses caused by vandalism, sprinkler leakage, building glass breakage, water damage, theft, or attempted theft. Since the building has been vacant for 75 days and the loss is water damage, the claim is denied entirely. For other covered causes of loss (like fire), the payment would be reduced by 15% rather than denied. The vacancy provision reflects the increased risk that unoccupied buildings face.
Question 4 (Chapter 2)
A business owner sells his commercial building but forgets to cancel the property insurance policy. Two months later, the building is damaged by fire. Can the former owner collect on the claim?
- A) Yes, because the policy is still in force
- B) Yes, but only for the amount of the deductible
- C) No, because the former owner no longer has an insurable interest in the property
- D) No, because the policy automatically transferred to the new owner
Show answer & explanation
Answer: C
Insurable interest requires the insured to suffer a financial loss if the insured property is damaged. Once the building was sold, the former owner no longer had a financial stake in the property and cannot collect. Property insurance policies do not automatically transfer to new owners.
Question 5 (Chapter 2)
A property owner is listed as an additional insured on a contractor's general liability policy. Compared to being listed as a loss payee, the additional insured designation provides:
- A) Coverage for direct property damage to the additional insured's building only
- B) Liability coverage for the additional insured for claims arising from the named insured's operations
- C) The right to receive all claim payments directly
- D) The ability to cancel the contractor's policy at any time
Show answer & explanation
Answer: B
An additional insured is a party added to a liability policy by endorsement who receives liability coverage for claims arising out of the named insured's operations. For example, a property owner added as an additional insured on a contractor's CGL policy would be covered if someone sues the property owner for injuries caused by the contractor's work. This is different from a loss payee, who has a financial interest in property and receives property insurance claim payments. Additional insured status provides liability protection; loss payee status provides property claim payment rights.
Question 6 (Chapter 2)
A property owner hires a painting contractor and requires the painter to provide proof of general liability insurance before starting work. The painter's insurer issues a document confirming $1,000,000 in CGL coverage. This document does NOT give the property owner any coverage rights. What is this document?
- A) A binder
- B) An additional insured endorsement
- C) A certificate of insurance
- D) A loss payee clause
Show answer & explanation
Answer: C
A Certificate of Insurance (COI) is evidence that a policy exists with specified coverages and limits. It is issued by the insurer or agent to a third party as proof of insurance but does NOT confer coverage rights on the certificate holder. The property owner cannot file a claim under the painter's policy based on the COI alone. If the property owner wants actual coverage under the painter's policy, they must be added as an Additional Insured via endorsement. A COI is informational only — it merely confirms coverage exists.
Practice Questions 7-12: Policy Provisions & Casualty Policies
Question 7 (Chapter 3)
Which of the following is a characteristic of an insurance contract that means only the insurer drafts the policy language, and any ambiguity is interpreted in favor of the insured?
- A) Aleatory
- B) Unilateral
- C) Contract of adhesion
- D) Conditional
Show answer & explanation
Answer: C
A contract of adhesion is drafted entirely by one party (the insurer) and offered on a take-it-or-leave-it basis. Because the insured has no ability to negotiate the terms, courts apply the doctrine of contra proferentem — ambiguities are construed against the drafter (insurer) and in favor of the insured.
Question 8 (Chapter 3)
A policyholder's insurance policy contains a provision stating: 'The application, a copy of which is attached, is part of this policy.' The application contains statements made by the insured. If the insurer later discovers a material misstatement on the application, what is the significance of this provision?
- A) It has no significance because applications are never part of the policy
- B) It means the entire contract clause incorporates the application into the policy, allowing the insurer to reference the insured's statements when evaluating coverage disputes or potential misrepresentation
- C) It means the application automatically overrides any policy language
- D) It means the insured can modify the policy by changing the application after issuance
Show answer & explanation
Answer: B
When the entire contract clause includes the application as part of the policy, the insured's statements on the application become part of the contract. This is significant because it allows the insurer to reference those statements when investigating potential misrepresentation. However, it also protects the insured by ensuring that only representations in the attached application — not other external documents or conversations — can be used against them.
Question 9 (Chapter 3)
A Texas homeowner's policy expires on June 30. The insurer mails a nonrenewal notice on June 20, giving only 10 days' notice. Under Texas law requiring 30 days' advance notice of nonrenewal, what is the effect?
- A) The nonrenewal is valid because any written notice is sufficient
- B) The nonrenewal is defective — because the insurer failed to provide the required 30 days' notice, the policy may continue in force until proper notice is given
- C) The insured must accept the nonrenewal regardless of notice timing
- D) The Texas Department of Insurance must approve all nonrenewals before they take effect
Show answer & explanation
Answer: B
Texas law requires at least 30 days' advance written notice of nonrenewal. If the insurer fails to provide timely notice, the nonrenewal is defective and the policy may continue in force until proper notice is provided. This protects consumers from losing coverage without adequate time to find replacement insurance.
Question 10 (Chapter 4)
In Texas, an employer chooses not to carry Workers' Compensation insurance (a non-subscriber). What is the primary legal consequence for the employer if an employee is injured on the job?
- A) The employer faces no liability because workers' comp is optional in Texas
- B) The employer loses three common-law defenses: contributory negligence, assumption of risk, and fellow-servant rule
- C) The employer must pay a fine to the Texas Department of Insurance
- D) The employer is automatically liable for triple damages
Show answer & explanation
Answer: B
Texas is unique in that workers' compensation is voluntary. However, employers who opt out (non-subscribers) lose three important common-law defenses: contributory negligence, assumption of risk, and the fellow-servant doctrine. This makes it much easier for injured employees to sue and recover damages from non-subscribing employers.
Question 11 (Chapter 4)
An employer operates in a monopolistic state fund jurisdiction but also has operations in Texas. The employer's standard Workers' Compensation policy does not cover the monopolistic state. What coverage can the employer add to its WC policy to fill the gap for employer liability exposure in that state?
- A) An umbrella liability policy
- B) Stop-gap coverage, which provides Coverage B (Employers Liability) in monopolistic state fund states where the state fund provides only Coverage A
- C) A CGL endorsement for employee injuries
- D) No additional coverage is available; the employer must self-insure
Show answer & explanation
Answer: B
In monopolistic state fund states (like Ohio, North Dakota, Washington, and Wyoming), the state fund provides only Coverage A (statutory workers' compensation benefits). It does not provide Coverage B (Employers Liability). Stop-gap coverage is an endorsement added to the employer's Workers' Compensation policy or CGL policy to provide Coverage B (Employers Liability) protection in those monopolistic states, filling the gap left by the state fund.
Question 12 (Chapter 4)
A marketing executive uses her personal car to drive to client meetings for her employer. The employer does not own the car but wants protection if she causes an accident during a business trip. Which commercial auto coverage symbol provides this protection?
- A) Symbol 2 — Owned autos only
- B) Symbol 8 — Hired autos
- C) Symbol 9 — Non-owned autos, which covers the employer's liability when employees use their personal vehicles for business purposes
- D) Symbol 7 — Specifically described autos
Show answer & explanation
Answer: C
Non-owned auto coverage (symbol 9) protects the employer when employees use their personal vehicles for business purposes. The employer does not own or lease the vehicle — the employee does. This is crucial for businesses whose employees drive personal cars for sales calls, client visits, or other work-related travel.
Want Every Exam Topic Covered?
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Practice Questions 13-18: Advanced Terms & Provisions
Question 13 (Chapter 5)
A restaurant patron suffers food poisoning and incurs $50,000 in medical bills and $10,000 in lost wages. She also experiences significant pain and emotional distress. Which category of damages would cover her pain and suffering?
- A) Special damages (economic damages)
- B) General damages (non-economic damages)
- C) Punitive damages
- D) Nominal damages
Show answer & explanation
Answer: B
General damages (non-economic damages) compensate for intangible losses such as pain, suffering, emotional distress, and loss of consortium. Special damages (economic damages) cover quantifiable financial losses like medical bills and lost wages. Punitive damages are awarded to punish egregious conduct, not to compensate the injured party.
Question 14 (Chapter 5)
A residential property in a Special Flood Hazard Area has filed three or more flood insurance claims of $5,000 or more within a 10-year period. Under the NFIP, this property is classified as a:
- A) Preferred risk property
- B) Grandfathered property
- C) Repetitive loss property
- D) Severe risk property
Show answer & explanation
Answer: C
A repetitive loss property under the NFIP is a structure that has had two or more flood insurance claims of more than $1,000 each within any 10-year period. Properties with even worse loss histories (four or more claims, or two claims exceeding the building's value) may be classified as severe repetitive loss properties. These properties are targeted for mitigation efforts such as elevation, relocation, or buyout to reduce future flood losses and NFIP payouts.
Question 15 (Chapter 5)
A PPO (Preferred Provider Organization) health plan offers members a network of healthcare providers. If a member sees an out-of-network provider, the plan still provides coverage but at a reduced benefit level. Compared to an HMO, a key advantage of a PPO is:
- A) Lower premiums in all cases
- B) Greater flexibility to see out-of-network providers with partial coverage
- C) No cost-sharing requirements
- D) No need for health insurance at all
Show answer & explanation
Answer: B
A PPO provides more flexibility than an HMO by allowing members to see out-of-network providers with reduced benefits (higher copays or coinsurance). An HMO generally requires members to stay within the network and obtain referrals from a primary care physician. PPOs typically do not require referrals to see specialists. PPO premiums are generally higher than HMO premiums due to this increased flexibility.
Question 16 (Chapter 6)
A business owner has a Business Income (Business Interruption) coverage form with a 72-hour waiting period. A covered fire shuts down operations for 30 days. For how many days will business income be paid?
- A) 30 days
- B) 27 days
- C) 28 days
- D) 33 days
Show answer & explanation
Answer: B
Business Income coverage with a 72-hour (3-day) waiting period means no benefits are paid for the first 72 hours after the loss. Benefits begin on day 4. For a 30-day shutdown, the insurer pays for 27 days (30 minus the 3-day waiting period).
Question 17 (Chapter 6)
Two insurers cover the same commercial building. After a $300,000 covered loss, Policy A (limit $600,000) contains a pro rata other insurance clause, and Policy B (limit $400,000) also contains a pro rata other insurance clause. How much does each insurer pay?
- A) Policy A pays $180,000; Policy B pays $120,000
- B) Each pays $150,000
- C) Policy A pays $200,000; Policy B pays $100,000
- D) Policy A pays $300,000; Policy B pays nothing
Show answer & explanation
Answer: A
When both policies contain the same type of other insurance clause (pro rata), each insurer pays in proportion to its policy limit relative to the total available coverage. Policy A's share: $600,000 / ($600,000 + $400,000) = 60%. Policy A pays 60% of $300,000 = $180,000. Policy B's share: $400,000 / $1,000,000 = 40%. Policy B pays 40% of $300,000 = $120,000. Total paid: $300,000.
Question 18 (Chapter 6)
An insured is injured by a drunk driver and incurs $100,000 in medical expenses. The insured's health insurer pays $80,000 (after the insured's $20,000 deductible/copay). The insured settles with the drunk driver's liability insurer for $100,000. The insured's total damages including pain and suffering are $250,000. Under the made-whole doctrine, how is the settlement allocated?
- A) The health insurer takes $80,000 immediately; the insured keeps $20,000
- B) The insured keeps the entire $100,000 because they have not been made whole for all damages including pain and suffering
- C) The settlement is split 50/50 between the insured and the health insurer
- D) The health insurer receives nothing because it already paid the claim
Show answer & explanation
Answer: B
Under the made-whole doctrine, the insured must be fully compensated for ALL damages — including non-economic damages like pain and suffering — before the health insurer can exercise subrogation. Since the insured's total damages of $250,000 exceed the $100,000 settlement, the insured has not been made whole, and the health insurer cannot recover any portion of the settlement.
Practice Questions 19-24: Texas-Specific Statutes
Question 19 (Chapter 7)
Under Texas continuing education requirements, a licensed P&C insurance agent must complete how many hours of continuing education per license renewal period (every two years)?
- A) 20 hours, including 2 hours of ethics
- B) 30 hours, including 2 hours of ethics
- C) 24 hours, including 3 hours of ethics
- D) 15 hours, including 1 hour of ethics
Show answer & explanation
Answer: C
Texas requires licensed insurance agents to complete 24 hours of continuing education every two-year renewal period, which must include at least 3 hours of ethics training. Failure to complete CE requirements can result in license suspension or non-renewal.
Question 20 (Chapter 7)
Three competing insurance companies in Texas secretly agree to refuse to sell commercial property coverage to a particular class of business unless all three approve. This practice is an example of:
- A) Unfair discrimination
- B) Rebating
- C) Boycott, coercion, and intimidation, which are prohibited unfair trade practices
- D) Legitimate underwriting cooperation
Show answer & explanation
Answer: C
A boycott occurs when two or more insurers agree to refuse to do business with a particular entity to force a desired outcome. Under the Texas Insurance Code and the McCarran-Ferguson Act, boycott, coercion, and intimidation are specifically prohibited unfair trade practices. Unlike cooperative rating activities (which are permitted), agreements among competitors to collectively refuse coverage constitute illegal anti-competitive behavior subject to both state and federal penalties.
Question 21 (Chapter 7)
A Texas auto insurer refuses to renew a policyholder's auto insurance solely because the policyholder filed a single not-at-fault accident claim during the prior policy period. Under Texas insurance law, this action may constitute:
- A) A legitimate underwriting decision with no regulatory implications
- B) An acceptable business practice since insurers have unlimited discretion
- C) Unfair discrimination if the non-renewal is not based on legitimate actuarial or risk-based factors
- D) A required action to maintain loss ratios
Show answer & explanation
Answer: C
Under Texas insurance law, insurers may not unfairly discriminate against policyholders. Non-renewal decisions must be based on legitimate underwriting and risk factors. Refusing to renew a policy solely because a policyholder filed a single not-at-fault claim may constitute unfair discrimination if it is not supported by actuarially sound reasoning. Texas law protects consumers from arbitrary adverse underwriting actions.
Question 22 (Chapter 8)
A property in a Texas coastal county must meet certain building code requirements to be eligible for TWIA coverage. What is this requirement commonly known as?
- A) Windstorm Inspection Program (WPI-8 Certificate)
- B) NFIP Elevation Certificate
- C) ISO Fire Rating Certificate
- D) Texas Building Commission Permit
Show answer & explanation
Answer: A
To be eligible for TWIA coverage, properties in designated catastrophe areas must comply with the Texas Department of Insurance Windstorm Inspection Program and obtain a WPI-8 certificate (Certificate of Compliance). This certificate verifies that the structure meets the windstorm building code requirements established by TDI.
Question 23 (Chapter 8)
The TAIPA application process requires a Texas driver seeking assigned risk coverage to complete specific steps. Which of the following accurately describes the TAIPA application process?
- A) The applicant applies directly to TAIPA online, and TAIPA issues the policy itself
- B) The applicant applies through a licensed agent, and TAIPA assigns the risk to a participating insurer that issues the policy
- C) The applicant must apply to at least 10 insurers before TAIPA will accept the application
- D) TAIPA coverage is only available through surplus lines brokers
Show answer & explanation
Answer: B
Under the TAIPA process, the applicant works with a licensed insurance agent who submits the application to TAIPA. TAIPA then assigns the risk to a participating insurer (all auto insurers in Texas are required to participate) on a rotational basis. The assigned insurer issues and services the policy. The agent assists the applicant throughout the process but does not select which insurer receives the assignment.
Question 24 (Chapter 8)
A Texas workers' compensation claimant reaches maximum medical improvement (MMI) and receives a 12% impairment rating. Impairment Income Benefits (IIBs) are calculated at what rate, and for how many weeks?
- A) 50% of average weekly wage for 24 weeks
- B) 70% of average weekly wage for 36 weeks (12% impairment rating x 3 weeks per percentage point)
- C) 100% of average weekly wage for 12 weeks
- D) 80% of average weekly wage for 48 weeks
Show answer & explanation
Answer: B
Under Texas Workers' Compensation, IIBs are paid at 70% of the employee's average weekly wage after reaching MMI. The duration is calculated by multiplying the impairment rating by 3 weeks. A 12% rating yields 36 weeks of IIBs (12 x 3 = 36). This benefit compensates the worker for permanent impairment resulting from the work-related injury.
Bonus: Exam-Day Strategy
Question 25 (Chapter 9)
During the Texas P&C exam, you encounter a question you cannot answer with 30 seconds remaining. What should you do?
- A) Leave it blank to avoid getting it wrong
- B) Select your best guess — there is no penalty for guessing
- C) Go back and change a previous answer instead
- D) Request additional time from the proctor
Show answer & explanation
Answer: B
There is no penalty for guessing on the Texas P&C exam. A blank answer is automatically wrong, but a guess gives you a 25% chance. Never leave a question unanswered.
Your Next Step
How did you score?
- 20+ correct (80%+): You are ready. Schedule your exam and do light review in the days before.
- 15-19 correct (60-79%): You need targeted practice. Focus on the chapters where you missed questions.
- Under 15 correct: You need broader study. Start with the Complete Texas P&C Study Guide and work through audio lessons before retesting.
Ready to drill deeper? Start with Chapter 1 free and listen while you drive.
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