Free Texas insurance law practice questions

These are the Texas state-law questions from our free sample, with the answer and the full explanation shown. Every figure in them was read from the Texas Insurance Code rather than from another study site, which matters more here than anywhere else on the exam: state law is where out-of-state material fails, and where the widely repeated version is often wrong.

Several of these test facts that circulate incorrectly. Reporting runs on a monthly basis rather than a thirty-day clock. The administrative penalty ceiling sits in chapter 84, because chapter 82 carries no figure of its own. Controlled business is measured on premium volume rather than commission, and the twenty-five percent is a floor under outside business rather than a cap on your own.

1. Who is the chief executive officer of the Texas Department of Insurance?

• A. The Commissioner of Insurance
• B. The Texas Attorney General's office
• C. The State Comptroller of Public Accounts
• D. The Secretary of State for Texas

Answer: A. The Commissioner of Insurance heads the Texas Department of Insurance and carries the powers and duties set out in the Texas Insurance Code, including rulemaking and enforcement. The Attorney General, Comptroller and Secretary of State hold separate offices with no authority to run the Department.

2. What does a Texas general lines property and casualty agent license authorize the holder to do?

• A. Adjust claims on behalf of insurers only
• B. Examine the financial records of insurers
• C. Approve insurance rates for the state
• D. Sell property and casualty insurance in Texas

Answer: D. The license authorises the holder to sell, solicit or negotiate property and casualty insurance in Texas. Adjusting claims requires an adjuster license, examining insurer records is a function of the Department, and rate approval is a regulatory rather than an agent function.

3. Which statement about the Texas temporary general lines license is correct?

• A. It may be renewed indefinitely on request
• B. It is issued only to nonresident applicants
• C. It lasts 180 days and depends on a sponsor
• D. It requires no sponsor of any kind

Answer: C. The Insurance Code sets the temporary license term at 180 days, and it depends on a sponsor who certifies the appointment and supervises the required training. It is not restricted to nonresidents and cannot be obtained without a sponsor. TDI also publishes that the license is issued only once, though the statutory bar on re-issue was repealed in 2021, so treat the once-only rule as TDI practice rather than as the Code.

4. A candidate passes the Texas licensing examination. Within what period must a completed license application be submitted?

• A. Within thirty days of passing
• B. Within twelve months of passing
• C. Within five years of passing
• D. There is no time limit at all on it

Answer: B. The Department issues a license to an applicant who has passed the required examination and submits a completed application within twelve months of passing. Missing that window means sitting the examination again, so thirty days is too short, five years too long, and a limit certainly applies.

5. A Texas general lines agent changes business address, is convicted of a felony, and is disciplined by another state's insurance regulator. On what timetable does the Insurance Code require these to be reported to the Department?

• A. Within 30 days of each event, each one reported separately
• B. Only at the next renewal, on the renewal application form
• C. On a monthly basis, since all three sit in the same subsection of the Code
• D. Within 10 days for the felony and 90 days for the other two

Answer: C. All three reports live in one subsection of the Insurance Code and all three run on a monthly basis, which makes the reporting periodic rather than a countdown from each event. The 30 day figure is repeated constantly in unofficial study material but it comes from a rule covering specialty licenses, not the general lines license. Waiting for renewal would defeat the purpose, since official notices go to the address of record, and no provision splits the three events onto different clocks.

6. An administrative penalty is assessed against a Texas license holder. What is the ceiling for a single violation, and where does that figure come from?

• A. $10,000, set out in chapter 82 alongside the Commissioner's sanction powers
• B. $25,000, set out in chapter 82, the only chapter carrying a penalty figure
• C. There is no ceiling, because each day of a continuing violation counts as a separate violation
• D. $25,000 per violation, set in chapter 84, because chapter 82 carries no figure of its own

Answer: D. Chapter 82 gives the Commissioner the sanction powers but states no amount, delegating that to chapter 84, where the ceiling is $25,000 for a violation unless the Code fixes a different figure for that offense. The lower amount is not the statutory ceiling, and nothing in the Insurance Code turns each day into a separate violation, so the multiplying penalty option is a myth. In practice the Commissioner sets the figure using factors such as seriousness, economic harm, prior history, deterrence and any effort to correct the conduct.

7. The Texas controlled business test is expressed as a proportion. What is that proportion measured against?

• A. Total premium volume, a quarter from other people
• B. The commission earned, split between own and outside
• C. The number of policies written each calendar year
• D. The number of unrelated clients on the book

Answer: A. The statute measures premium volume and requires that, in any calendar year, at least 25 percent of the total volume of premiums comes from other people and from property the applicant does not control. Candidates routinely substitute commission, which is the agent's own earnings rather than the premium written, and the test counts neither policies nor clients. The point of the rule is that a license is a public facing credential rather than a way of writing your own household's insurance.

8. When may a risk properly be placed in the surplus lines market in Texas?

• A. Whenever the client prefers a lower premium
• B. When cover is not reasonably available from admitted insurers
• C. Only when the insured is a government body
• D. Only when the agent holds no general lines license of any kind

Answer: B. Surplus lines exists for risks the admitted market will not write, so the placement is proper when the coverage is not reasonably available from authorized insurers. Price preference alone is not a justification, the insured's status as a public body is irrelevant, and surplus lines placements require a license rather than the absence of one.

9. How must uninsured and underinsured motorists coverage be handled on a Texas personal auto policy?

• A. It is prohibited outright in Texas
• B. It must be included with no right to decline
• C. It must be offered and may be rejected in writing
• D. It is available only to commercial insureds

Answer: C. Texas requires insurers to offer uninsured and underinsured motorists coverage, and an insured who does not want it must reject it in writing. The coverage is neither prohibited nor compulsory, and it is available to personal as well as commercial insureds.

10. Hail damages a Texas roof, the insurer pays late, and the homeowner pursues the statutory damages on the first party claim. Which rate applies?

• A. The Finance Code rate plus five percentage points
• B. 18 percent a year, as on any other late claim
• C. No damages, weather sitting outside the rules
• D. A rate the court fixes case by case

Answer: A. Where a first party claim arises from a force of nature such as hail or windstorm, Chapter 542A takes over and the damages rate becomes the Finance Code rate plus five percentage points, simple interest. That is exactly why the cause of loss must be read before reaching for a rate: the same house's kitchen fire would run at 18 percent a year. Weather claims are not exempt from the timetable, and the rate comes from statute rather than from judicial discretion.

11. Texas counts declinations before a homeowner may buy from a residual market. How many does each association require?

• A. Two for the windstorm association, one for the FAIR Plan
• B. One for each of the two associations
• C. One for the windstorm association, two for the FAIR Plan
• D. Three for each, as with surplus lines

Answer: C. The windstorm association needs a single declination from the voluntary market, while the FAIR Plan needs two, and the pair is worth learning together precisely because the numbers sit so close to one another. Reversing them is the mistake the question is built to catch. Surplus lines supplies no comparison at all, because Texas sets no declination count for that market and asks only for a documented diligent effort.

12. A Texas customer asks how much personal injury protection the law obliges her to carry. What is the correct answer?

• A. None, $2,500 being a ceiling on the offer, not a floor
• B. $2,500, the minimum every Texas auto policy carries
• C. $10,000, matching the usual medical payments floor
• D. $25,000, matching the property damage liability minimum

Answer: A. The section carrying the $2,500 figure is titled maximum required amount and caps the amount of personal injury protection an insurer is obliged to offer. Texas sets no statutory minimum at all, so an option calling $2,500 a minimum is wrong in the most tempting way possible: the number is genuine and only the label has been swapped. Read the word in front of the figure. The other two amounts belong elsewhere and have nothing to do with personal injury protection, which is included in every auto policy unless the customer rejects it in writing.

The state-specific portion is the smaller half of the examination but the half candidates lose marks on, because it cannot be learned from national material. What the exam actually tests sets out how many scored questions each domain carries, and the full practice sample runs ten questions across all eight domains with the answers withheld until you submit.