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Texas Personal Lines — Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full Texas Personal Lines — Property & Casualty course (Texas Personal Lines Property and Casualty Agent — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. Which homeowners form is best suited for an older dwelling whose replacement cost greatly exceeds its market value?
HO-5HO-8HO-3HO-2
2. A homeowner is on a weekend trip and walks his dog through a public park. The dog, normally docile, bites a jogger, requiring stitches and ER care totaling $9,200. The insured carries an HO-3 with Coverage E $300,000 and Coverage F $5,000. No dog-bite exclusion is in place. How does the policy respond to the jogger's claim?
Coverage E pays only after a court rules and judgment is entered — no payment is made until a final adjudication of liability is reachedOnly Coverage C responds, because the dog is personal property of the insured and bodily-injury claims attaching to owned animals are limited to Coverage CIt does not respond because Section II incidents occurring away from the residence premises are excluded under the standard 'off-premises pet activity' barCoverage F pays up to $5,000 regardless of fault, and Coverage E pays any liability damages above that if the insured is legally responsible
3. An insured raises his collision deductible from $500 to $2,500 in exchange for a 30% premium reduction. The primary trade-off is:
Identical net cost over the policy life because the deductible-related premium savings always equal the expected additional out-of-pocket retention under the standard actuarial-equivalence ruleHigher premium and lower claim payments because the carrier will pay larger claims when the insured chose a higher deductible amount on the comprehensive coverageLower premium today but greater out-of-pocket exposure on every collision claim; only worthwhile if the insured can comfortably absorb $2,500Lower premium with no change to claim payments because the deductible reduction only reduces premium but does not transfer any additional risk to the insured
4. Defense costs in a personal-lines liability policy are typically:
Capped at $1,000 per claimOutside the limits — they do NOT erode the per-occurrence limitPaid by the insuredInside the limits of liability — they erode the limit
5. An 'occurrence' on a liability policy is generally defined as:
Any event reported during the policy period, regardless of when the underlying injury or damage actually aroseA single sudden event only that takes place at one identifiable point in time within the policy periodAn accident, including continuous or repeated exposure to substantially the same general harmful conditionsA claim made by a third party against the insured and tendered for defense during the policy period
6. An HO-3 lists 16 named perils for personal property. Which of the following is NOT one of them?
FloodFire or lightningTheftVolcanic eruption
7. What is the standard waiting period for new NFIP coverage to take effect?
30 days24 hoursNo waiting period10 days
8. An attractive nuisance, such as an unfenced swimming pool that draws neighborhood children, is best classified as a:
Physical hazard increasing liability exposureMoral hazard arising from intent to defraudSpeculative risk under the gain-or-loss testPure benefit arising under the policy bargain
9. A named driver exclusion endorsement on a PAP:
Lists drivers who are guaranteed coverage under the rated-operator schedule attached to the declarationsIncreases the deductible for one driver under the operator-specific deductible filing for high-risk household driversExcludes a specifically named driver from any coverage when operating any vehicle covered by the policyExcludes only physical damage but keeps liability under the partial-coverage carve-out written into the operator schedule
10. The NFIP defines a 'flood' as:
Any water damage from any source, including internal plumbing leaks, appliance overflow, roof leaks during a windstorm, and condensation, all consolidated under the federal flood program for uniform claims handling regardless of cause of lossAny water damage occurring within 100 feet of a body of water, regardless of whether the water actually entered the structure, under the proximity-based mapping rule that applies inside a Special Flood Hazard Area as designated on the official Flood Insurance Rate MapDamage from a sewer backup, including loss caused by failure of sump pumps, septic systems, and storm drains that cannot handle ordinary rainfall, treated as a covered flood event under FEMA's expanded 2012 Biggert-Waters Act definition for residential structuresA general and temporary condition of partial or complete inundation of normally dry land area from overflow of inland or tidal waters or unusual and rapid accumulation/runoff of surface waters
11. A representation on an insurance application must be:
Substantially true and material to the underwriting decisionNotarized by a commissioned officer of the carrier on fileMade under oath before a notary or other authorized officerAbsolutely true in every detail with no exceptions allowed
12. An insured calls his agent asking why the policy 'doesn't cover' damage to his rental property's roof from a recent windstorm. The agent reviews the policy. The dwelling is listed on the declarations as 'Tenant-occupied,' the insuring agreement promises payment for direct physical loss by windstorm, and there is no exclusion for tenant-occupied dwellings — but the form is an HO-3, which the conditions limit to owner-occupied premises. Which part of the policy is the source of the denial?
The conditions, because HO-3 eligibility requires owner occupancyAn endorsement, because tenant-occupied requires a DP formThe declarations, because the dwelling is misclassifiedThe insuring agreement, because windstorm is not promised
13. A retired couple owns a $90,000 mobile home permanently affixed to a foundation on a leased lot in a senior community. They want coverage on the structure, their belongings, and personal liability. Which approach correctly addresses the eligibility issue?
Standard HO-3, because the structure is permanently affixed and thus qualifies as real property eligible under the special-form residence ruleHO-4 tenants form, because they do not own the underlying land and the contents-broad-form chassis fits a leasehold-lot residential exposureHO-6 condominium form, because the lot is leased and the unit-owners form is filed for any owner with a ground-lease interest in the parcelA mobile/manufactured home policy or HO-7 form, which is designed for mobile home risks
14. An SR-22 is:
A certificate filed with the state by the insurer demonstrating the driver carries required liability insuranceAn endorsement adding rental coverage to the PAP after a covered comprehensive or collision loss prevents normal use of the vehicleA type of auto policy written for high-risk drivers with a history of license suspensions and prior at-fault uninsured accidentsA waiver of UM coverage signed by the named insured when the underlying liability limits selected are below the carrier's UM-waiver threshold
15. An applicant owns a single-family home worth $380,000. She wants the broadest coverage available on both the dwelling AND her personal property — she does not want to argue with the adjuster about whether a particular peril is named in the form. Her producer recommends an HO-5. What is the key difference between an HO-5 and an HO-3 that justifies the recommendation?
HO-5 carries higher Section II personal liability and medical-payments limits than HO-3 as filed and approved minimums under the comprehensive-form filing scheduleHO-5 covers BOTH the dwelling and personal property on an open-peril basis; HO-3 covers the dwelling open-peril but personal property named-perilHO-5 covers the dwelling on an open-peril basis; HO-3 covers only personal property on an open-peril basis with the dwelling on named-peril basis under the inverted-form ruleHO-5 automatically includes flood and earthquake coverage as built-in additional perils that HO-3 expressly excludes under the standard earth-movement and water-damage exclusions
16. On an HO-3, jewelry, watches, and furs are subject to a special limit for theft. What is the standard ISO sub-limit?
$2,500$5,000$1,500$1,000
17. An insured buys a PAP with $100/300/100 liability limits but is not offered UM/UIM at any point during the application. Six months later she is hit by an uninsured driver. How are her UM limits determined?
UM limits default to the state's minimum financial responsibility limits under the residual-coverage rule for unselected UM electionsUM limits are zero until she signs a UM-coverage endorsement after the loss; the carrier may not retroactively backdate coverage to pre-lossUM limits default to the same $100/300/100 limits as her liability because she did not reject UM in writingUM is excluded entirely from the policy because she did not specifically request it on the application or endorse it after policy issuance
18. The appraisal clause is invoked when:
The deductible is in dispute because the insured and the carrier disagree on which deductible applies to the lossThe insured and insurer cannot agree on the AMOUNT of the lossThe insurer suspects fraud and refers the file to the special-investigations unit for criminal-fraud reviewCoverage is denied entirely by the carrier under the coverage-determination provision of the policy contract
19. When two policies cover the same loss on the same property, the typical 'other insurance' provision in property forms specifies:
The newer policy responds first under the most-recently-issued policy priority rule of standard property formsLoss is shared pro rata based on each policy's limit relative to total insuranceThe insured collects the full limit from each policy under the stacking provision applicable to concurrent policiesOnly one policy responds; the others are voided ab initio under the non-concurrent coverage forfeiture rule
20. An insured discovers that a slow drip under a bathroom vanity has been leaking for an estimated 14 months, causing rotted subflooring, mold growth in the wall cavity, and warped cabinetry. Repair estimates total $18,400. The HO-3 contains the standard wear-and-tear, gradual deterioration, and continuous-seepage exclusions. How does the policy respond?
Covered — water damage is a named peril under Coverage CExcluded — continuous or repeated seepage over weeks or months is specifically excluded; only sudden and accidental discharge is coveredCovered — open-peril Coverage A pays for any resulting water damage unless that specific cause of loss is excluded by name in the policyCovered, but only the mold remediation portion is excluded

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