Texas Property & Casualty Insurance License Exam
| 2026–2027
,What are 3 subjects an auto policy covers? 1. Body
2. The vehicle
3. Assets
Bodily Injury Types Personal Injury
Med Pay
Uninsured Motorist
No Fault Insurance State stipulates that parties cannot file a claim to the other persons insurance policy
unless required in excess. Instead, each party is required to file a primary claim
against their own insurance regardless who is at fault. EX. Florida
Financial Responsibility Laws State Laws regulating that people are to carry a minimum coverage amount set by
the state to protect themselves, others, and property.
P.A.P Personal Automotive Policy
Negligence The failure to act as a prudent person would under similar circumstances
Legal Liability Involves proven negligence or fault
Vicarious Liability Being responsible for the negligent acts of someone else. Ex. Your children
Absolute or Strict Liability Stems from hazardous or dangerous activities that makes the owner liable
WITHOUT the requirement of proof of negligence.
Liability Being responsible for the damages or injury you or someone else you're
responsible for has done.
The 7 Characteristics of a Contract 1. Personal Contract
2. Conditional Contract
3. Adhesion
4. Indemnity
5. Aleatory
6. Unilateral
7. Utmost Good Faith
Personal Contract Is stipulation of a contract that says the contract is for the name person and cannot
be transferred to another.
Conditional Contract Stipulates set by a contract. "You can do this, but...."
Adhesion A stipulation that the contract and it's language is binding, or "sticks" and the parties
agreeing cannot back out so long as the conditions are met.
, Indemnity The contract agrees to indemnify, or make whole again the customer. Makes them
no better, nor worse, just whole.
Aleatory The stipulation that the contract must include and unequal transfer of money. Ex.
The insured signed a contract a month ago and has paid a single payment of $300.
The company has only received $300, but it on the hook to pay out $30,000 in the
event of a loss.
Unilateral Stipulation that the contract is one-sided. Ex. The customer doesn't HAVE to pay
the insurance company, but IF they do, then the insurance company HAS to pay
out.
Utmost Good Faith Parties believe that both will deal with eachother honestly and fairly, without
misleading or withholding
Insurance A contract by which an Insurance company agrees to compensate an insured for a
covered loss in return for a premium payment.
Underwriting Process of evaluating policyholders to determine eligibility for coverage and pricing
Law of Large #'s Principle that the larger the examples of data, the more accurate the information
Speculative Risk Risk of Gain OR Loss Ex. Gambling or Investment Insurance
Pure Risk No chance of gain or benefit. The only kind that insurance deals with.
Exposure An opportunity for risk or loss
Risk Possibility of financial loss
Peril The direct cause of a loss
Representation Statements on an insurance contract that the insured BELIEVES to be true
4 Means of Managing Risk 1.Reduction
2.Retain
3.Avoid
4.Transfer
Reduction reduce the risk shared by the insured and insurer Ex. Good maintenance
| 2026–2027
,What are 3 subjects an auto policy covers? 1. Body
2. The vehicle
3. Assets
Bodily Injury Types Personal Injury
Med Pay
Uninsured Motorist
No Fault Insurance State stipulates that parties cannot file a claim to the other persons insurance policy
unless required in excess. Instead, each party is required to file a primary claim
against their own insurance regardless who is at fault. EX. Florida
Financial Responsibility Laws State Laws regulating that people are to carry a minimum coverage amount set by
the state to protect themselves, others, and property.
P.A.P Personal Automotive Policy
Negligence The failure to act as a prudent person would under similar circumstances
Legal Liability Involves proven negligence or fault
Vicarious Liability Being responsible for the negligent acts of someone else. Ex. Your children
Absolute or Strict Liability Stems from hazardous or dangerous activities that makes the owner liable
WITHOUT the requirement of proof of negligence.
Liability Being responsible for the damages or injury you or someone else you're
responsible for has done.
The 7 Characteristics of a Contract 1. Personal Contract
2. Conditional Contract
3. Adhesion
4. Indemnity
5. Aleatory
6. Unilateral
7. Utmost Good Faith
Personal Contract Is stipulation of a contract that says the contract is for the name person and cannot
be transferred to another.
Conditional Contract Stipulates set by a contract. "You can do this, but...."
Adhesion A stipulation that the contract and it's language is binding, or "sticks" and the parties
agreeing cannot back out so long as the conditions are met.
, Indemnity The contract agrees to indemnify, or make whole again the customer. Makes them
no better, nor worse, just whole.
Aleatory The stipulation that the contract must include and unequal transfer of money. Ex.
The insured signed a contract a month ago and has paid a single payment of $300.
The company has only received $300, but it on the hook to pay out $30,000 in the
event of a loss.
Unilateral Stipulation that the contract is one-sided. Ex. The customer doesn't HAVE to pay
the insurance company, but IF they do, then the insurance company HAS to pay
out.
Utmost Good Faith Parties believe that both will deal with eachother honestly and fairly, without
misleading or withholding
Insurance A contract by which an Insurance company agrees to compensate an insured for a
covered loss in return for a premium payment.
Underwriting Process of evaluating policyholders to determine eligibility for coverage and pricing
Law of Large #'s Principle that the larger the examples of data, the more accurate the information
Speculative Risk Risk of Gain OR Loss Ex. Gambling or Investment Insurance
Pure Risk No chance of gain or benefit. The only kind that insurance deals with.
Exposure An opportunity for risk or loss
Risk Possibility of financial loss
Peril The direct cause of a loss
Representation Statements on an insurance contract that the insured BELIEVES to be true
4 Means of Managing Risk 1.Reduction
2.Retain
3.Avoid
4.Transfer
Reduction reduce the risk shared by the insured and insurer Ex. Good maintenance
