Free Texas Property & Casualty Insurance License Exam Practice Test

Sample TX P&C practice questions

Try a few representative questions below. Each includes the correct answer and a short explanation — the same style you'll see in the full practice test.

1. Question 1Commercial Property

   A commercial property policy uses a coinsurance clause requiring 80% coverage. The building's replacement cost is $1,000,000, and the policy limit is $600,000. If a loss of $100,000 occurs, how much of the loss will the policy pay, assuming no deductible?

   • A.A $50,000, as the coinsurance penalty reduces the payout by 50%.
   • B.A $100,000, as the loss is less than the policy limit.
   • C.A $75,000, calculated as ($600,000 / $800,000) * $100,000.(Correct)
   • D.A $60,000, calculated as ($600,000 / $1,000,000) * $100,000.

   Explanation

   The coinsurance formula is: Insurance Carried / (Replacement Cost * Coinsurance Percentage) * Loss Amount. The required insurance is $1,000,000 * 0.80 = $800,000. The payout is ($600,000 / $800,000) * $100,000 = $75,000. The policy is underinsured.

2. Question 2Commercial General Liability

   An insured has a Commercial General Liability policy with a $1,000,000 per occurrence limit and a $2,000,000 aggregate limit. If the insured experiences three separate claims, each resulting in a $500,000 payout, what is the total amount the insurer will pay?

   • A.A $1,000,000 for the first two claims, and the third claim will be denied due to the aggregate limit.
   • B.A $2,000,000, as the total payout cannot exceed the aggregate limit.(Correct)
   • C.A $1,000,000, because the aggregate limit has been reached.
   • D.A $1,500,000, as each claim is within the per occurrence limit.

   Explanation

   Each claim is $500,000, which is within the $1,000,000 per occurrence limit. The total payout for the three claims is $1,500,000. However, the aggregate limit of $2,000,000 caps the total payout for the policy period. Therefore, the insurer will pay the full $1,500,000, leaving $500,000 of the aggregate limit remaining.

3. Question 3Workers' Compensation

   Under the Texas Workers' Compensation Act, which of the following is NOT considered an employee for the purposes of coverage?

   • A.A partner in a general partnership.
   • B.A corporate officer of a Texas corporation.
   • C.A full-time salesperson working on a commission basis.
   • D.An independent contractor performing services for a business.(Correct)

   Explanation

   Independent contractors are generally excluded from workers' compensation coverage as they are considered self-employed and responsible for their own coverage. Employees, including partners, corporate officers, and commission-based salespersons, are typically covered.

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