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Texas Surplus Lines Practice Exam

20 exam-style questions drawn from the same bank as our full Texas Surplus Lines course (Texas Surplus Lines 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. A standing agreement under which a reinsurer automatically covers all of an insurer's homeowners policies is an example of:
Facultative reinsurance for one dwellingTreaty reinsurance for that line of businessCoinsurance owed by each homeownerRetail reinsurance sold to homeowners
2. In the surplus lines context, the abbreviation E&S stands for:
Exempt and specialty lines coverageEligible and standard lines coverageExtended and secondary lines coverageExcess and surplus lines coverage
3. A windstorm knocks a tree onto a power line, which sparks a fire that destroys a home. The unbroken chain identifying the fire's origin points to the:
Morale hazard of the homeownerProximate cause of the resulting lossInsurable interest of the homeownerSalvage value left after the loss
4. The practical effect of an insurance policy being a contract of adhesion is that unclear terms are interpreted in favor of the:
Insured who did not draft the wordingInsurer that prepared the wordingState that licensed the insurerAgent who delivered the policy
5. Under TIC Section 981.0032, part of the exempt commercial purchaser standard can involve the buyer's use of a:
Guaranty association representativeQualified risk manager as defined by statuteComptroller field auditor for the dealState-appointed public insurance adjuster
6. In a reinsurance arrangement, risk flows from the ceding insurer to the:
Original policyholder who bought coverageState guaranty association as backstopIndependent agent who sold the policyAssuming insurer that accepts the risk
7. For a Texas surplus lines placement, the premium tax is generally:
Waived entirely whenever the buyer is an individual consumerAbsorbed by the stamping office out of its own filing feesCollected by the agent from the insured and remitted to the statePaid by the admitted insurer that declined to write the risk
8. A person who independently shops several insurers to find coverage for a buyer is functioning primarily as a:
Adjuster acting for a claimantReinsurer acting for a cedentAgent acting for one insurerBroker acting for the buyer
9. Waiver in insurance is best defined as the:
Transfer of the policy to a new beneficiaryVoluntary giving up of a known legal rightRefund of unearned premium after cancellationAutomatic renewal of a policy at each term
10. An 'authorized' (admitted) insurer is one that:
Sells only through the surplus lines market by designIs barred from writing any business within the stateHolds a certificate of authority to transact in the stateOperates without any certificate from a state regulator
11. An insurer with no certificate of authority that nonetheless solicits ordinary admitted business in Texas is:
Operating lawfully as an eligible surplus lines insurerOperating lawfully as a domestic admitted insurerExempt because surplus lines rules always applyActing unlawfully as an unauthorized insurer
12. Compared with a warranty, a representation is judged against a standard that is:
Higher, requiring literal exactnessIdentical in every legal respectLower, requiring only substantial truthIrrelevant to the insurer's remedies
13. Without the buyer's written request, the ECP diligent-effort waiver:
Applies once the policy is filed with SLTXDoes not apply, and diligent effort is still requiredApplies only if the premium exceeds one millionApplies automatically to any commercial buyer
14. A driver leaves keys in an unlocked car thinking 'insurance will pay if it's stolen.' This attitude illustrates:
A physical hazard involving a tangible defectA moral hazard involving intentional dishonestyA speculative risk carrying a chance of gainA morale hazard born of indifference to loss
15. A terminated agent still displays the insurer's signage that the insurer failed to remove, and a customer relies on it to buy coverage. The insurer may be bound through:
Fiduciary authority owed to the customerExpress authority stated in the ended contractApparent authority based on its own conductImplied authority needed to finish a task
16. For an insurance application, a representation is held to the standard that it be:
True only after the policy period endsGuaranteed true as a term of the contractSubstantially true to the applicant's knowledgeAbsolutely and literally true in every detail
17. A surplus lines agent who collects premium tax funds from an insured to remit to the state holds those funds as a:
Bailor who is lending the money to the stateDebtor who may treat them as personal incomeCreditor to whom the insurer owes the moneyFiduciary responsible for proper handling
18. An agent is asked to place a risk with an insurer that appears on no eligible or admitted list. The agent should:
Decline to place coverage with that insurerPlace it if the buyer signs a waiverPlace it and file it with the stamping officePlace it and collect the premium tax
19. Diligent effort must be a genuine, good-faith attempt because it is intended to:
Confirm the admitted market truly will not write the riskGuarantee the agent a larger commissionReplace the need to file with the stamping officeIncrease the premium tax owed to the state
20. An eligible surplus lines insurer is one that is:
Prohibited from writing any Texas coverage at allNon-admitted in Texas but approved to write surplus linesOwned in whole or in part by the state of TexasAdmitted and licensed to do all business in Texas

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