Personal Lines Study Guide 2025/2026 QUESTIONS AND
ANSWERS GUARANTEE A+
Implied Authority - Authority that is not expressed or written into the contract, but which the
agent is assumed to have in order to transact the business of insurance for the principal.
Apparent Authority - Exceeding express authority
Fair Credit Reporting Act - Act that protects privacy of background information and ensures that
information supplied is accurate.
Risk - The chance of loss from an event that cannot be entirely controlled
Peril - cause of loss
Hazard - A danger or risk.
Principle of Indemnity - The principle that insurance policies should provide a benefit no greater
than the loss suffered by an insured.
Insurable Interest - something of value that, if lost, would cause you financial harm, must exist at
time of loss
Insurance Contract - -A legal contract purchased to indemnify the insured against a loss, damage,
or liability arising from an unexpected event.
-The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may
be large or small.
-A contract designed to transfer risk from the insured to the insurer.
,Underwriting Factors - used to determine premium include the nature of the risk, hazards, claims
history, and other factors that vary depending upon the risk
Occurence - accident including repeat exposure to harmful conditions
Pro Rata Cancellation - The termination of a contract with premium charge being adjusted in
proportion to the exact time the protection has been in force. All unearned premium is returned to
the insured.
Proximate Cause - The primary cause of loss
friendly fire - fire contained where intended
Hostile Fire - a fire that leaves its intended place, such as a spark that escapes a fireplace and sets
the carpet on fire
endorsement - A policy form that alters or adds to the provisions of a property and casualty
insurance contract.
Direct Loss - Loss that is a direct result of a peril, such as fire.
Indirect Loss - Loss that is a result or consequence of a direct loss
Named Perils - Covered perils are specifically named in the policy
Open Perils - a type of insurance that covers all perils except those specifically noted as excluded
Replacement Value - a claim settlement method in which the insured receives the full cost of
repairing or replacing a damaged or lost item
, Actual Cash Value (ACV) - Cost to replace property with new property of like kind and quality
less depreciation.
Valued Policy - Policy in which insurer pays total limit on a total loss
Scheduled Limit - insures one or more items on a single policy and each item is insured at a
scheduled limit of insurance
Blanket Limit - The maximum dollar amount the insurer will pay for two or more items or
classes of property at one or more locations.
Declarations Page - The basic information about a policy:
Who - names of insurer and insured
What - description of insured property
Where - address and legal description of insured property
When - effective and expiration dates.
How Much - limits of coverage, deductible, premium
Insuring Agreement - A statement in an insurance policy that the insurer will, under described
circumstances, make a loss payment or provide a service.
Conditions - provisions in the policy that qualify or place limitations on the insurer's promise to
perform
Subrogation - 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.
ANSWERS GUARANTEE A+
Implied Authority - Authority that is not expressed or written into the contract, but which the
agent is assumed to have in order to transact the business of insurance for the principal.
Apparent Authority - Exceeding express authority
Fair Credit Reporting Act - Act that protects privacy of background information and ensures that
information supplied is accurate.
Risk - The chance of loss from an event that cannot be entirely controlled
Peril - cause of loss
Hazard - A danger or risk.
Principle of Indemnity - The principle that insurance policies should provide a benefit no greater
than the loss suffered by an insured.
Insurable Interest - something of value that, if lost, would cause you financial harm, must exist at
time of loss
Insurance Contract - -A legal contract purchased to indemnify the insured against a loss, damage,
or liability arising from an unexpected event.
-The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may
be large or small.
-A contract designed to transfer risk from the insured to the insurer.
,Underwriting Factors - used to determine premium include the nature of the risk, hazards, claims
history, and other factors that vary depending upon the risk
Occurence - accident including repeat exposure to harmful conditions
Pro Rata Cancellation - The termination of a contract with premium charge being adjusted in
proportion to the exact time the protection has been in force. All unearned premium is returned to
the insured.
Proximate Cause - The primary cause of loss
friendly fire - fire contained where intended
Hostile Fire - a fire that leaves its intended place, such as a spark that escapes a fireplace and sets
the carpet on fire
endorsement - A policy form that alters or adds to the provisions of a property and casualty
insurance contract.
Direct Loss - Loss that is a direct result of a peril, such as fire.
Indirect Loss - Loss that is a result or consequence of a direct loss
Named Perils - Covered perils are specifically named in the policy
Open Perils - a type of insurance that covers all perils except those specifically noted as excluded
Replacement Value - a claim settlement method in which the insured receives the full cost of
repairing or replacing a damaged or lost item
, Actual Cash Value (ACV) - Cost to replace property with new property of like kind and quality
less depreciation.
Valued Policy - Policy in which insurer pays total limit on a total loss
Scheduled Limit - insures one or more items on a single policy and each item is insured at a
scheduled limit of insurance
Blanket Limit - The maximum dollar amount the insurer will pay for two or more items or
classes of property at one or more locations.
Declarations Page - The basic information about a policy:
Who - names of insurer and insured
What - description of insured property
Where - address and legal description of insured property
When - effective and expiration dates.
How Much - limits of coverage, deductible, premium
Insuring Agreement - A statement in an insurance policy that the insurer will, under described
circumstances, make a loss payment or provide a service.
Conditions - provisions in the policy that qualify or place limitations on the insurer's promise to
perform
Subrogation - 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.
