Texas Property & Casualty License Latest Updated 2023

Chapter 1: Property vs Casualty: What is considered property? - Answer Structure & Personal Property Property vs Casualty: What is considered casualty? - Answer Non-property losses. Legal liability to others. 3rd Party. Casualty insurance means that the policy includes liability (accountability or responsibility) coverages to help protect you if you're found legally responsible for an accident that causes injuries to another person or damage another persons belongings. Property and casualty are typically bundled together into one insurance. Liability means something you owe Risk - Answer uncertainty (unpredictable/ unknown) of financial loss or chance of loss Pure Risk - Answer Chance of Loss - no possibility of gain Broker - Answer Represents the client not the insurance company. Insured - Answer The policyholder. Insurer - Answer The insurance company. Agent - Answer Legal representative of the company. Sharing risk method - Answer Insurance uses the sharing risk method that is spreading the risk. They help cover the risk in exchange of premium payments to earn profit. Speculative Risk - Answer Chance of Loss or possibility Gain (Gamble) Insurance (covers which type of risk?) - Answer Pure Risk Only How does the law of large numbers apply in insurance? - Answer Actuaries use the law of large numbers to estimate claims Risk Management Techniques - Answer 1. Risk Avoidance: staying away from risky activities 2. Risk Reduction: taking measures to reduce risk 3. Risk Retention: build up a fund 4. Risk Shifting: getting someone to accept the risk. 5. Buying insurance: obvious ways to manage risk is to buy insurance. What is the law of large numbers? - Answer as the number of a similar loss exposure increases, the more accurate claims can be predicted from the group. *Large numbers : losses become more predictable as the # of insureds increase. What is the purpose of insurance? - Answer to idemnify by making the insured whole, not have them come out ahead. What is an insurance? - Answer A contract, transfer of risk and social device. client agrees to incur a small immediate loss in exchange for protection against the potential of a large future loss. Indemnification - Answer insurance policy is meant to make the insured whole after suffering a loss. What characteristics must be met for insurance companies to insure economic losses? - Answer predictable, accidental, measurable, non-catastrophic. Types of insurance - Answer 1)stock companies: owned by stockholders. board of directors to protect. Non-participating. 2)Mutual companies: owned by policyholders. Participating. 3) Reciprocal Companies: Attorney-in-fact- a person in charge. Cooperative. Hospitals use this type of insurance. 4) Fraternal benefit societies: common ethnic, religion, charitable heritage. lutherans. 5) Government insurers: medicare, medicaid. U.S. runs world largest insurance org, 6) Insurance Regulation: NAIC national association of insurance commission. provide uniformity to insurance laws and regulations. Insurance Regulation - Answer most regulation is done at the state level, not at the federal level. Chapter 2: What is a peril? - Answer cause of loss wind, hail, fire, smoke. The more you ask to cover, the more expensive the policy is. underwriters - Answer review policy applications and determines whether the applications are acceptable. Actuaries - Answer mountains of data about people of specified age, gender, occupation, avocation. field underwriters - Answer insurance agents What is a hazard? - Answer things that increase the chance of a peril happening. factors that increase the chance of loss occuring. The more risk the less likely you qualify to be insured or if there are many risks you pay more. Three types of hazards - Answer 1)Physical: visible characteristic (dead tree, faulty wiring,worn tires,slippery floors, loose handrail; the more physical the higher the premium) 2)Moral: Dishonest tendencies (people will try to do intentional things like letting something burn on purpose) 3) Morale: Attitude of carelessness (someone who doesnt care, they will pay more because they are more prone to risk) insurable interest - Answer financial interest one has if a loss occurs. owner has insurable interest in his own property but not in their tenant's property. vice versa. Limit of liability - Answer max amount of pay the insurer must pay for the loss. deductible - Answer the portion of the loss that the insured must absorb before the insurance company begins to pay. $250. This gets taken away from the cost of damage to see how much insurance will have to pay. deductible reduces morale and moral hazards. Raising the deductible lowers the premium. Deductible does not uphold the principle of indemnification because you are paying this portion. side mirror: damage $200 deductible $250 insurer pays $0 trunk: damage $300 deductible $250 insurer pays $50 per-loss deductible - Answer insured may agree to be responsible for all liability claims under $100,000 and the insurer will cover the balance. other insurance clause - Answer States that if a person has more than one insurance policy on a property, each company is liable for only a prorated amount of the loss. cannot use other insurances to recover double it has to be portionate, a whole. This upholds the principle of indemnification. endorsement - Answer or rider, extension. An addition to the policy. it can add or subtract coverage. How many of the insureds must agree to a change in the policy? - Answer only the first named insured who controls the policy. What are the two types of termination of a policy? - Answer Cancellation - occurs when the insured/insurer cancels the contract before the end of the policy period. Non-Renewals - occurs at the end of the policy period. assignment - Answer transfer of a policy to a new policy. must be agreed in writing by the old policy owner, the new policy owner and the insurance company. nonrenewal - Answer A termination of a policy by an insurer on the anniversary or renewal date. iterm-11nsurer does not need to let the insured know of nonrenewal but insured does not have to notice to not renew, they can walk away. cancellation - Answer the process of ending the policy period. insured has to give the insurer written notice but doesnt have to say a reason. 10 days for insurer to give cancellation notice, say one of the reasons: nonpayments, misrepresentation, financial impairment or substantial increase of risk - DL suspended, blind. proportional or pro rata refund - Answer the insurer if cancels will give 2/3 refund. short-rate refund - Answer if insurer cancels they will get less than proportional refund. certificate of insurance - Answer proof of coverage or/and a summary of the policy's coverage Causes of Loss Form - Answer A form that specifies what perils are insured against and lists exclusions. Several different versions provide increasingly broad coverage from Basic to Broad to Special. Basic covers 11 perils, broad covers 16 perils. which ones are the named perils - Answer basic and broad because they specifically name the covered perils. All Risk Form - Answer covers all perils except the listed exclusions. except named perils. exclusion - Answer peril or item not covered by the policy. perils of war, nuclear catastrophe, sewer backup, floods,earthquakes, intentional destruction by the insured, Liberalization Clause - Answer insurer is permitted to change the terms of the contract at any time as long as the change benefits the insured and no additional premium is charged Inherent Vice - Answer insurance policy wont cover this. war, terrorism, catastrophy. chapter 3 contract (4 elements) - Answer agreement consisting of an offer and its acceptance. a policy is a contract. 2 parts: insurance 1- offers (like an invitation) insured 2-accepts (cost, dates services) *Agreement is the first component of a contract. offer + acceptance = agreement. consideration - Answer second component. each party must put something of value, promises, money, property and services. money- premium payments information - DL, value of home. legally competent party - Answer third component of a contract. you must be sober and an adult to sign contract. legal purpose - Answer fourth component of a contract - purpose has to be valid, legit if the contract is legal. What are the four major parts to an insurance policy structure? (DICE) - 4 policy sections. what comes in the contract. - Answer D - Declarations Page (First Page) - insurers name, insured name, description of what is being covered, time period of the policy, premium total, deductible, limit of liability. I - Insuring Agreement (Insurers promise to pay) - perils covered, what type of coverage, basic broad or all risk. C - Conditions (Rules)- insureds obligations. E - Exclusions (Not covered) - loss, peril or item not covered in the policy Proof of Loss Form - Answer within 60 days the insured must provide the insurer with a completed and sworn proof of loss form. What is representation? - Answer Information believed to be true. is a statement made to the best of the applicants knowledge and belief. unintentional will not be voided. basic info that if provided wrong its ok. phone, email, zip code. What is warranty? - Answer statements made on an application form that the applicant guarantees to be absolutely and literally true. statement that if provided false, policy will be voided. Concealment - Answer intentional hiding the truth. Misreprentation - Answer an intentional lie. Contract of Adhesion - Answer the insured must accept the entire contract with all of its terms and conditions. binder - Answer A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued. terminates before the actual policy is issued. 90 days. Consumer Reporting Agency (CRA) - Answer company that compiles and keeps records on consumer payment habits and sells these reports to banks and other companies to use for evaluating creditworthiness Federal Fair Credit Reporting Act (FCRA) - Answer respect for privacy to the information gathering industry. 2 types of consumer report. 1) credit report - data of persons banks, credit card companies, mortgage. 2) investigative report - inspection report. Chapter 4 property insurance - Answer covers structures as well as structure's contents. Personal Property - Answer All property not classified as real property. Business Personal Property - Answer Includes machinery/equipment, inventory (finished goods, goods in process, raw materials), improvements & betterments; leased personal property, debris removal; property of others, valuable papers & records. desks, cell phones. Homeowners personal property - Answer tv sets, beds, chairs, silverware, clothes, art. Additional Coverages - Answer Supplemental Insurance coverages that apply only in certain circumstances. 1) Debris Removal - Answer pays for the expense of removing debris resulting from a loss that is covered by the policy 2) Removal/Preservation of Property - Answer insurer will provide coverage for an additional time 30 days if the insured has to remove personal property from the covered premises. Fire Department Service Charge - Answer pays up to $500 for service call to fire dept homeowner policy. and $1,000 for commercial policy. basic form - Answer covers 11 perils, cheapest, named peril fire lightning riot and civil commotion explosion wind and hail smoke sprinkler leakage sinkhole collapse volcano vehicles or aircraft vandalism broad form - Answer covers 16 perils , named peril. 11 basic +4 more water damage weight of snow, ice, and sleet glass collapse Glass Coverage - Answer basic - no coverage broad - some coverage special - full coverage special form - Answer covers the greatest number of perils "all-risk" included. except the excluded (war, nuclear, floods,sewer backup, explosion,terrorism, intentional acts,,). it is not named peril. 4-8 What are the Insured's duties after a loss? - Answer Submit a proof of loss or sworn statement within 60 days. Protect property from further damage. Cooperate with the insurer. Fair Market Value (FMV) - Answer The price a reasonable, unpressured buyer would pay for property on the open market. Replacement Cost - Answer The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation. Actual Cash Value (ACV) - Answer The required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation. Valued Policy - Answer a policy that pays the face amount of insurance if a total loss occurs Appraisal Provision - Answer used when the insured and insurer agree that the loss is covered, but the amount of the loss is in dispute appraisal - Answer 1)individual who will represent that party in conducting an evaluation of the amount of the loss. (friend, lawyer anyone.) 2) choose a netral third party 3) two appraisers evaluate the situation 4) two appraisers disagree are passed on to the umpire (third party) 5)recommendations 6)disputes 4-15 arbitrary provision - Answer each party selects an arbitrator and the two arbitrators select an umpire. Subrogation - Answer The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss. Right of Salvage - Answer The right of the insurer to take possession of damaged property after the loss to the property has been paid. The salvage belongs to the insurer. standard mortgage provision - Answer entitle to at least 10 days notice of cancellation add that amount to the mortgage loan mortgage will have an additional 60 days to file cannot collect more than the balance owing on the mortgage plus any accrued interest. Direct Loss vs. Indirect Loss - Answer A direct loss is a financial loss that results from the physical damage, destruction, or theft of the property, such as fire damage to a home An indirect or consequential loss is a financial loss that results indirectly from the occurrence of a direct physical damage or theft loss, e.g., the additional living expenses after a fire *most property policies only conver direct loss damage to the property itself. indirect loss that occurs as a result of the loss may be covered with a separate policy or with a business interruption endorsement. business interruption endorsement - Answer indirect loss - consequential loss. (loss of income) 3 standard additional coverage that comes with property policies: - Answer debris removal removal/preservation of property fire department service charge chapter 5 purpose of liability insurance? - Answer to pay third party for damages the insured causes to that person or to that persons property. tort - Answer injury to another or damage to another's property unintentionally. these may result in civil lawsuit but not jail. intentional tort - Answer A tort committed by one who intends to do the act that creates the harm. liability insurance won't cover the insured's intentional torts. negligent tort - Answer occurs when the defendant fails to act in a responsible way and thereby subjects other people to an unreasonable risk of harm drunk driving may be both a crime and negligent tort if someone is injured as a result. neglicence - Answer careless neglect, often resulting in injury. if the insured is negligent, the insurer has to write the big check. reasonable person - Answer a prudent person, whose behavior would be considered appropriate under the circumstances. has command of all senses, speech, and actions, honest and moderate in all activities. four negligence definitions - Answer 1) duty - everyone has the duty to act as a reasonable person. safety and well being. 2)breach of duty - did the person breach the duty to act as a reasonable person? violated or not acted upon? 3) damages - if you dont cause any harm to anyone or their property negligence does not exist. 4) proximate clause - the initial act which directly and foreseeably caused the damage. 3 coverages in liability - Answer 1) medical payments - pays the injured persons medical expenses without regard to fault. ambualnce, doctor, funeral, prosthetic. 2)suplementary payments - lawyer fees, provate investigator, lawyes loss of earnings and travel costs, bonds, insurer picks the lawyer. 3)liability payments - will compesate the injured third party. what a liability policy will pay for - Answer bodily injury property damage personal injury - many liabilities policies will not cover this. infrigement - advertising injury - unfair competition. - Answer unauthorized copying, sale, display, or performance of a copyrighted work Compensatory Damages - Answer money intended to restore a plaintiff to the position he was in before the injury Punitive Damages - Answer damages exceeding simple compensation and awarded to punish the defendant. exemplary damages - Answer Damages awarded to make an example of the wrongdoer. ways to resolve a claim - Answer 1) insurermay agree out of court settlement and pays damages. 2) if the insurer thinks the damages claims are unreasonably high the insurer may choose to let a court of law decide how much is owed by who and whom it is owed. Vicarous liability - Answer liability for the acts of another. Absolute Liability - Answer A type of liability that occurs due to extremely dangerous operations, such as the use of explosives or working at extreme heights. Strict Liability - Answer The legal responsibility for damage or injury even if you are not negligent chapter 6 commercial package policy CPP - Answer a collection of different policies that, for the sake of convenience, hang out together. may be purchased individually or may be purchased together to create a package of policies. property policies available with CPP - Answer building and personal property boiler and machinery policy inland marine insurance farm policy casualty policies available with the CPP - Answer commercial general liability policy commercial crime insurance commercial auto policy common conditions section of the CPP - Answer insured may cancel at any time in writing. insurer cancels, 10 days notice must be given if the cancellation is due to nonpayments of premium. cancellation notice must be send to last mailing address. first named insured can only change or cancel first named responsible for the payment of the premium. Inspection and surveys provision - Answer A policy provision that states the insured's duty to permit an insurer representative to enter the insured's premises and make loss control inspections and surveys. insurer has right to recommend changes insured may assign the policy and its benefits only with written consent of the insurer. Chapter 7 The building and personal property coverage (BPP) - Answer big businesses in america use this policy. to insure most commercial property, mid-sized and larger businesses. What does BPP cover? - Answer 1)buildings 2)business personal property 3)personal property of others 1)building coverage - Answer This class of property include structures such as stores factories and Warehouse but it also includes additions to the building, permanent indoor and outdoor fixtures, permanently state installed machinery and equipment, personal property used to maintain or service the building including fire extinguishers, outdoor furniture, lawn mowers, snow throwers, and appliances for refrigerating, ventilating, cooking, dishwashing, or laundering. Materials equipment and supplies used for making alterations to the building. above items are Unscheduled: meaning that they do not need to be specifically listed in the policy. 2) Business personal property - Answer Business personal property is within a hundred feet of the described premises. Premises refers to the parcel of land on which the buildings are situated the policy also covers a tenant's interest in improvements and betterment remodel the interior and exterior those improvements become part of the building and are insured. Reporting form - Answer Reporting form each month that will contain the dollar limit of liability needed for the following month. Utilize a reporting form to obtain the proper dollar amount of inventory coverage. 3)personal property of others - Answer Personal property of others a computer repair shop for example, may have shelves full of PCS that belong to his customers. Such a business will certainly want to purchase insurance that covers personal property of others because the payment is made to the property's owner. Debris removal coverage - Answer This provides protection for reasonable expenses incurred by the insured for removal of debris after a loss caused by a covered peril.Debris that has been left behind building coverage pays for removing this junk up to a point 25% of the total loss plus $10,000. Fire department service charge - Answer fire department service charge has a thousand limit of liability, has no deductible and pays above the policies over a limit of liability. Pollutant Cleanup and Removal - Answer If it covered peril causes a pollutant insurer will pay up to $10,000 the problem must be however reported to the insurer within a hundred and eighty days of the loss the tiny bit of pollution coverage only applies if the pollution was caused by a cover peril. Coverage Extensions - Answer Coinsurance requirement which is usually 80% of the property's value and you get the five coverage extension. 1)newly acquired or constructed property 2)personal effects and property of others 3)valuable papers and records - 2,500 limit 4)property off premises 5)outdoor property - fences,signs,antennas,dishes,trees, shrubs $1000 limit personal effects - Answer Personal property items owned by individuals that are personal in nature, such as jewelry, clothes, wallets, or purses. total limit is 2,500 property of others - Answer Not insured unless interest of insured is stated in the contract excluded property losses - Answer Indirect consequential losses, valuable papers, animals, Bridges roadways walks patios, Contraband, expenses of reconstruction, foundations, land, personal property, bulkheads pilings, property specifically covered by some other policy, retaining walls that are not part of the building, underground pipes flus or drains, lost information, automobiles, vehicles that are license for use of public roads, and outdoor property like fences antennas satellite dishes Tower signed not attached to buildings trees and shrubs won't be covered except as indicated in the coverage extension section. vacancy issues - Answer A vacant building may not be cover for some pearls even though it might have been covered had it not been vacant. Unoccupied property is fully covered an example is a small store that is closed while the owner is on vacation a commercial building is cover vacant if there's not enough staff there to properly conduct business and no one will be around to watch it if property is vacant no people know stuff for more than 60 consecutive days they're building would not be cover for losses due to vandalism glass breakage water damaged stuff or attempted or sprinkler damage. Common Exclusions - Answer Ordinance or law, Earth movement which excludes from virtually all common policies, government action if the government sees or destroys the cover property the owners beef lies with the government and not with the insurer, nuclear Hazard, off-premises power failure, or in military action, water like flood-damaged, leakage, artificially generated electrical current, explosion of steam vessels, mechanical breakdown, employee theft, money or theft of money. exclusions unique to special - Answer Predictable losses, insure dishonesty, animal waste, nesting, or infestation, voluntary parting, that's a first, jewelry, gems, shrinkage. sample of policy building and personal property form (BPP) - Answer page 7-16 Chapter 8 Business Interruption - Answer The business income coverage form is assigned to replace business loss due to a covered Pearl, making a normal operation of that business and possible. It protects against the financial problems that arise when a business cannot continue doing business as usual because of the direct loss. For example if an oven in your pizza parlor goes berserk and burns the place down the lesser of your problems when be rebuilding the construction truck shirt even greater May I Rise as each day passes without income because you have no pizza to sell. Business income policy - Answer Pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage. Extra Expense Policy - Answer extra expense business income with extra expense - Answer can purchase both - Answer Business income coverage form. The business income coverage form pays for the Lost business income also referred to as business burning when indirect laws buy a cover Pearl makes it impossible to do business as usual. Only the losses that occurred during the period of restoration or cover the period of restoration begin 72 hours after the loss occurs this policy form contains a provision called the extended business income. That continues to pay benefits for up to 30 days after reopening necessary containing operating expenses such as maintaining the phone the website is security guard or covered. for this reason the business income policy coinsurance requirement is 50% not the 80% used in other kinds of coverage the business income policy may include a monthly limit of Indemnity to restrict the amount of a particular month claim. An option the insured may wish to consider is a business income from dependent properties endorsement this writer protect the insurer from an income declined resulting from a direct loss to property the insured does not own operate control or even Ensure. extra expense coverage form - Answer The extra expense coverage form protects these kind of businesses by paying for such extra cost while the store properties restored to its original condition. This extra expense coverage only pays for the extra expenses incurred not for any ordinary ongoing expenses if the restoration is complete within 30 days the insured can only collect 40% of the policy limit between 30 and 60 days that coverage prices to 80% and after 60 days up to 100% of the policy limit may be paid. Chapter 9 Boilers, etc. - Answer the boiler and machinery policy also known as equipment breakdown insurance covers our boiler and machinery against the explosion and mechanical breakdown perils that were excluded by the BPP. the insurance is really a hybrid policy with mostly property insurance and just a tiny bit of libility coverage. excludes other peoples property. Accidents vs Occurrences - Answer B&M ensures like to distinguish between cover accidents which they Define as happening suddenly and unexpectedly and occurrences which they Define as happening gradually and repeatedly overtime or q and says are excluded from coverage for example a boiler that explodes will be covered because it was a sudden event an accident while the boiler that are fails because some page gasket slowly crumble to dust and occurrence probably will not be covered. boilers, machinery, and what else? - Answer The cover objects falls into six General categories boilers but not stoves are furnaces pressures and refrigerators air conditioning units compressors and electric steam generators, mechanical objects such as engines pumps fans and blowers, electrical objects such as Transformers induction feeder regulators and rectified units, turbine objects, comprehensive coverage excluding production machinery all insurable boiler and Machinery objects expect production machinery and comprehensive coverage including production Machinery all insurable boiler and Machinery objects excluding production machinery. boiler & machinery coverage - Answer Types of coverage includes the insured's property, property of others, Expediting expenses, 90 days automatic coverage for newly acquired locations, defends against suits for property damage, Policy Limits - Answer Cats number two is that within the state of policy limit are several supplements payment amounts that will not be exceeded even though the overall policy limit has not yet been reached typically these are Expediting expensive limit of $25,000 water damage limit of $25,000 hazardous substances cleanup limit of $25,000 an ammonia contamination limit of $25,000 exclusions - Answer Accidents doing boiler testing, malfunctioning safety devices, damage to neighboring property, war and military action, changes required by ordinance or law, floods, lightning, accidents caused by Earth's movement and you clear hazards. quick check of chapter 9 - Answer This policy automatically covers the cost of temporary repairs it provides 90 days coverage for newly acquired location and only covers direct losses a rider must be purchased to cover indirect losses.