Texas Personal Lines Deductible and Limit Practice Questions

Deductible and limit questions look like arithmetic, but the main challenge is choosing the right base and order. Is the amount a flat deductible or a percentage of Coverage A? Is the limit per person, per occurrence, per item, or aggregate? Does a sublimit apply before the deductible? These original practice scenarios give the needed policy wording. Follow it exactly; terms vary by insurer and coverage.

Question 1: Flat deductible on a covered loss

A covered homeowners loss totals $8,600. The policy has a flat $1,000 deductible for this peril and no sublimit. Assuming the full amount is covered, how much is payable before other policy adjustments?

The arithmetic is simple because the stem says the loss is fully covered and no sublimit applies. Real claims still require valuation and coverage decisions before applying the deductible. If the policy says the deductible is per occurrence, multiple damaged items in the same occurrence may share one deductible; if it says per item or coverage, the calculation can differ.

Question 2: Percentage wind deductible

A homeowners declarations page shows a 2% wind/hail deductible, and the endorsement says the percentage is applied to the $300,000 Coverage A limit. A covered wind loss totals $7,500. What is the simplified payment before other adjustments?

Step 1 identify the base; here it is Coverage A, not the estimate. Step 2 convert 2% to 0.02 and multiply: 300,000 × 0.02 = 6,000. Step 3 subtract that deductible from the $7,500 covered loss, leaving $1,500. If the covered loss had been $5,000, the deductible would exceed it and the insurer could owe no payment under the simplified assumptions.

Question 3: Per-person and per-occurrence liability limits

One covered auto occurrence injures three people with damages of $60,000, $45,000, and $35,000. The policy limit is $50,000 per person and $100,000 per occurrence. Assume liability is established and damages otherwise qualify. What is the maximum total payment under those limits?

The calculation has two stages. Per claimant, the eligible amounts are min(60,000, 50,000) = 50,000; min(45,000, 50,000) = 45,000; and min(35,000, 50,000) = 35,000. The sum is 130,000. The occurrence limit then caps that sum at 100,000. The policy may contain further allocation or settlement rules if claims exceed the cap.

Question 4: A sublimit within a contents limit

A policy has a $60,000 general personal-property limit but a $1,500 sublimit for a category of jewelry stolen in one event. The insured loses jewelry worth $2,500. The applicable deductible is $500, and the policy applies the sublimit before the deductible. What is the simplified payment?

Sublimits often apply to particular classes of property or additional expenses. Read whether the limit is per item, per occurrence, or total. This question explicitly provides order; some policy provisions may state that a sublimit is the maximum payment inclusive of or before deductible. Do not assume the order if the contract says otherwise.

Question 5: Limit is not a payment amount

A personal auto policy has a $25,000 property-damage liability limit per accident. The insured causes $4,500 in covered damage to a neighbor’s fence, and the policy has no deductible for liability coverage. Assuming liability and coverage are established, what is the maximum payment indicated by these facts?

A limit describes the largest amount available under the coverage, not an amount promised for every claim. The insurer still determines the covered damages and may pay less than the limit. If covered claims exceed the limit, the insured can remain legally responsible for the excess. Do not confuse liability’s limit with a first-party deductible.

Question 6: Two limits and a deductible

A covered property loss is $24,000. The policy has a $20,000 sublimit for the damaged category and a $1,000 deductible. The policy says the sublimit applies before the deductible. What is the simplified maximum insurer payment?

Use the contract’s order. If a policy instead defined the sublimit as inclusive of all payments after deductible, the calculation could be expressed differently, though the maximum total payment might still be $20,000. A question that asks for an exact amount must provide enough wording to determine order. Flag ambiguous practice items rather than quietly importing a rule from another form.

Review calculations with a limit stack

Write the gross covered loss at the top, then mark sublimits and per-person caps, calculate applicable deductibles, and finally check occurrence or aggregate limits as required by the form. Some contracts apply a deductible before the limit; others describe the cap as the maximum payment after deductible. Follow the wording and the question’s assumptions. The arithmetic is only as good as the sequence.

Texas homeowners and auto policies can use separate deductibles for wind, hail, collision, comprehensive, UM property damage, and other coverages. TDI’s auto guide explains that deductibles apply to collision, comprehensive, and UM/UIM claims, while liability, PIP, and rental coverages have dollar limits. The exact policy determines which one applies to a particular loss.

Question 7: Two coverages, two deductibles.

A hailstorm damages a home roof and a parked car. The homeowners policy has a $2,000 wind/hail deductible; the auto policy has a $500 other-than-collision deductible. Each insurer accepts its loss under its own policy. What is the sound starting calculation?

The arithmetic should follow the contract’s order: establish the covered amount, apply any sublimit, subtract the deductible, and then compare with applicable coverage limits. Liability limits cap payment for covered claims and do not function as deductibles. A deductible can reduce a small first-party claim to zero even when the cause of loss is covered.

Question 8: Liability limit versus deductible.

An insured causes a covered $42,000 property-damage claim to another person. The auto policy has a $25,000 property-damage limit and no liability deductible. What is the maximum insurer payment and potential excess exposure?

The arithmetic should follow the contract’s order: establish the covered amount, apply any sublimit, subtract the deductible, and then compare with applicable coverage limits. Liability limits cap payment for covered claims and do not function as deductibles. A deductible can reduce a small first-party claim to zero even when the cause of loss is covered.

Question 9: Deductible exceeds covered property damage.

A covered auto hail loss is valued at $350. The other-than-collision deductible is $500, and no separate minimum payment applies. What is the simplified insurer payment?

The arithmetic should follow the contract’s order: establish the covered amount, apply any sublimit, subtract the deductible, and then compare with applicable coverage limits. Liability limits cap payment for covered claims and do not function as deductibles. A deductible can reduce a small first-party claim to zero even when the cause of loss is covered.

If one event damages several items under one coverage, check whether the deductible applies once per occurrence or separately by item. If separate policies cover separate property, use each policy’s own deductible. Do not aggregate figures from unrelated coverage parts unless the form explicitly says to do so. Those distinctions can matter more than the subtraction itself.

Pearson’s current exam outline includes deductibles, liability limits, special limits, and related contract concepts. These original examples simplify coverage eligibility so you can focus on the math. In an actual claim, first establish coverage and valuation, then read the declarations and endorsements, and apply other insurance or coordination provisions where relevant.