REAL Texas Adjuster Study Guide/ 367 QUESTIONS AND ANSWERS

REAL Texas Adjuster Study Guide/ 367 QUESTIONS AND ANSWERS 1. perils: a cause of property losses under an insurance con- tract ex: windstorm, hurricane, explosion, collapse of build- ing, vandalism, accidental discharge, and theft 2. law of large numbers: a fundamental concept in statistics and probability that describes how the average of a random- ly selected large sample from a population. it basically re- lies on the principle that the larger the pool, the more pre- dictable the amount of losses will be in a given period 3. principle of indemnity: is an insurance principle stating that an insured may not be compensated by insurance company in an amount exceeding the insured's economic loss. 4. limits of liability: the maximum amount that an insurance pol- icy will pay. it is specified on the policy declaration page. 5. property insurance: coverage for real and personal prop- erty against loss or damage from perils insured against. 6. loss settlement: the process used to determine the amount of the loss 7. actual cash value: the value of the property based on the current cost to replace it minus depreciation. 8. agreed value: the amount that the insured and insurer agree upon during the time of policy inception. 9. replacement cost: the cost associated with replacing prop- erty at current market prices 10. market value: the amount that the property is worth in a competitive market. this amount is accepted by the buyer and seller. 11. tort: is a wrong that involves a breach of civil duty owed to someone else. this breach determines if that person is neg- ligence. 12. elements used to determine negligence: a duty owed, a duty breached, proximate cause, and damages 13. methods to determine loss are:: acv, market value, replace- ment cost, agreed value 14. casualty insurance: protects a person from financial loss arising from bodily injury or property 2 / 31 damage to others 15. hazard: is a situation that poses a level of threat to life, health, property, or environment. 16. indirect loss: type of loss that does not result from di- rect damage of a covered cause of loss or peril but is instead a consequence of the direct damage loss. 17. direct loss: direct physical loss to property 18. insuring agreement: this section of the insurance policy specifies what the insurance will provide coverage for in ex- change for premium payments by their customer. 19. deductible: the amount the insured must pay in a loss be- fore any payment is due from the insurance company. 20. where is a homeowner percentage deductible always taken from?: coverage a structure policy limits of liability that is used on the declaration page. 21. cancellation: is the termination of an insurance policy by either side and it must be done in writing 22. liability: a person is legally liable for an accident if that person is found responsible for bodily injury or property damage to another party. 23. negligence: the failure to exercise the care that a reason- ably prudent person can be characterized by the average per- son. 24. additional living expenses: charges covered by homeown- ers policy over and above policy holders customary living due to damage by a covered peril and makes the home tempo- rary uninhabitable. 25. exposure: the measure of the possibility of the loss 26. insured: the party to an insurance arrangement that has an insurable interest in the property that is being insured. 27. insurer: insurance company 28. loss history: is the insured history of losses with other companies. insurance company views this as indication of in- sured propensity for a claim in future. 3 / 31 29. notice of loss: notice required by the insurance company immediately after an incident. policy holder responsibility af- ter a loss 30. depreciation: act of lowering an item due to value wear and tear it is based on age, condition, and life expectancy. 31. punitive damage: the amount awarded by the court which is intended to reform or deter the defendant from engaging in similar conduct in the future 32. comparative negligence: is a partial legal defense that re- duces the amount of damages that a person can recover based upon the amount that this person's own negligence con- tributed to the loss 33. contributory negligence: is a law defense where a person negligence contributed to the harm that he or she sustained 34. assumption of risk: a doctrine under which a plaintiff may not recover for injuries or damage suffered from risks he or she knows of and has voluntarily assumed 35. adverse selection: the tendency of insured's who present a higher probability of loss to purchase or renew insurance more often than those who present a lower probability 36. attractive nuisance: a dangerous place, condition, or object that is particularly attractive to children. 37. accident: unforeseen, unintended event, something unex- pected 38. occurrence: an event that results in an insured loss which results in bodily injury or damages 39. betterment: improvement of property that puts it in a bet- ter condition than it was before the occupancy or loss 40. all risk insurance: "open perils" insurance - protecting the insured from loss arising from any peril other than those perils specifically excluded by name 41. appraisal: is a form of dispute resolution that occurs when there is a dispute between the insured and the insurance company regarding the amount of the claim or loss. both par- ties hire an appraisal and if cant decide then they will hire an umpire