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📘 FREE COMPLETE EXAM REVIEWER

 

Below is a complete, structured General Lines Property & Casualty (P&C) Texas exam reviewer designed to help you study, retain, and pass the exam with confidence. This aligns with the Texas Department of Insurance (TDI) exam outline and what candidates are actually tested on.

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TEXAS GENERAL LINES PROPERTY & CASUALTY (P&C)
📘 COMPLETE EXAM REVIEWER

​

 

1️⃣ INSURANCE BASICS (FOUNDATION)
Risk & Insurance Concepts

  • Risk: Uncertainty of loss

  • Peril: Cause of loss (fire, wind, theft)

  • Hazard: Increases the chance of loss

    • Physical

    • Moral

    • Morale

Risk Management Methods

  • Avoidance

  • Retention

  • Reduction

  • Transfer (insurance)

Law of Large Numbers

  • Predicts loss more accurately with larger groups

Insurable Interest

  • Must exist at time of loss (P&C)

2️⃣ POLICY STRUCTURE & CONTRACT LAW
Insurance Policy Parts

  • Declarations

  • Insuring Agreement

  • Conditions

  • Exclusions

  • Endorsements

Contract Characteristics

  • Adhesion

  • Aleatory

  • Utmost Good Faith

  • Unilateral

  • Personal Contract

  • Conditional

Legal Concepts

  • Indemnity – restore to the financial position before the loss

  • Subrogation – insurer seeks recovery

  • Coinsurance – penalty for underinsurance

  • Proximate Cause – dominant cause of loss

3️⃣ PROPERTY INSURANCE (MAJOR EXAM WEIGHT)
Types of Property Coverage

  • Dwelling

  • Homeowners

  • Commercial Property

  • Inland Marine

  • Ocean Marine

  • Builders Risk

HOMEOWNERS POLICIES
HO Forms

Policy Who It Covers

HO-2Named perils

HO-3Open perils (dwelling)

HO-4Renters

HO-5Open perils (dwelling + contents)

HO-6Condo

HO-8Older homes

Section I Coverages

  • A – Dwelling

  • B – Other Structures

  • C – Personal Property

  • D – Loss of Use

Common Exclusions

  • Flood

  • Earthquake

  • Wear & tear

  • Intentional loss

  • War

  • Nuclear hazard

COMMERCIAL PROPERTY

  • Causes of Loss: Basic / Broad / Special

  • Valuation:

    • ACV

    • Replacement Cost

    • Functional Replacement Cost

4️⃣ LIABILITY INSURANCE (VERY IMPORTANT)
Liability Principles

  • Negligence

  • Duty

  • Breach

  • Causation

  • Damages

Types of Liability

  • Bodily Injury

  • Property Damage

  • Personal & Advertising Injury

PERSONAL LIABILITY

  • Homeowners Section II

  • Personal Umbrella (excess liability)

COMMERCIAL GENERAL LIABILITY (CGL)

Coverage Parts

  • Coverage A – BI & PD

  • Coverage B – Personal & Advertising Injury

  • Coverage C – Medical Payments

Key Exclusions

  • Workers’ Comp

  • Pollution

  • Professional Liability

  • Expected/Intentional Injury

  • Liquor Liability (unless endorsed)

5️⃣ AUTO INSURANCE (HEAVILY TESTED)
Personal Auto Policy (PAP)
Coverages

  • Liability (BI / PD)

  • Medical Payments

  • Uninsured / Underinsured Motorist

  • Collision

  • Other Than Collision (Comprehensive)

Texas Minimum Limits

  • 30/60/25

    • $30,000 BI per person

    • $60,000 BI per accident

    • $25,000 PD

Commercial Auto

  • Business Auto Coverage Form

  • Garage Policy

  • Motor Carrier Coverage

6️⃣ WORKERS’ COMPENSATION

Benefits

  • Medical

  • Income

  • Death

  • Rehabilitation

Employer Liability

  • Part Two of the policy

Texas Note

⚠️ Texas allows non-subscriber employers, but coverage is strongly recommended.

7️⃣ INLAND & OCEAN MARINE
Inland Marine

  • Tools & Equipment

  • Contractors Equipment

  • Personal Articles Floater

  • Accounts Receivable

Ocean Marine

  • Cargo

  • Hull

  • Freight

  • Protection & Indemnity (P&I)

8️⃣ BONDS & SURETY

Parties

  • Principal

  • Obligee

  • Surety

Types

  • Contract Bonds

  • License & Permit Bonds

  • Court Bonds

  • Fidelity Bonds

9️⃣ TEXAS INSURANCE LAW & REGULATIONS (CRITICAL)
Texas Department of Insurance (TDI)

  • Regulates insurers & agents

  • Enforces the Texas Insurance Code

Agent Authority

  • Soliciting

  • Binding (if authorized)

  • Fiduciary responsibility

Unfair Trade Practices

  • Misrepresentation

  • Twisting

  • Rebating (illegal in TX)

  • False advertising

  • Coercion

Licensing & Compliance

  • License renewal: every 2 years

  • Continuing Education (CE)

  • Appointment by insurer

  • Fiduciary duty for premiums

🔟 CLAIMS & LOSS HANDLING

Duties After Loss

  • Prompt notice

  • Protect property

  • Cooperate with the insurer

  • Proof of loss

Claim Settlement

  • Actual Cash Value vs Replacement Cost

  • Appraisal process

  • Arbitration vs Litigation

🧠 EXAM STRATEGY TIPS

✅ Expect scenario-based questions
✅ Watch for “EXCEPT” and “MOST LIKELY” wording
✅ Texas law questions are heavily tested
✅ Eliminate obviously wrong answers first
✅ Know exclusions — they are tested more than coverages

​

FULL PRACTICE EXAMS with ANSWERS modeled after the Texas General Lines Property & Casualty (P&C) licensing exam.
Questions are scenario-based, wording is exam-style, and answers include brief explanations so you learn why, not just what.

📝 TEXAS GENERAL LINES P&C

PRACTICE EXAM #1 (50 Questions)

SECTION A — GENERAL INSURANCE CONCEPTS

1. Which of the following is a morale hazard?

A. A faulty electrical system
B. Lying on an insurance application
C. Leaving doors unlocked due to carelessness
D. Flooding from heavy rain

✅ Answer: C
Explanation: Morale hazard = carelessness because insurance exists.

2. Insurance is best defined as:

A. A savings plan
B. A gambling contract
C. A method of risk transfer
D. A loan agreement

✅ Answer: C

3. Which contract characteristic means only one party is legally bound?

A. Aleatory
B. Adhesion
C. Unilateral
D. Conditional

✅ Answer: C

4. The principle that restores the insured to their financial position before loss is:

A. Subrogation
B. Contribution
C. Indemnity
D. Coinsurance

✅ Answer: C

5. In P&C insurance, insurable interest must exist:

A. At application only
B. At policy issue only
C. At time of loss
D. At renewal

✅ Answer: C

SECTION B — PROPERTY INSURANCE

6. Which homeowners policy provides open peril coverage for both dwelling and contents?

A. HO-2
B. HO-3
C. HO-5
D. HO-8

✅ Answer: C

7. Flood damage is excluded under:

A. All homeowners policies
B. HO-5 only
C. Commercial policies only
D. Renters policies only

✅ Answer: A

8. Coverage B in a homeowners policy applies to:

A. Personal property
B. Additional living expenses
C. Other structures
D. Medical payments

✅ Answer: C

9. Replacement Cost coverage pays:

A. Depreciated value
B. Market value
C. Cost to repair/replace without depreciation
D. Original purchase price

✅ Answer: C

10. Coinsurance penalties apply when:

A. Deductibles are unpaid
B. Property is overinsured
C. Property is underinsured
D. Claims exceed limits

✅ Answer: C

SECTION C — LIABILITY INSURANCE

11. All of the following are required to prove negligence EXCEPT:

A. Duty
B. Breach
C. Intent
D. Damages

✅ Answer: C

12. Coverage B in a CGL covers:

A. Medical payments
B. BI & PD
C. Personal & advertising injury
D. Workers’ compensation

✅ Answer: C

13. Which is excluded under a CGL?

A. Fire damage to rented premises
B. Medical payments
C. Workers’ compensation
D. Advertising injury

✅ Answer: C

14. A personal umbrella policy provides:

A. Primary coverage
B. Excess liability coverage
C. Property coverage
D. Workers’ compensation

✅ Answer: B

15. Medical Payments coverage pays:

A. Only if insured is negligent
B. Regardless of fault
C. Only after lawsuit
D. Only for insured injuries

✅ Answer: B

SECTION D — AUTO INSURANCE

16. Texas minimum auto liability limits are:

A. 25/50/25
B. 30/60/25
C. 50/100/50
D. 100/300/100

✅ Answer: B

17. Collision coverage applies when:

A. Car is stolen
B. Vehicle hits another object
C. Flood damage occurs
D. Wind damages vehicle

✅ Answer: B

18. Uninsured Motorist coverage protects against:

A. At-fault insured drivers
B. Drivers with no insurance
C. Mechanical failure
D. Road conditions

✅ Answer: B

19. Comprehensive coverage includes:

A. Collision
B. Theft
C. Liability
D. Medical payments

✅ Answer: B

20. Which is NOT required in Texas?

A. Liability
B. PIP (Personal Injury Protection)
C. UM/UIM (can be rejected in writing)
D. Proof of financial responsibility

✅ Answer: B

SECTION E — WORKERS’ COMP & MARINE

21. Workers’ compensation provides all EXCEPT:

A. Medical benefits
B. Income benefits
C. Pain & suffering
D. Death benefits

✅ Answer: C

22. Texas employers:

A. Must carry workers’ comp
B. Are allowed to be non-subscribers
C. Are prohibited from coverage
D. Must self-insure

✅ Answer: B

23. Inland Marine typically covers:

A. Buildings
B. Fixed locations
C. Mobile property
D. Liability risks

✅ Answer: C

24. Ocean Marine Protection & Indemnity covers:

A. Cargo
B. Hull damage
C. Legal liability
D. Freight loss

✅ Answer: C

25. A Personal Articles Floater covers:

A. Homes
B. Automobiles
C. Scheduled valuables
D. Liability

✅ Answer: C

SECTION F — BONDS & SURETY

26. The party that purchases the bond is the:

A. Obligee
B. Surety
C. Principal
D. Insured

✅ Answer: C

27. Fidelity bonds protect against:

A. Natural disasters
B. Employee theft
C. Auto accidents
D. Property damage

✅ Answer: B

SECTION G — TEXAS LAW & REGULATIONS

28. Rebating in Texas is:

A. Allowed
B. Required
C. Illegal
D. Encouraged

✅ Answer: C

29. License renewal occurs every:

A. 1 year
B. 2 years
C. 3 years
D. 5 years

✅ Answer: B

30. An agent must hold premiums in:

A. Personal account
B. Trust / fiduciary capacity
C. Investment account
D. Escrow for 90 days

✅ Answer: B

31. Twisting involves:

A. Claim fraud
B. Policy cancellation
C. Misrepresentation to replace a policy
D. Rate discrimination

✅ Answer: C

32. False advertising is considered:

A. Ethical sales
B. Unfair trade practice
C. Required disclosure
D. Underwriting

✅ Answer: B

33. Who regulates insurance in Texas?

A. NAIC
B. Federal government
C. Texas Department of Insurance
D. IRS

✅ Answer: C

34. CE requirements are enforced to:

A. Increase premiums
B. Protect consumers
C. Increase sales
D. Limit agents

✅ Answer: B

35. Binding authority allows an agent to:

A. Pay claims
B. Approve underwriting
C. Put coverage into effect
D. Cancel policies

✅ Answer: C

SECTION H — CLAIMS & POLICY CONDITIONS

36. Subrogation allows an insurer to:

A. Cancel policies
B. Recover from responsible third party
C. Increase deductibles
D. Reduce limits

✅ Answer: B

37. Proof of loss is:

A. Optional
B. Insurer’s duty
C. Insured’s statement of claim
D. Adjuster report

✅ Answer: C

38. Arbitration differs from litigation because it:

A. Uses judges
B. Is informal and binding
C. Is always optional
D. Requires a jury

✅ Answer: B

39. Deductibles exist to:

A. Increase premiums
B. Reduce small claims
C. Eliminate losses
D. Replace coinsurance

✅ Answer: B

40. Appraisal is used to resolve:

A. Coverage disputes
B. Fault disputes
C. Value disputes
D. Legal disputes

✅ Answer: C

FINAL REVIEW QUESTIONS

41. Wear and tear is:

A. Covered
B. Excluded
C. Endorsed
D. Optional

✅ Answer: B

42. A named peril policy covers:

A. All losses except excluded
B. Only listed perils
C. Liability only
D. Flood

✅ Answer: B

43. Personal property coverage is:

A. Coverage A
B. Coverage B
C. Coverage C
D. Coverage D

✅ Answer: C

44. Loss of Use is:

A. Medical payments
B. Additional living expenses
C. Liability
D. Deductible

✅ Answer: B

45. An endorsement:

A. Deletes coverage only
B. Modifies policy terms
C. Cancels policy
D. Replaces declarations

✅ Answer: B

46. Umbrella policies require:

A. No underlying coverage
B. High deductibles
C. Underlying liability limits
D. Property coverage

✅ Answer: C

47. Salvage belongs to:

A. Insured
B. Insurer after payment
C. Agent
D. State

✅ Answer: B

48. Which policy is best for renters?

A. HO-3
B. HO-4
C. HO-6
D. HO-8

✅ Answer: B

49. Moral hazard refers to:

A. Carelessness
B. Physical conditions
C. Dishonesty
D. Weather

✅ Answer: C

50. The MOST tested exam area is:

A. Bonds
B. Texas law & auto
C. Flood insurance
D. Life insurance

✅ Answer: B

PRACTICE EXAM #2 — HARD MODE** for the **Texas General Lines Property & Casualty (P&C)** exam.
These questions are **more difficult than Exam #1**, highly **scenario-based**, and focused on **Texas law traps, exclusions, coverage gaps, and “BEST / MOST LIKELY” wording** — exactly how the real exam tries to trick you.


# 🧠 TEXAS GENERAL LINES P&C

## PRACTICE EXAM #2 — HARD MODE (50 Questions)


## SECTION A — CONTRACTS, RISK & LEGAL CONCEPTS

### 1. An insurance policy is considered a **contract of adhesion** because:

A. Both parties negotiate equal terms
B. Only the insured is legally bound
C. Ambiguities favor the insured
D. It involves an unequal exchange of value

✅ **Answer: C**

### 2. Which situation BEST illustrates **proximate cause**?

A. Fire followed by theft
B. Windstorm causes roof damage, and rain enters
C. Theft causes vandalism
D. Earthquake causes fire

✅ **Answer: B**

### 3. Which is NOT a requirement of an insurable risk?

A. Loss must be definite
B. Loss must be catastrophic
C. Loss must be measurable
D. Loss must be accidental

✅ **Answer: B**

### 4. An insured intentionally burns their property. This violates:

A. Indemnity
B. Aleatory principle
C. Utmost good faith
D. Insurable interest

✅ **Answer: C**

### 5. A homeowner over-insures their home. This:

A. Creates moral hazard
B. Violates indemnity
C. Is illegal
D. Triggers coinsurance

✅ **Answer: B**

## SECTION B — HOMEOWNERS & PROPERTY (VERY HARD)

### 6. Under an HO-3, which loss is MOST LIKELY covered?

A. Flood destroys the basement
B. Earthquake cracks the foundation
C. Accidental overflow of water from plumbing
D. Wear and tear on the roof

✅ **Answer: C**

### 7. A tree falls due to decay and damages a fence. Which coverage applies?

A. Coverage A
B. Coverage B
C. Coverage C
D. Coverage D

✅ **Answer: B**

### 8. Which property is covered ONLY by endorsement under HO-3?

A. Clothing
B. Jewelry over sublimit
C. Furniture
D. Appliances

✅ **Answer: B**

### 9. Functional replacement cost is MOST appropriate for:

A. New custom homes
B. Historic buildings
C. Vacant land
D. Mobile homes

✅ **Answer: B**

### 10. Coinsurance applies when:

A. Loss exceeds policy limits
B. Property is insured below the required percentage
C. Deductible is unpaid
D. ACV is selected

✅ **Answer: B**

## SECTION C — LIABILITY (EXAM FAVORITES)

### 11. Which element of negligence is MOST difficult to prove?

A. Duty
B. Breach
C. Causation
D. Damages

✅ **Answer: C**

### 12. A guest slips on ice at a home. Medical payments coverage:

A. Pays only if the insured is negligent
B. Pays regardless of fault
C. Requires a lawsuit
D. Pays only the insured’s family

✅ **Answer: B**

### 13. Which is excluded under Coverage A of a CGL?

A. Fire damage to rented premises
B. Products-completed operations
C. Expected or intentional injury
D. Advertising injury

✅ **Answer: C**

### 14. A personal umbrella policy will NOT:

A. Extend limits
B. Drop down when no underlying coverage exists
C. Cover excluded losses
D. Require underlying limits

✅ **Answer: C**

### 15. Which policy is REQUIRED before an umbrella attaches?

A. Property
B. Workers’ comp
C. Underlying liability
D. Inland marine

✅ **Answer: C**

## SECTION D — AUTO (TEXAS TRAPS)

### 16. Texas requires UM/UIM coverage unless:

A. Agent waives it
B. Insurer denies it
C. Insured rejects in writing
D. Vehicle is financed

✅ **Answer: C**

### 17. PIP coverage:

A. Covers vehicle damage
B. Is fault-based
C. Pays medical expenses & lost wages
D. Is mandatory in Texas

✅ **Answer: C**

### 18. A covered auto is stolen and later recovered with damage. Which coverages apply?

A. Collision only
B. Comprehensive only
C. Liability
D. Medical payments

✅ **Answer: B**

### 19. Business use of a personal auto policy:

A. Is always excluded
B. Is automatically covered
C. May be limited
D. Requires commercial policy always

✅ **Answer: C**

### 20. Texas minimum property damage liability is:

A. $10,000
B. $15,000
C. $25,000
D. $30,000

✅ **Answer: C**

## SECTION E — WORKERS’ COMP & EMPLOYER ISSUES

### 21. Texas non-subscriber employers:

A. Are illegal
B. Lose certain legal protections
C. Must self-insure
D. Cannot be sued

✅ **Answer: B**

### 22. Which benefit is NOT provided by workers’ comp?

A. Medical
B. Income
C. Pain and suffering
D. Death

✅ **Answer: C**

### 23. Employer’s Liability is found in:

A. Part One
B. Part Two
C. Part Three
D. Endorsement

✅ **Answer: B**

### 24. Which injury is covered by workers’ comp?

A. Intentional self-harm
B. Injury outside the scope of employment
C. Occupational disease
D. Weekend hobby injury

✅ **Answer: C**

### 25. Workers’ comp is designed to:

A. Protect only employers
B. Protect only employees
C. Protect both parties
D. Replace liability insurance

✅ **Answer: C**

## SECTION F — MARINE & BONDS (HARD BUT TESTED)

### 26. Inland Marine is best described as:

A. Water-based risk
B. Coverage for movable property
C. Liability insurance
D. Flood insurance

✅ **Answer: B**

### 27. Protection & Indemnity covers:

A. Cargo loss
B. Hull damage
C. Legal liability of the ship owner
D. Freight charges

✅ **Answer: C**

### 28. A fidelity bond protects against:

A. Employee theft
B. Natural disasters
C. Lawsuits
D. Auto losses

✅ **Answer: A**

### 29. In a surety bond, the obligee is:

A. The one who purchases the bond
B. The party protected
C. The insurer
D. The contractor

✅ **Answer: B**

### 30. Surety bonds differ from insurance because:

A. Risk is transferred
B. Loss is expected to be repaid
C. Premiums are higher
D. Coverage is optional

✅ **Answer: B**

## SECTION G — TEXAS LAW (HIGH FAILURE AREA)

### 31. Rebating in Texas is:

A. Allowed if disclosed
B. Allowed for renewals
C. Prohibited
D. Required

✅ **Answer: C**

### 32. An agent who misrepresents coverage is guilty of:

A. Twisting
B. Rebating
C. Unfair trade practice
D. Fraud only

✅ **Answer: C**

### 33. The license renewal cycle in Texas is:

A. Annual
B. Biennial
C. Triennial
D. Every 5 years

✅ **Answer: B**

### 34. An agent holding client premiums must:

A. Deposit into personal account
B. Invest funds
C. Hold in fiduciary capacity
D. Transfer after 60 days

✅ **Answer: C**

### 35. Binding authority allows an agent to:

A. Adjust claims
B. Approve underwriting
C. Place coverage into force
D. Cancel policies

✅ **Answer: C**


## SECTION H — CLAIMS & POLICY CONDITIONS

### 36. Appraisal resolves disputes over:

A. Coverage
B. Liability
C. Amount of loss
D. Negligence

✅ **Answer: C**

### 37. Salvage belongs to:

A. Insured
B. Agent
C. Insurer after claim payment
D. State of Texas

✅ **Answer: C**

### 38. Proof of loss must be submitted by:

A. Insurer
B. Adjuster
C. Insured
D. Agent

✅ **Answer: C**

### 39. Subrogation allows the insurer to:

A. Sue the insured
B. Recover from the responsible party
C. Cancel the policy
D. Raise premiums

✅ **Answer: B**

### 40. Arbitration is BEST described as:

A. Court litigation
B. Informal binding dispute resolution
C. Non-binding negotiation
D. Claims denial

✅ **Answer: B**

## FINAL CHALLENGE QUESTIONS

### 41. Which loss is NEVER covered without endorsement?

A. Fire
B. Theft
C. Flood
D. Windstorm

✅ **Answer: C**

### 42. Wear and tear is:

A. Covered peril
B. Excluded loss
C. Insurable interest
D. Deductible

✅ **Answer: B**

### 43. Coverage D provides:

A. Personal property
B. Medical payments
C. Loss of use
D. Liability

✅ **Answer: C**

### 44. A named peril policy covers:

A. All losses except excluded
B. Only listed perils
C. Liability losses
D. Flood losses

✅ **Answer: B**

### 45. An endorsement is used to:

A. Cancel a policy
B. Modify policy terms
C. Replace declarations
D. Pay claims

✅ **Answer: B**

### 46. Umbrella policies primarily provide:

A. Property coverage
B. Excess liability limits
C. Medical coverage
D. Auto coverage

✅ **Answer: B**

### 47. Moral hazard involves:

A. Carelessness
B. Physical danger
C. Dishonesty
D. Natural causes

✅ **Answer: C**

### 48. A renters policy is:

A. HO-3
B. HO-4
C. HO-5
D. HO-6

✅ **Answer: B**

### 49. Which coverage pays regardless of fault?

A. Liability
B. Collision
C. Medical Payments
D. Property damage

✅ **Answer: C**

### 50. MOST Texas exam failures occur due to:

A. Property math
B. Bonds
C. Texas law misunderstandings
D. Flood insurance

✅ **Answer: C**

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