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TX Claims Adjuster study materials
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TX Claims Adjuster practice questions

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Question 1Insurance Principles and Concepts

Which principle holds that a property insurance payment should restore the insured to approximately the same financial position held before the loss, without creating a profit?

  1. Subrogation
  2. Contribution
  3. Indemnity Correct answer.
  4. Coinsurance

Explanation

Indemnity is the core principle that insurance replaces actual financial loss rather than providing a gain. It supports limits, actual cash value, and other rules that measure recovery by the loss sustained.

Question 2Insurance Principles and Concepts

Insurable interest in property insurance means that the insured:

  1. paid every premium with a personal check
  2. holds a real estate sales license
  3. would lose money if the property is damaged Correct answer.
  4. has occupied the property continuously for at least one year

Explanation

Insurable interest exists when the insured would suffer a direct financial detriment from damage to the property. It must exist at the time of loss for property coverage to respond.

Question 3Insurance Principles and Concepts

The duty of utmost good faith requires an insured to:

  1. inspect the insurer's claim files
  2. buy coverage from every licensed insurer
  3. disclose material facts about the risk Correct answer.
  4. guarantee that the property will not be damaged

Explanation

Utmost good faith obligates the applicant to give the insurer material information relevant to underwriting the risk. Concealment or misrepresentation of such facts can affect coverage.

Question 4Insurance Principles and Concepts

A policy is a contract of adhesion because:

  1. both parties negotiate each clause as equals
  2. the insurer must accept every term proposed by the insured
  3. the insured generally must accept the insurer's written terms Correct answer.
  4. it becomes enforceable only after a loss occurs

Explanation

An adhesion contract is drafted by one party and offered to the other on a take-it-or-leave-it basis. Because the insurer drafts the policy, ambiguities are generally construed against the insurer.

Question 5Insurance Principles and Concepts

An insurance contract is aleatory because:

  1. it is void if the insured cannot read the policy
  2. both parties exchange equal value at the same time
  3. it must be signed by both parties before coverage begins
  4. the amounts exchanged may be unequal after a loss Correct answer.

Explanation

Aleatory means the parties' exchange is conditional and may be unequal; the insured pays a premium and may receive a much larger payment, or no payment, depending on chance.

Question 6Insurance Principles and Concepts

The declarations page of a policy typically shows:

  1. the named insured, policy period, limits, and deductible Correct answer.
  2. the insurer's confidential claim handling guidelines
  3. the complete legal definitions of every policy term
  4. the full text of all applicable state insurance regulations

Explanation

The declarations page identifies the named insured and summarizes key policy information such as dates, limits, deductible, and covered property. The definitions and conditions appear elsewhere in the policy.

Question 7Insurance Principles and Concepts

A deductible in a property policy primarily serves to:

  1. eliminate the need to report a claim promptly
  2. increase the policy limit after a covered loss
  3. make the insured bear part of each covered loss Correct answer.
  4. automatically guarantee payment of the full replacement cost

Explanation

A deductible is the amount the insured absorbs before the insurer pays on a covered loss. It reduces small claims and premium while keeping the insured sharing in the loss.

Question 8Insurance Principles and Concepts

Subrogation allows an insurer that has paid a covered loss to:

  1. collect additional premium from the insured
  2. cancel the policy without giving notice
  3. avoid paying a claim because the insured was negligent
  4. pursue the responsible third party in the insured's name Correct answer.

Explanation

After paying a covered loss, the insurer may step into the insured's shoes and pursue a third party who caused the loss. This helps prevent the insured from recovering twice and holds responsible parties accountable.

Question 9Insurance Principles and Concepts

Under a typical property policy, actual cash value is calculated as:

  1. original purchase price plus inflation
  2. market value plus the deductible
  3. replacement cost less depreciation Correct answer.
  4. replacement cost plus depreciation

Explanation

Actual cash value generally reflects the cost to replace the property minus depreciation. It measures the property's value at the time of loss rather than the cost of a brand-new replacement.

Question 10Insurance Principles and Concepts

Replacement cost coverage differs from actual cash value coverage because replacement cost:

  1. uses the property's tax assessment as the basis
  2. pays to replace without deducting depreciation Correct answer.
  3. applies only to liability claims
  4. always pays more than the policy limit

Explanation

Replacement cost coverage pays the cost to repair or replace with new property of like kind and quality, without deducting depreciation, subject to the policy limit. Actual cash value deducts depreciation.

Question 11Insurance Principles and Concepts

A coinsurance clause in a commercial property policy is designed to:

  1. limit coverage to one occurrence per policy
  2. penalize the insurer for canceling midterm
  3. require the insured to use a specific contractor
  4. require insurance to a stated percentage of value Correct answer.

Explanation

A coinsurance clause encourages the insured to carry limits at a specified percentage of the property's value. If the insured carries less, a covered loss may be reduced by a coinsurance penalty.

Question 12Insurance Principles and Concepts

In property claims, proximate cause is best described as:

  1. any cause remotely connected to the loss
  2. the event that physically touches the damaged property
  3. the dominant cause that sets the loss in motion Correct answer.
  4. the last event before the loss occurs

Explanation

Proximate cause is the efficient or dominant cause that sets in motion the chain of events resulting in loss. It helps determine whether a loss falls within covered perils rather than looking only at the final event.

Question 13Insurance Principles and Concepts

An insurance binder provides:

  1. proof that all future premiums have been paid
  2. permanent coverage that cannot be canceled
  3. temporary proof of coverage until the policy is issued Correct answer.
  4. a guarantee that the policy will never be endorsed

Explanation

A binder is temporary evidence that coverage is in force until the policy is issued or the binder expires. It is subject to the terms of the eventual policy.

Question 14Insurance Principles and Concepts

Which statement distinguishes a warranty from a representation in insurance?

  1. A warranty is made after a loss; a representation is made before.
  2. A warranty applies only to liability; a representation only to property.
  3. A warranty is always oral; a representation is always written.
  4. A warranty is guaranteed true; a representation is believed true. Correct answer.

Explanation

A warranty is a statement or condition that the insured guarantees to be true. A representation is a statement the insured believes to be true, and a material misrepresentation can affect coverage.

Question 15Insurance Principles and Concepts

If an insurer knowingly accepts late premium payments for several months and then denies coverage for a later late payment, the insured may argue:

  1. salvage
  2. subrogation
  3. waiver and estoppel Correct answer.
  4. contribution

Explanation

Waiver is the voluntary relinquishment of a known right, and estoppel can prevent an insurer from asserting a right after the insured reasonably relied on the insurer's conduct. Accepting late payments may support that argument.

Question 16Insurance Principles and Concepts

Contribution among insurers applies when:

  1. a policy contains a deductible clause
  2. the insured has no insurable interest in the property
  3. an insurer pays more than its share of a shared loss Correct answer.
  4. every policy excludes the loss

Explanation

Contribution allows an insurer that paid more than its share of a loss covered by multiple policies to seek proportionate recovery from the other insurers. It prevents one insurer from bearing a disproportionate burden.

Question 17Insurance Principles and Concepts

After paying a total loss, an insurer may sell damaged property for salvage because:

  1. the insurer loses all rights to the property after payment
  2. the insured must always keep the damaged property
  3. salvage cuts insurer loss; abandonment requires consent Correct answer.
  4. salvage sales are required by the deductible clause

Explanation

When an insurer pays a total loss, it may take the salvage and sell it to reduce the amount of the loss. The insured cannot abandon damaged property to the insurer without the insurer's consent.

Question 18Insurance Principles and Concepts

Policy exclusions are used primarily to:

  1. expand coverage beyond the insuring agreement
  2. remove certain risks from the coverage grant Correct answer.
  3. set the premium charged for the policy
  4. describe the insured's duties after a loss

Explanation

Exclusions carve out specified risks, property, or circumstances that would otherwise fall within the insuring agreement. They help define the boundaries of coverage.

Question 19Insurance Principles and Concepts

An occurrence limit applies to:

  1. only the first claim ever submitted
  2. the total premium paid during the year
  3. all claims during the policy period combined
  4. each occurrence or event that causes loss Correct answer.

Explanation

An occurrence limit caps payment for each occurrence or event that causes loss. An aggregate limit, by contrast, caps total payments across multiple occurrences during the policy period.

Question 20Insurance Principles and Concepts

Conditions in an insurance policy generally state:

  1. the property and perils covered by the policy
  2. the insured's duties and coverage enforcement rules Correct answer.
  3. the insurer's promise to pay covered claims
  4. the schedule of exclusions and definitions

Explanation

Conditions set out obligations and procedural rules, such as reporting a loss, providing proof of loss, and cooperating with the investigation. They also address enforcement matters such as appraisal and suit limitations.

Question 21Insurance Principles and Concepts

When a loss results from a covered risk and an excluded risk acting together, the efficient proximate cause rule generally asks:

  1. which peril was the dominant cause of the loss Correct answer.
  2. whether the claim was reported within 24 hours
  3. whether the excluded risk occurred first in time
  4. whether the insurer inspected the property first

Explanation

The efficient proximate cause rule looks to the dominant cause that set the loss in motion. If the efficient cause is covered, the loss may be covered even if an excluded peril also contributed.

Question 22Insurance Principles and Concepts

Under Texas's valued policy law, if a policy insures real property for an agreed value and the property is a total loss, the insurer generally must:

  1. pay the value set by the tax assessor
  2. pay only actual cash value regardless of policy amount
  3. pay the agreed policy amount for a total loss Correct answer.
  4. pay nothing if depreciation exceeds the policy limit

Explanation

Texas's valued policy law addresses total losses to real property and generally makes the insurer liable for the full amount stated in the policy, subject to policy terms and the loss being total. It is intended to avoid disputes over value after a total loss.

Question 23Insurance Principles and Concepts

After receiving all items it requested, Texas prompt payment rules require an insurer to:

  1. accept or reject the claim within 15 business days Correct answer.
  2. pay the full claim five business days after first notice
  3. wait for the insured to file suit before deciding
  4. deduct a mandatory penalty from every payment

Explanation

Texas prompt payment rules require the insurer to notify the claimant of acceptance or rejection within a specified period, generally 15 business days after receiving all requested items. If accepted, payment is then due within a short period set by statute.

Question 24Insurance Principles and Concepts

Under the made-whole doctrine, an insurer's subrogation recovery generally:

  1. cannot be enforced until the insured is fully paid Correct answer.
  2. has priority over the insured's unpaid loss
  3. bars the insured from suing the third party
  4. applies only to workers' compensation claims

Explanation

The made-whole doctrine generally gives the insured priority to be fully compensated for the loss before the insurer enforces subrogation. It prevents the insurer from taking recovery while the insured remains unpaid.

Question 25Insurance Principles and Concepts

If an insured intentionally misrepresents a material fact on an insurance application, the insurer may:

  1. rescind the policy if the misstatement was material Correct answer.
  2. only increase the deductible after a claim
  3. pay the claim under the adhesion doctrine
  4. never rescind a policy after it is issued

Explanation

A material misrepresentation on an application can allow the insurer to rescind the policy or deny coverage because the insurer relied on inaccurate information in issuing the policy. The misstatement generally must be material to the risk.

Question 26Insurance Principles and Concepts

Which type of risk is generally considered insurable by a private insurer?

  1. Speculative risk, in which either gain or loss is possible
  2. Market risk, in which prices may move in either direction
  3. Pure risk, in which only loss or no loss is possible Correct answer.
  4. A certainty of loss, where only the timing is unknown

Explanation

Private insurers write pure risk because the outcome is either loss or no loss, and the frequency and severity of such accidental losses can be predicted across a large pool of exposures. Speculative risks involve the chance of gain and are generally left to investors rather than insurers.

Question 27Insurance Principles and Concepts

Insurable interest in property insurance must exist at which point in time?

  1. At the time of the loss Correct answer.
  2. Only when the application is signed
  3. Continuously from the policy's effective date through expiration
  4. Only when the proof of loss is filed

Explanation

Property insurance requires insurable interest at the time of loss, because the insured must actually suffer financial detriment from the damage. Life insurance follows a different rule and requires interest only when the policy is issued.

Question 28Insurance Principles and Concepts

The principle of indemnity provides that a covered loss should do which of the following?

  1. Pay the full policy limit for every covered loss
  2. Provide a fixed benefit regardless of the loss size
  3. Pay the insured more than the amount of the loss
  4. Restore the insured's pre-loss financial position Correct answer.

Explanation

Indemnity means the insured is put back in approximately the same financial position as before the loss, no better and no worse. Valuation methods, deductibles, and policy limits all exist to keep recoveries within that boundary.

Question 29Insurance Principles and Concepts

A homeowner stores gasoline cans beside a gas-fired water heater. For insurance purposes, this condition is best described as:

  1. A moral hazard
  2. A physical hazard Correct answer.
  3. A catastrophe exposure
  4. A speculative risk

Explanation

Physical hazards are tangible conditions, such as flammable storage or faulty wiring, that increase the chance or severity of a loss. They are distinguished from moral hazard, which involves a dishonest tendency, and morale hazard, which involves indifference or carelessness.

Question 30Insurance Principles and Concepts

Underwriting is designed largely to guard against adverse selection, which occurs when:

  1. Repair costs rise faster than premiums, reducing rate adequacy
  2. Insurers decline to write any coverage in certain geographic areas
  3. High-risk applicants buy coverage more readily than low-risk ones Correct answer.
  4. Policyholders drop their coverage shortly after filing a claim

Explanation

Adverse selection is the tendency of those most likely to suffer a loss to seek or keep insurance, which can force premiums upward unless risks are classified and priced accordingly. Insurers respond with underwriting standards, exclusions, and experience-based rating.

Question 31Insurance Principles and Concepts

A producer takes a homeowners application, collects the first premium, and tells the applicant the coverage is in force. The insurer has not yet issued the policy. The insurer is generally bound because the producer had:

  1. A fiduciary duty to underwrite the risk
  2. Only a courtesy role with no binding power
  3. Apparent authority to bind coverage Correct answer.
  4. No binding authority until the policy is issued

Explanation

Producers ordinarily hold express and implied authority to bind coverage for the insurer, and third parties may rely on that apparent authority. The insurer is therefore bound even though the policy document has not yet been issued.

Question 32Insurance Principles and Concepts

In a standard property policy, the insuring agreement is the part that:

  1. States the insurer's promise to pay covered losses Correct answer.
  2. Lists the insured's duties after a loss
  3. Shows the named insured, limits, and policy period
  4. Identifies the perils the policy excludes

Explanation

The insuring agreement contains the insurer's core promise to pay for loss from covered perils occurring during the policy period, subject to the rest of the form. Declarations, conditions, and exclusions each perform different functions.

Question 33Insurance Principles and Concepts

An insured adds an endorsement scheduling a specific item of jewelry to a homeowners policy. The endorsement generally:

  1. Converts the policy into a commercial property form
  2. Changes the base form's terms for that item Correct answer.
  3. Extends the policy's expiration date by one year
  4. Erases the base policy's existing coverage entirely

Explanation

Endorsements amend the base policy, and where an endorsement conflicts with the printed form, the endorsement controls. A jewelry schedule commonly adds or changes coverage for the described item, such as special limits or additional perils.

Question 34Insurance Principles and Concepts

Under a claims-made liability policy, coverage is triggered when:

  1. The insurer approves the insured's renewal application
  2. The injurious act or damage takes place during the policy period
  3. A claim is first made against the insured in the policy period Correct answer.
  4. The policy's retroactive date is reached

Explanation

A claims-made form responds to claims first made against the insured during the policy period, subject to any retroactive date and reporting requirements, regardless of when the act occurred. An occurrence form instead uses the date of injury or damage.

Question 35Insurance Principles and Concepts

A primary insurer purchases reinsurance chiefly in order to:

  1. Spread large or catastrophic losses and add capacity Correct answer.
  2. Guarantee an underwriting profit on every policy
  3. Satisfy state requirements for policy form filings
  4. Transfer its claim-handling duties to the reinsurer

Explanation

Reinsurance is insurance for insurers: it spreads severity, protects surplus, and allows the primary insurer to write more business than its capital would otherwise support. The reinsurer does not deal directly with the insured and does not take over claims.

Question 36Insurance Principles and Concepts

An insurance policy is described as a unilateral contract because:

  1. Only the insurer makes a legally enforceable promise Correct answer.
  2. The policy is issued on a take-it-or-leave-it basis
  3. Both parties exchange promises of equal value
  4. The insured may cancel at any time without notice

Explanation

In a unilateral contract only one party, the insurer, makes an enforceable promise, and that promise is conditioned on the insured paying premium and satisfying policy conditions. The insured's payment is an act rather than a reciprocal promise.

Question 37Insurance Principles and Concepts

An aleatory contract is one in which:

  1. The amounts exchanged depend on an uncertain event Correct answer.
  2. Both parties perform their duties at the same time
  3. The parties exchange promises of exactly equal value
  4. The insurer pays only after a court enters judgment

Explanation

Insurance is aleatory because the premium paid and the benefit received are unequal and depend on whether an insured event occurs; a modest premium can produce a large payment. That uncertainty is central to how insurance transfers risk.

Question 38Insurance Principles and Concepts

A liability policy requires the insurer to defend the insured against covered suits. Which statement best reflects the relationship between the duty to defend and the duty to indemnify?

  1. The two duties are coextensive and end at the same time
  2. The duty to indemnify is broader because it includes defense costs
  3. The duty to defend arises only if liability is established
  4. The duty to defend is broader than the duty to indemnify Correct answer.

Explanation

The duty to defend is measured by the allegations of the complaint, so the insurer defends whenever the allegations state a potentially covered claim, even if the suit is groundless or ultimately unsuccessful. The duty to indemnify is narrower and arises only when liability for a covered loss is actually established.

Question 39Insurance Principles and Concepts

A policy provision is genuinely ambiguous, and the ambiguity cannot be resolved from other policy language. A court will most likely:

  1. Adopt the reading most favorable to the insurer
  2. Refer the wording to the state insurance department
  3. Construe the provision against the insurer Correct answer.
  4. Void the entire policy for uncertainty

Explanation

Because insurance is a contract of adhesion drafted by the insurer, ambiguities are construed in favor of the insured and against the drafter under the contra proferentem rule. The rule applies only when the language is genuinely susceptible to more than one reasonable meaning.

Question 40Insurance Principles and Concepts

After a covered partial loss, an insured writes to the insurer, "The building is yours; pay me the full limit." Under a standard property policy, the insured most likely:

  1. Cannot abandon the property to the insurer without its consent Correct answer.
  2. Is entitled to the full limit because the loss is partial
  3. Has validly exercised a right to transfer salvage
  4. May compel payment of the full limit by tendering the property

Explanation

Property policies contain a no-abandonment condition, meaning the insured cannot surrender damaged property to the insurer and demand the limit. Salvage belongs to the insurer only after it pays the loss and elects to take the property, and recovery is otherwise limited to the actual loss up to the limit.

Question 41Texas Insurance Law and Regulations

Which state agency is responsible for regulating the Texas insurance industry and issuing adjuster licenses?

  1. Texas Department of Licensing and Regulation
  2. Texas Workforce Commission
  3. Texas Department of Insurance Correct answer.
  4. Texas Office of Consumer Credit Commissioner

Explanation

The Texas Department of Insurance administers the Texas Insurance Code, charters and examines insurers, and licenses adjusters, agents, and other insurance professionals. The other named agencies regulate occupations or programs outside the insurance code.

Question 42Texas Insurance Law and Regulations

Under the Texas Insurance Code, a person who investigates and settles insurance claims for an insurer for compensation generally must hold which of the following?

  1. A surety bond filed with the county clerk of the home county
  2. A certificate of authority issued by the Texas Secretary of State
  3. A Texas adjuster license Correct answer.
  4. A Texas real estate broker license

Explanation

Texas requires persons who investigate, adjust, or settle claims for an insurer to be licensed as adjusters by the Texas Department of Insurance. Licensing is the mechanism through which the state enforces adjuster competence and conduct standards.

Question 43Texas Insurance Law and Regulations

How often must a Texas adjuster license be renewed?

  1. Every four years, in even-numbered years
  2. Every two years Correct answer.
  3. Each year on the licensee's birth date
  4. Every three years on December 31

Explanation

Texas adjuster licenses are issued on a two-year term and must be renewed with the required continuing education completed. Annual and multi-year cycles do not match the Texas renewal schedule.

Question 44Texas Insurance Law and Regulations

To renew a Texas adjuster license, the licensee must complete continuing education consisting of:

  1. 30 hours, including at least 6 hours of ethics
  2. 12 hours, including at least 1 hour of ethics
  3. 20 hours, including at least 4 hours of ethics instruction
  4. 24 hours, including at least 2 hours of ethics Correct answer.

Explanation

Texas requires adjusters to complete 24 hours of continuing education per two-year license term, with a minimum of 2 of those hours devoted to ethics. The requirement must be satisfied before the license can be renewed.

Question 45Texas Insurance Law and Regulations

An insurer receives notice of a claim. Under the Texas Prompt Payment of Claims Act, the insurer must acknowledge receipt of the claim within:

  1. 45 days
  2. 15 days Correct answer.
  3. 30 days
  4. 60 days

Explanation

The Act requires the insurer to acknowledge receipt of a claim not later than the 15th day after receiving notice of the claim. During that same window the insurer must begin its investigation and request any items it reasonably needs.

Question 46Texas Insurance Law and Regulations

An insurer has received all items, statements, and forms it requested from a claimant. Under the Texas Prompt Payment of Claims Act, the insurer must notify the claimant in writing of acceptance or denial of the claim within:

  1. 20 days
  2. 5 business days
  3. 30 days
  4. 15 days Correct answer.

Explanation

Once the insurer has received everything it reasonably requested to evaluate the claim, it has 15 days to notify the claimant in writing that the claim is accepted or denied. The notice must state the reasons for a denial.

Question 47Texas Insurance Law and Regulations

After notifying a claimant in writing that a claim is accepted, the insurer must pay the claim within:

  1. 5 business days Correct answer.
  2. 2 business days
  3. 15 days
  4. 10 business days

Explanation

The Act requires payment not later than the fifth business day after the insurer notifies the claimant that the claim is accepted. Payment delayed beyond that point can trigger statutory interest and fee liability.

Question 48Texas Insurance Law and Regulations

An insurer is found liable for a claim but delayed payment beyond the deadlines in the Texas Prompt Payment of Claims Act. In addition to the claim amount, the insurer is liable for:

  1. A 10 percent statutory penalty plus court costs only
  2. 6 percent simple interest on the claim, with no other recovery
  3. 18 percent per year plus attorney's fees Correct answer.
  4. 12 percent interest plus treble damages

Explanation

The Act imposes interest at 18 percent per year on the amount of the claim, plus reasonable and necessary attorney's fees, when the insurer delays payment and is ultimately found liable. This penalty applies in addition to the underlying policy benefits.

Question 49Texas Insurance Law and Regulations

The Texas Prompt Payment of Claims Act applies to which of the following?

  1. Only claims arising from weather-related losses
  2. A liability claim asserted by a third party against an insured person
  3. Any claim handled by a surplus lines insurer
  4. A first-party claim under the insured's own policy Correct answer.

Explanation

The Act governs first-party claims, meaning claims by an insured seeking benefits under its own policy. Third-party liability claims are not within the Act's deadlines and penalty provisions.

Question 50Texas Insurance Law and Regulations

Under the Texas Prompt Payment of Claims Act, an insurer may extend the 15-day period to accept or deny a claim if it notifies the claimant in writing of the reasons the extension is needed. What is the maximum length of that extension?

  1. 45 days Correct answer.
  2. 60 days
  3. 15 days
  4. 90 days

Explanation

The insurer may extend the decision period by not more than 45 days, and only if it gives the claimant written notice explaining why more time is needed. An extension beyond 45 days is not authorized by the statute.