TX Property & Casualty common mistakes
TX Property & Casualty · Understand the traps and how to avoid them.
Answers every cancellation-or-nonrenewal-notice question with a single memorized number (usually 30 days), instead of selecting the notice period that matches the specific situation described in the item.
Study outlines often list 'cancellation' and 'nonrenewal' side by side with one number each, so candidates collapse four or five distinct notice periods into one and then pick whichever figure appears most often among the answer choices.
What to do instead
Build and drill a five-row table before exam day: nonpayment of premium = 10 days' written notice; cancellation of a policy in force less than 60 days = 10 days (any reason); cancellation after 60 days = 30 days and only for permitted reasons; nonrenewal = 30 days; premium increase or change in coverage at renewal = 30 days. On each practice item, first identify which of the five situations is described, then recall the number.
Treats the Texas prompt-payment statute as a single deadline, or cannot state the penalty, when an item asks what happens to an insurer that misses a claim-handling milestone.
Candidates memorize '15 days' as a slogan and never attach it to the individual steps (acknowledge, accept or deny, pay), so questions that isolate one step or ask about the penalty have no anchor.
What to do instead
Learn the sequence as three separate clocks - 15 days to acknowledge receipt of the claim, 15 days to accept or deny, 5 days to pay after notice of acceptance - and separately memorize the consequence for violation: an additional 18% per year on the claim amount plus reasonable attorney's fees. Practice by writing the three clocks and the penalty from memory, then checking.
Assumes every Texas employer must carry workers' compensation coverage and answers questions about an employer's defenses as if coverage were mandatory.
Candidates generalize from other states, where coverage is compulsory, and never register Texas as the exception; the exam then tests the consequence of opting out rather than the obligation to buy.
What to do instead
Anchor the fact that Texas is the only state where workers' compensation is elective for most private employers, and pair it with what an employer gives up by opting out: the common-law defenses of contributory negligence, fellow-servant, and assumption of the risk. When you see a Texas employer question, ask 'covered or opted out?' before anything else.
Applies the wrong trigger to a liability policy - for example, asking whether the injury happened during the policy period when the policy is written on a claims-made basis, or looking for a retroactive date in an occurrence policy.
Both forms are described with similar language about 'injury during the policy period,' and the distinguishing element (when the claim is made) appears in a short definition that candidates skim.
What to do instead
Use a two-question routine on every liability trigger item: (1) Does the form ask when the injury or damage occurred or when the claim was made? (2) If claims-made, is there a retroactive date, and does a reporting extension apply? Only occurrence forms care solely about the date of injury; claims-made forms require both a covered event and a claim made/reported within the policy period or extended reporting period.
Computes a property loss settlement using replacement cost when the item asks for actual cash value, or vice versa, and then also mishandles the deductible.
The two valuation methods share the same arithmetic up to the final step, and candidates under time pressure grab the larger number or forget that depreciation is subtracted before the deductible is applied.
What to do instead
Write the two formulas out explicitly every time: ACV = replacement cost minus depreciation, then subtract the deductible; replacement cost = full cost to repair or replace with like kind and quality, then subtract the deductible, subject to the policy limit. Watch for the added condition that replacement cost is paid only after repair or replacement is actually completed, with ACV paid first.
Answers dwelling-fire-policy items with homeowners-policy features - assuming personal liability and medical payments coverage come automatically, or that the same replacement-cost and insurance-to-value rules apply.
Both product lines cover a dwelling and both use the DP/HO form numbering, so candidates study one set of forms and let it stand in for the other.
What to do instead
Memorize the boundary: dwelling forms (DP-1, DP-2, DP-3) are property-only - no Section II liability or medical payments to others unless added by endorsement - and they offer loss-of-use/rental-value coverage as an option rather than a standard percentage. The basic form settles the dwelling at actual cash value; broader forms provide replacement cost when the dwelling is insured to at least 80% of replacement cost. If an item mentions suits, guests, or injuries, it is not a dwelling form item.
Applies the coinsurance (insurance-to-value) penalty formula but then forgets to cap the result at the policy limit or mishandles the deductible, producing a settlement figure that is mathematically off.
The formula has three moving parts, and candidates who finally remember the ratio rush the last two steps because the hard part feels finished.
What to do instead
Do it in a fixed order every time: (1) required insurance = percentage × replacement cost; (2) ratio = insurance carried ÷ insurance required, capped at 1.0; (3) payment = ratio × loss; (4) subtract the deductible; (5) cap the payment at the policy limit. Write the five steps in the margin of your scratch paper before starting the calculation so the last steps cannot be skipped.
Keeps a homeowners policy in force on a dwelling after the named insured moves out and rents the house to tenants, or assumes a home-based business is covered because it is on the residence premises.
Candidates read 'the insured's house' and stop there, missing that the homeowners definition of 'residence premises' requires the named insured to actually reside there and that business pursuits are excluded.
What to do instead
Check two facts on every homeowners item: does the named insured reside at the described location, and is any income-producing activity involved? If the insured has moved out and rented the home, the exposure belongs on a dwelling policy. If a business operates from the home, look for the business-pursuits exclusion, the limited perils coverage for business property on premises, and the need for an endorsement or a commercial policy.
Treats the commercial general liability general aggregate as spendable per occurrence, or assumes the products-completed operations aggregate is a separate per-occurrence limit that stacks on top of the each-occurrence limit.
The declarations page lists five separate limits in similar type, and candidates memorize 'the aggregate' as a single concept without mapping which limit responds to which claim.
What to do instead
Draw the five CGL limits as a labeled diagram and practice assigning a fact pattern to each: each-occurrence limit caps one occurrence; the general aggregate caps all covered losses in the policy period other than products-completed operations; the products-completed operations aggregate is its own bucket; the personal and advertising injury limit is a sublimit; and damage to premises rented to you has its own small limit. Then confirm which limit a given claim draws down.
Applies the wrong notification window to a newly acquired auto, or denies liability coverage for a newly acquired auto altogether because the insurer was never told about the vehicle.
The 14-day and 4-day rules apply to different coverages, and candidates memorize one number without attaching it to physical damage versus liability.
What to do instead
Fix the rule by coverage, not by vehicle: liability coverage on a newly acquired auto is automatic with no notification requirement; physical damage coverage is automatic for 14 days if the policy already carries physical damage on at least one other auto; if the policy carries no physical damage on any auto, physical damage on the new vehicle applies only if the insured asks for it within 4 days. Also separate 'newly acquired' from 'temporary substitute' and from 'non-owned auto,' which have their own definitions.