Texas Property & Casualty Insurance Exam — Complete Study Guide (2026)

Outline reference: Texas Property and Casualty Agent State Specific outline, Section II (Texas statutes and rules pertinent to property and casualty insurance), item D, Homeowner's insurance: 1. Declination, cancellation, nonrenewal (TIC 551.001-.113); 2. Texas FAIR Plan Association (TIC 2211.051-.059); 3. Texas Windstorm Insurance Association (TIC 2210.001-.084); 4. Loss settlement provisions (TIC 542.051-.061; 542.15-.154); 5. Liquidated demand (TIC 862.053). Section II carries a printed weight of 12 of the 30 scored Texas items, shared with rates and forms, automobile, workers' compensation and the guaranty associations (Chapters 9, 13 and 14).

Homeowners law is where Texas looks least like the national content. Hurricanes and hail produced two insurers of last resort, a claim-payment statute with an interest penalty, and a fire-loss rule that makes the policy amount a liquidated demand. The Texas Personal Lines P&C license is a separate license with its own exam and is not covered by this book.

12.1 How to Read This Chapter

Source note. Insurance Code text was read on October 15, 2026 at statutes.capitol.texas.gov; 28 TAC 5.7002 was read on the Cornell LII mirror of the TAC the same day (confirm on the official TAC). Many sections here were amended in 2025 (89th Legislature), and the chapter flags them. Dollar amounts that are indexed or set by commissioner order are labeled; confirm them with TDI or the association before relying on them. This book is an independent study guide, not an approved course, and is not affiliated with TDI or Pearson VUE.

12.2 Declination, Cancellation and Nonrenewal (Outline II.D.1)

Outline "Ref": TIC 551.001-.113. Homeowners rules are in Subchapter C (551.101-.113); Subchapter A is general; Subchapter B is commercial.

Scope and vocabulary

Subchapter C applies only to a personal auto policy (other than one written through the Texas Automobile Insurance Plan Association), a homeowners or farm or ranch owners policy, a standard fire policy on a one-family dwelling or duplex (or the contents of a dwelling, duplex or apartment), and P&C policies issued to the state and its political subdivisions. (TIC 551.102) TWIA and the FAIR Plan have their own rules. An insurer cancels when, without the insured's consent, it terminates coverage, refuses additional coverage the insured is entitled to, or reduces or restricts coverage by endorsement or other means (a properly noticed renewal change excepted). (TIC 551.103) Moving a policyholder between admitted companies in the same insurance group is not a refusal to renew. (TIC 551.004)

When a homeowners policy may be cancelled (TIC 551.104)

An insurer may cancel only as the section allows.

A cancellation for non-payment, a fraudulent claim, a regulatory violation or a hazard increase takes effect no earlier than the 10th day after the insurer mails notice. (TIC 551.104(e)) An inspection report is considered accepted unless the insurer rejects it before the 11th day after receipt. (TIC 551.104(h)) The 2023 amendment (Acts 2023, 88th Leg.) added the two special homeowners grounds for the first 60 days. The TDI rule on the LII mirror speaks of cancelling a homeowners policy "in effect for more than 59 days" only for the usual reasons, which matches the 60-day line, and bars dating or sending a non-payment cancellation before the premium due date. (28 TAC 5.7002(b)-(d)) A cancellation in violation of the subchapter has no effect. (TIC 551.111)

Nonrenewal and renewal changes

• Sixty days. Unless the insurer mailed written notice of nonrenewal, or of renewal with written notice of a change in coverage, not later than the 60th day before the policy expires, it must renew at the insured's request. Even if late, the policy ends on the effective date of a replacement policy with another carrier. (TIC 551.105)
• Changes on renewal. A change on renewal is not a cancellation or nonrenewal if the insurer gives written notice of each material change (reduced coverage, changed conditions, changed duties of the insured) in a conspicuous place, in plain language, not later than the 30th day before renewal, and gives agents written notice 30 days before the new form is first used. (TIC 551.1055; 2002.001; 2002.102)
• Claims-based surcharge and nonrenewal (standard fire, homeowners, farm and ranch owners). Claims caused by natural causes, claims not paid or payable, and water claims barred by TIC 544.353 do not count. An insurer may surcharge at renewal after two or more claims in the preceding three policy years, in an actuarially sound amount. It may refuse to renew after three or more claims in any three-year period, but only if after the second claim it sent a warning notice listing the claims and carrying the statutory warning sentence. Without that notice there is no claims-based nonrenewal. (TIC 551.107)
• Customer inquiry. A call or communication that does not result in an investigation or claim, including questions about the claim process or whether a loss would be covered, cannot be a basis to decline, nonrenew or cancel a homeowners policy. (TIC 551.113)
• Underwriting limits. Mold and water-damage history rules (Chapter 11) also limit declination and nonrenewal; a church may not be cancelled or nonrenewed solely for arson or a reported threat; an elected official's policy may not be cancelled or nonrenewed solely because of the office. (TIC 544.303, 544.353, 544.253, 551.152)
• Tying (2025). A homeowners policy may not be conditioned on buying personal auto from the same or an affiliated insurer, or the reverse; there is no private action. (TIC 551.251-.254)
• Disclosure of flood exclusion. A residential property insurer must include a conspicuous flood-insurance statement with policy documents at issue and renewal when the policy has no flood coverage. Failure does not invalidate the exclusion. (TIC 2002.103)

Reasons, reports and notices (2025 amendments, effective January 1, 2026)

An insurer that declines a completed and submitted application, or cancels or nonrenews, must give a written statement of reasons that fully explains the decision, states the precise incident, circumstance or risk factors and the source of the information. (TIC 551.002, 551.109) Under House Bill 2067 (Acts 2025, 89th Leg.), insurers also file a quarterly report of reasons with TDI organized by ZIP code (workers' compensation excepted), posted in aggregate without naming insurers; notices may be delivered electronically; and for commercial declinations the notice goes to the applicant's agent, who must disclose it to the applicant. (TIC 551.006-.008, 551.0521) Good-faith statements carry immunity unless known false or made with malice. (TIC 551.003, 551.110)

Contrast: commercial lines (Subchapter B)

A liability or commercial property policy that is a renewal may not be cancelled, and an initial term policy may not be cancelled after the 60th day, except for fraud, non-payment, increased hazard in the insured's control, or loss of reinsurance. Notice of cancellation is due at least 10 days before effect; nonrenewal notice 60 days before expiration, and a late notice extends coverage to the 61st day after notice. (TIC 551.052-.054) Homeowners law has no such extension: a late notice means the insurer renews on request.

12.3 The Texas FAIR Plan Association (Outline II.D.2)

Outline "Ref": TIC 2211.051-.059, read with Chapter 2211 as a whole.

Purpose and creation. The commissioner may establish a Fair Access to Insurance Requirements Plan to deliver residential property insurance in underserved areas if, after a public hearing, the commissioner finds that residential property insurance is not reasonably available in the voluntary market to a substantial number of insurable risks in all or part of the state, or that at least 25 percent of qualified applicants to the residential property market assistance program have not been placed in the preceding six months. (TIC 2211.051(a)) The commissioner designates underserved areas by rule. (TIC 2211.152) "Residential property insurance" means homeowners, residential fire and allied lines, and farm and ranch owners coverage. (TIC 2211.001) The plan may add property owners' association insurance (common areas of homeowners' and condominium associations) in an area reaching up to 10 miles beyond the TWIA catastrophe area. (TIC 2211.051(b), 2211.1515)

Administration. An 11-member governing committee, appointed by the commissioner, runs the plan under a plan of operation: five insurer representatives, four public members and two general P&C agents, with the commissioner or a designee ex officio. (TIC 2211.052) The plan of operation provides for a nonprofit association that issues policies in its own name, immediate binding of eligible risks, premium installments, deductibles, maximum limits, agent commissions for submitting applications and reinsurance. (TIC 2211.054-.055) Every insurer writing residential property must participate, in proportion to net direct premiums written; TWIA may not participate. (TIC 2211.101) Rates must carry claims to maturity and cover expenses; the commissioner approves or disapproves within 60 days, extendable 30 days, and no policy issues before rate approval. (TIC 2211.056) The association files a public annual operating report by March 31. (TIC 2211.058) Suits on a policy are brought only against the association. (TIC 2211.055(b))

Eligibility. The association must make coverage available to each applicant in an underserved area whose property is insurable under reasonable underwriting standards but who, after diligent efforts, cannot get residential property insurance, as shown by two declinations from authorized insurers writing it. (TIC 2211.151) A person with an insurable interest may apply for an inspection and evaluation; a general or personal lines P&C agent may apply for the applicant on the association's form. If the property meets standards, the association issues a policy or binder; if not, the applicant gets written reasons and is entitled to one reinspection on or before the 60th day after the first inspection. (TIC 2211.154-.155)

The windstorm carve-out. The FAIR Plan may not provide windstorm and hail coverage for a risk eligible for that coverage under Chapter 2210 (TWIA), though it may cover structures built over water with limits and deductibles. (TIC 2211.156-.157) A Galveston dwelling in the TWIA catastrophe area may therefore need both: FAIR Plan for fire and other perils, TWIA for wind and hail.

Money. Participating insurers share losses in proportion to net direct premiums; an insolvent insurer's unpaid assessment is redistributed. (TIC 2211.102-.103) On a deficit, at the commissioner's direction, the association may request revenue bonds (up to $75 million in total, maturing within 10 years, issued by the Texas Public Finance Authority) or assess insurers. (TIC 2211.104, 2211.205-.206) Insurers recoup an assessment or bond service fee by a premium surcharge on policies effective within three years starting on the 90th day after payment, set as a uniform percentage equal to one-third of the ratio of the assessment to direct earned premium. (TIC 2211.104(b)-(c)) The association keeps its profits to mitigate losses and offset assessments, and may not distribute them to insurers. (TIC 2211.105) An applicant or insurer may appeal to the association, and then to the commissioner within 30 days. (TIC 2211.003)

12.4 The Texas Windstorm Insurance Association (Outline II.D.3)

Outline "Ref": TIC 2210.001-.084. The chapter continues past .084; this section teaches the parts the outline's topics reach. Chapter 2210 was amended extensively in 2025 (House Bill 3689, Acts 2025, 89th Leg.). Some changes took effect September 1, 2025 and others take effect September 1, 2027, as flagged below.

Purpose, territory and membership

TWIA exists to provide an adequate market for windstorm and hail insurance in the seacoast territory, as a residual insurer of last resort that must not be a direct competitor in the private market. (TIC 2210.001) The seacoast territory is the 14 first tier coastal counties (Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, Willacy) plus 14 second tier coastal counties (Bee, Brooks, Fort Bend, Goliad, Hardin, Harris, Hidalgo, Jackson, Jim Wells, Liberty, Live Oak, Orange, Victoria, Wharton). (TIC 2210.003) TWIA writes only in a catastrophe area, which the commissioner designates after at least 10 days' notice and a hearing, on finding that windstorm and hail insurance is not reasonably available to a substantial number of owners of insurable property in territory subject to unusually frequent and severe damage. (TIC 2210.005) Covered is deductible insurance against direct loss from windstorm or hail and indirect losses resulting from it. (TIC 2210.003(13))

Every insurer authorized to write property insurance must be a member, with limited exceptions such as farm mutuals that are not fronting insurers. (TIC 2210.006, 2210.051) A member shares insured losses and operating expenses above premium in proportion to its net direct premiums in the preceding calendar year; a new member is exempt until its second anniversary. (TIC 2210.052)

Board, plan of operation and agents

The nine-member board is accountable to the commissioner. The commissioner appoints three insurance-industry members who write windstorm and hail in the first tier counties, three first-tier-county residents (one for each of three regions, at least one a licensed, non-captive P&C agent who sells TWIA policies) and three residents outside the catastrophe area. Terms are three years, staggered, with a limit of three consecutive full terms. (TIC 2210.101-.103; amended 2023 and 2025) The commissioner adopts the plan of operation by rule with the board's advice. (TIC 2210.151-.153) Agents who sell TWIA policies are not agents of the association; the association may set requirements and audit them. (TIC 2210.016)

Eligibility and insurable property

Insurable property is immovable property at a fixed location in a catastrophe area, or movable property in it, in insurable condition under normal underwriting standards. (TIC 2210.004) Construction or repair begun after the 2009 reforms (June 19, 2009) must meet the plan's building code standards, and the association may not insure it until a certificate of compliance issues, with exceptions for a residential structure cancelled or nonrenewed in the private market and a 30-day temporary-cover window. (TIC 2210.258) A noncompliant residential structure pays an annual surcharge of 15 percent of premium (10 percent, on a voluntary-market-based premium, for the private-market-nonrenewal exception). (TIC 2210.259) The association may not cover a wind turbine. (TIC 2210.210)

Declination. The association must make coverage available to an applicant in the catastrophe area with insurable property who, after diligent efforts, cannot get it in the voluntary market, as shown by one declination from an insurer writing windstorm and hail in the first tier counties; one declination every three calendar years is required before renewal. (TIC 2210.202(a)) A P&C agent submits the initial application on the association's form, certifying possession of the declination and proof of flood insurance or its unavailability. (TIC 2210.202(b)) For structures built or enlarged on or after September 1, 2009 in designated areas, if any part is in Zone V or a similar wave-hazard zone and federal flood insurance is available, TWIA will not issue or renew without evidence of flood coverage, and the agent must offer flood insurance. (TIC 2210.203(a-1))

Policy terms

The policy is a one-year term, renewable annually while the property remains insurable; the association runs automatic renewal with an option for the insured to cancel first; the commissioner sets a renewal grace period of not more than 10 days. (TIC 2210.203, 2210.2031) The association must accept credit cards and offer installments, and premium financing is prohibited (provisions amended by H.B. 2518, 2025). (TIC 2210.2032) An insured-requested cancellation earns a refund of unearned premium only for purchase of similar voluntary coverage, sale to an unrelated party, total loss, or loss of insurability, with proof. (TIC 2210.204) The policy must require a claim to be filed within one year of damage (extendable up to 180 days for good cause) and carry boldface notice of appraisal and dispute procedures. (TIC 2210.205)

Replacement cost for one- and two-family dwellings follows an 80 percent rule: if the insurance on the effective date is at least 80 percent of full replacement cost (or the maximum available), loss is paid without depreciation; below that, liability is the replacement cost of the damaged part less depreciation. The commissioner may authorize actual cash value on roof coverings. (TIC 2210.207) Dwelling policies must include wind-driven rain (whether or not wind makes an opening), loss of use and consequential losses, where a voluntary companion policy excluded them. (TIC 2210.208)

Rates, discounts and surcharges

The association files rates, rules and forms with TDI; a general filing is considered approved unless disapproved within 30 days. (TIC 2210.351) It files an annual manual rate by August 15; the commissioner acts by October 15, after which the filing is considered approved. (TIC 2210.352) A rate not above the current rate and filed at least 30 days before use may take effect without approval (once a year); a filing for a rate above the current rate needs a two-thirds board vote. (TIC 2210.351(f), 2210.352) A rate may not reflect an average change of more than 10 percent for commercial or for noncommercial windstorm and hail insurance, or more than 15 percent for a single rating class, unless the commissioner suspends the limit after notice and hearing following a catastrophe. (TIC 2210.359) Rates must be reasonable, adequate, not unfairly discriminatory and nonconfiscatory. (TIC 2210.355) A discount or surcharge credit of up to 10 percent may be offered for a binding arbitration endorsement, and discounts for construction exceeding code. (TIC 2210.363)

Liability limits (indexed figures)

The board proposes maximum liability limits, deemed approved unless the commissioner disapproves or modifies within 30 days. The statute sets floors: at least $350,000 for a dwelling and its contents, $125,000 for contents in an owner-occupied apartment, condominium or townhouse unit, $1,500,000 for a structure other than a dwelling or public building, and $2,192,000 for a building occupied by a governmental entity as described. (TIC 2210.501(b)) The board proposes inflation adjustments by September 30 each year using the BOECKH Index; they apply to policies issued or renewed on or after the next January 1, and the commissioner may not approve limits below the floors. (TIC 2210.502-.504) Current limits are therefore above the statutory floors and change yearly; confirm the current figure with TWIA or TDI.