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Texas “All Lines Adjuster” License Exam Questions
and Correct Answers (Verified Answers) Plus
Rationales 2025
- What is the primary purpose of insurance? A. To reduce taxes B. To eliminate all risks C. To transfer risk D. To create wealth Insurance transfers financial risk from the insured to the insurer in exchange for a premium.
- Which of the following is NOT a type of hazard? A. Physical B. Moral C. Catastrophic D. Morale Catastrophic events are perils, not hazards. Hazards increase the likelihood of a peril occurring.
- In Texas, how many hours of continuing education are required every 2 years for adjuster license renewal? A. 12 hours
B. 15 hours C. 24 hours D. 30 hours Texas requires adjusters to complete 24 hours of CE, including 2 hours of ethics, every two years.
- What does indemnity mean in an insurance context? A. Profit for the insured B. Guaranteed payout C. Restoring the insured to their pre-loss condition D. Payment above the loss Indemnity is the principle of making the insured whole again, not better or worse.
- Which of the following is a first-party claim? A. A liability claim against the insured B. A property claim by the insured C. A lawsuit filed by a third party D. A workers’ compensation claim A first-party claim is filed by the policyholder for their own loss (e.g., property damage).
- Which Texas law protects consumers from unfair claims settlement practices? A. McCarran-Ferguson Act B. Texas Insurance Code - Chapter 541 C. National Claims Act
10.What is subrogation? A. Arbitration B. A type of deductible C. Insurer’s right to recover from a third party D. A coverage exclusion Subrogation allows insurers to recover losses from third parties legally responsible for the loss. 11.What does an adjuster primarily do? A. Sell insurance policies B. Determine coverage limits C. Investigate, evaluate, and settle claims D. Conduct audits Adjusters assess the loss and facilitate claim resolution. 12.Which of the following is considered a morale hazard? A. Careless behavior due to insurance coverage B. Arson C. Faulty wiring D. Insurance fraud Morale hazard refers to the insured's indifference to risk because they have insurance. 13.Which of these is a duty of the insured after a loss? A. Pay the claim B. Promptly notify the insurer C. Increase the loss
D. Deny liability The insured must promptly notify the insurer so the claim can be investigated. 14.When does an adjuster license expire in Texas? A. Every year on Jan 1 B. After 1 year from issuance C. Every 2 years on the licensee’s birth month D. Every 5 years on December 31 Texas adjuster licenses expire every 2 years on the last day of the adjuster's birth month. 15.What is an exclusion in an insurance policy? A. Something covered by the policy B. A risk or loss type that is not covered C. A bonus payout D. A deductible Exclusions remove coverage for certain perils, events, or types of property. 16.A proof of loss must typically be submitted within how many days after the insurer’s request? A. 15 days B. 91 days C. 180 days D. 365 days In Texas, policyholders usually have 91 days after the insurer requests a proof of loss.
D. Conditions Tax statements are not part of the insurance policy structure. 21.What is actual cash value (ACV)? A. Replacement cost minus depreciation B. Replacement cost only C. Market value plus inflation D. Face value of the policy ACV accounts for depreciation of the damaged item from its original cost. 22.What does the declarations page of a policy include? A. Only exclusions B. Only policy conditions C. Key details like names, coverage amounts, and dates D. The insurer’s financials The declarations page outlines who is covered, policy limits, deductibles, and policy period. 23.Under Texas law, what is the penalty for adjusting claims without a license? A. No penalty B. Fine and potential imprisonment C. Suspension from business D. Warning letter only Unlicensed activity can lead to fines and criminal penalties in Texas. 24.What is the standard of proof in a civil insurance claim case? A. Beyond a reasonable doubt B. Preponderance of the evidence
C. Probable cause D. Clear and convincing Civil cases require proof that the claim is more likely true than not (preponderance). 25.Which type of adjuster may work as an independent contractor representing multiple insurers? A. Staff B. Independent C. Public D. Fiduciary Independent adjusters are contracted and may work for various insurers. 26.What is the primary purpose of the insuring agreement in a policy? A. List the policy conditions B. List policy exclusions C. Outline what is covered D. Identify the agent The insuring agreement specifies the perils and losses covered under the policy. 27.What does the term "reservation of rights" mean in claim handling? A. A denial of the claim B. The insurer may not cover the claim despite investigating C. A cancellation notice D. A settlement offer
A. 15 days B. 5 business days C. 60 days D. 90 days Once a claim is accepted, payment must be issued within 5 business days. 32.An "occurrence" policy covers: A. Claims filed within the policy period only B. Losses that occur during the policy period, regardless of claim date C. Only claims reported immediately D. Life insurance benefits Occurrence policies cover incidents that happen during the policy period, even if reported later. 33.A fire that damages the insured’s garage is considered what type of loss? A. Consequential B. Liability C. Direct D. Indirect Direct loss is physical damage to the property from a covered peril. 34.Which of the following is a named peril? A. Open peril B. Hail damage C. Broad form D. All-risk Named perils are specifically listed in the policy, such as hail.
35.A claims adjuster who is dishonest about damages may be guilty of: A. Arbitration B. Insurance fraud C. Misrepresentation only D. Policy violation Knowingly submitting false information for a claim is insurance fraud. 36.In Texas, which entity oversees insurance regulation? A. NAIC B. FEMA C. Texas Department of Insurance (TDI) D. HUD TDI enforces insurance laws and licenses adjusters in Texas. 37.What is the purpose of salvage in property claims? A. To punish the insured B. To recover value from damaged property C. To assess depreciation D. To file subrogation Salvage allows insurers to sell damaged items to recover part of the claim payout. 38.A "non-waiver agreement" is signed when: A. The claim is denied B. Coverage is uncertain but investigation proceeds C. The claim is paid D. A deductible applies
C. The claim can be denied D. The insurer refers it to arbitration Failure to cooperate is a breach of the policy conditions and can void the claim. 43.An adjuster owes a duty of ___________ to both the insurer and the insured. A. Silence B. Loyalty only C. Good faith D. Profit Adjusters must act in good faith and handle claims honestly and fairly. 44.What type of liability applies regardless of fault? A. Comparative B. Absolute C. Strict D. Negligent Strict liability applies even if the defendant was not negligent, often seen in defective products. 45.A general release in a settlement does what? A. Extends coverage B. Ends all future claims related to the loss C. Increases claim value D. Only applies to bodily injury
A general release waives all rights to further claims arising from the same incident. 46.When is a recorded statement typically taken? A. Before a claim is filed B. During initial investigation C. After litigation D. Only in court Statements help document facts and are taken early in the investigation. 47.What’s the difference between an appraisal and arbitration? A. Appraisal settles legal disputes B. Appraisal determines value; arbitration settles disputes C. Appraisal is binding; arbitration is not D. They are the same Appraisal determines the value of the loss, not legal liability. 48.What type of coverage applies when a third party is injured due to the insured's negligence? A. Property B. Liability C. Medical payments D. Umbrella Liability insurance protects the insured against claims by others for bodily injury or property damage. 49.Which of the following best defines "bodily injury"? A. Emotional distress
53.A total loss occurs when: A. The insured rejects payment B. The cost to repair equals or exceeds the value of the property C. There is a deductible D. The claim is denied Total loss means it is not economically feasible to repair the property. 54.What is considered "proof of loss"? A. Receipt of premium B. Adjuster’s estimate C. A formal statement by the insured about the loss D. Policy limits Proof of loss is a sworn statement by the insured detailing the amount and circumstances of the loss. 55.Which type of insurance policy covers all perils unless excluded? A. Named peril B. Open peril C. Actual cash value D. Deductible policy Open peril (or all-risk) policies cover all losses unless specifically excluded. 56.In liability insurance, what is a "third party"? A. The insurance company B. The policyholder C. The person who suffers injury or damage caused by the insured D. The underwriter
Third parties are outside individuals or entities making claims against the insured. 57.A standard fire policy in Texas covers which of the following perils? A. Theft, water damage, earthquake B. Vandalism, mold, collapse C. Fire, lightning, and removal of property D. Flood, windstorm, explosion The standard fire policy includes fire, lightning, and removal to prevent further damage. 58.If a policy has an 80% coinsurance clause, the insured must carry what percentage of coverage to avoid a penalty? A. 60% B. 70% C. 80% D. 90% The insured must maintain at least 80% of the property's value in coverage to receive full claim payments. 59.What is a binder in insurance? A. A rejection notice B. A temporary agreement that provides coverage until a policy is issued C. A claim file D. A premium receipt Binders offer temporary protection until the actual policy is delivered.
D. Waive policy conditions A reservation of rights preserves the insurer’s right to deny the claim later. 64.An example of an insurable interest is: A. A neighbor’s car B. A home you own C. A rented hotel room D. A co-worker’s office Insurable interest exists when a person would suffer financial loss from property damage. 65.What does a "loss payable clause" do? A. Denies claim payment B. Cancels the policy C. Protects a third-party lender or lienholder D. Removes coverage It ensures a lender is paid in case of a covered loss involving financed property. 66.When can the Texas Department of Insurance audit an adjuster’s records? A. Only during tax season B. At any reasonable time C. Only with a court order D. Once per year The TDI may audit records during normal business hours without a court order.
67.When is an adjuster required to notify the TDI of a name or address change? A. Within 60 days B. Every renewal C. Within 30 days D. Only if the license is active Licensees must report name or address changes within 30 days. 68.What is the main function of reinsurance? A. Sell policies to individuals B. Spread risk among insurers C. Underwrite large group plans D. Cancel excess coverage Reinsurance allows insurers to transfer part of their risk to another company. 69.Which policy section lists the covered perils? A. Conditions B. Exclusions C. Insuring agreement D. Declarations The insuring agreement outlines the covered perils and what the policy protects. 70.When a loss is paid and the insurer gains rights to pursue a third party, this is: A. Arbitration
