Texas Insurance License Exam Prep
P&C Questions & Answers
What are 3 subjects an auto policy covers? - ANSWER1. Body
2. The vehicle
3. Assets
Bodily Injury Types - ANSWERPersonal Injury
Med Pay
Uninsured Motorist
No Fault Insurance - ANSWERState 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 - ANSWERState Laws regulating that people are to carry
a minimum coverage amount set by the state to protect themselves, others, and
property.
P.A.P - ANSWERPersonal Automotive Policy
Negligence - ANSWERThe failure to act as a prudent person would under similar
circumstances
Legal Liability - ANSWERInvolves proven negligence or fault
Vicarious Liability - ANSWERBeing responsible for the negligent acts of someone else.
Ex. Your children
Absolute or Strict Liability - ANSWERStems from hazardous or dangerous activities that
makes the owner liable WITHOUT the requirement of proof of negligence.
Liability - ANSWERBeing responsible for the damages or injury you or someone else
you're responsible for has done.
The 7 Characteristics of a Contract - ANSWER1. Personal Contract
2. Conditional Contract
3. Adhesion
4. Indemnity
5. Aleatory
6. Unilateral
7. Utmost Good Faith
,Personal Contract - ANSWERIs stipulation of a contract that says the contract is for the
name person and cannot be transferred to another.
Conditional Contract - ANSWERStipulates set by a contract. "You can do this, but...."
Adhesion - ANSWERA 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 - ANSWERThe contract agrees to indemnify, or make whole again the
customer. Makes them no better, nor worse, just whole.
Aleatory - ANSWERThe 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 - ANSWERStipulation 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 - ANSWERParties believe that both will deal with eachother
honestly and fairly, without misleading or withholding
Insurance - ANSWERA contract by which an Insurance company agrees to compensate
an insured for a covered loss in return for a premium payment.
Underwriting - ANSWERProcess of evaluating policyholders to determine eligibility for
coverage and pricing
Law of Large #'s - ANSWERPrinciple that the larger the examples of data, the more
accurate the information
Speculative Risk - ANSWERRisk of Gain OR Loss Ex. Gambling or Investment
Insurance
Pure Risk - ANSWERNo chance of gain or benefit. The only kind that insurance deals
with.
Exposure - ANSWERAn opportunity for risk or loss
Risk - ANSWERPossibility of financial loss
Peril - ANSWERThe direct cause of a loss
, Representation - ANSWERStatements on an insurance contract that the insured
BELIEVES to be true
4 Means of Managing Risk - ANSWER1.Reduction
2.Retain
3.Avoid
4.Transfer
Reduction - ANSWERreduce the risk shared by the insured and insurer Ex. Good
maintenance
Retain - ANSWERTaking risks by retaining the risk to ones self. Ex. Not reporting an
accident to the insurance company, or not getting insurance at all.
Avoid - ANSWERAvoiding risk all together. Ex. Not driving at all
Transfer - ANSWERTransferring risk. Ex. Getting insurance in the first place transfers
risk from the insured to the insurer
Insurable Interest - ANSWERTo have insurable interest in something it's loss or
damage would have to cause you to suffer financial or economic loss. Must have
ownership
Hazards - ANSWEREvent increases likelyhood of loss. Ex. Texting while driving,
weather.
Insurance Agreement - ANSWERAgreement by insurance to provide coverage in
exchange for a premium
Conditions in an Insurance Contract - ANSWERAssigns:
Duties after a loss
Defines Policy Terms
Outlines how to cancel
Stipulates on multiple contracts (primary & secondary)
Insurance Exclusions - ANSWERThings not covered. Ex. Intentional Acts
Coverage - ANSWERDefines what is covered and what is insured against within an
insurance contract
Premium - ANSWERMonetary amount charged by insurer in exchange for coverage
Casualty Insurance - ANSWERA broad term for insurance that covers PROPERTY and
LIABILITY losses.
P&C Questions & Answers
What are 3 subjects an auto policy covers? - ANSWER1. Body
2. The vehicle
3. Assets
Bodily Injury Types - ANSWERPersonal Injury
Med Pay
Uninsured Motorist
No Fault Insurance - ANSWERState 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 - ANSWERState Laws regulating that people are to carry
a minimum coverage amount set by the state to protect themselves, others, and
property.
P.A.P - ANSWERPersonal Automotive Policy
Negligence - ANSWERThe failure to act as a prudent person would under similar
circumstances
Legal Liability - ANSWERInvolves proven negligence or fault
Vicarious Liability - ANSWERBeing responsible for the negligent acts of someone else.
Ex. Your children
Absolute or Strict Liability - ANSWERStems from hazardous or dangerous activities that
makes the owner liable WITHOUT the requirement of proof of negligence.
Liability - ANSWERBeing responsible for the damages or injury you or someone else
you're responsible for has done.
The 7 Characteristics of a Contract - ANSWER1. Personal Contract
2. Conditional Contract
3. Adhesion
4. Indemnity
5. Aleatory
6. Unilateral
7. Utmost Good Faith
,Personal Contract - ANSWERIs stipulation of a contract that says the contract is for the
name person and cannot be transferred to another.
Conditional Contract - ANSWERStipulates set by a contract. "You can do this, but...."
Adhesion - ANSWERA 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 - ANSWERThe contract agrees to indemnify, or make whole again the
customer. Makes them no better, nor worse, just whole.
Aleatory - ANSWERThe 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 - ANSWERStipulation 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 - ANSWERParties believe that both will deal with eachother
honestly and fairly, without misleading or withholding
Insurance - ANSWERA contract by which an Insurance company agrees to compensate
an insured for a covered loss in return for a premium payment.
Underwriting - ANSWERProcess of evaluating policyholders to determine eligibility for
coverage and pricing
Law of Large #'s - ANSWERPrinciple that the larger the examples of data, the more
accurate the information
Speculative Risk - ANSWERRisk of Gain OR Loss Ex. Gambling or Investment
Insurance
Pure Risk - ANSWERNo chance of gain or benefit. The only kind that insurance deals
with.
Exposure - ANSWERAn opportunity for risk or loss
Risk - ANSWERPossibility of financial loss
Peril - ANSWERThe direct cause of a loss
, Representation - ANSWERStatements on an insurance contract that the insured
BELIEVES to be true
4 Means of Managing Risk - ANSWER1.Reduction
2.Retain
3.Avoid
4.Transfer
Reduction - ANSWERreduce the risk shared by the insured and insurer Ex. Good
maintenance
Retain - ANSWERTaking risks by retaining the risk to ones self. Ex. Not reporting an
accident to the insurance company, or not getting insurance at all.
Avoid - ANSWERAvoiding risk all together. Ex. Not driving at all
Transfer - ANSWERTransferring risk. Ex. Getting insurance in the first place transfers
risk from the insured to the insurer
Insurable Interest - ANSWERTo have insurable interest in something it's loss or
damage would have to cause you to suffer financial or economic loss. Must have
ownership
Hazards - ANSWEREvent increases likelyhood of loss. Ex. Texting while driving,
weather.
Insurance Agreement - ANSWERAgreement by insurance to provide coverage in
exchange for a premium
Conditions in an Insurance Contract - ANSWERAssigns:
Duties after a loss
Defines Policy Terms
Outlines how to cancel
Stipulates on multiple contracts (primary & secondary)
Insurance Exclusions - ANSWERThings not covered. Ex. Intentional Acts
Coverage - ANSWERDefines what is covered and what is insured against within an
insurance contract
Premium - ANSWERMonetary amount charged by insurer in exchange for coverage
Casualty Insurance - ANSWERA broad term for insurance that covers PROPERTY and
LIABILITY losses.
