Personal Lines Study Guide 2025/2026 QUESTIONS AND
ANSWERS GUARANTEE A+
Physical Hazard - Physical condition that increases probability of loss.
Ex. Flammable material stored near the furnace.
Peril - The cause of the loss.
*Listed in the INSURING AGREEMENT
Loss - Disappearance of value.
Direct Loss - Loss that is a direct result of a peril (cause of loss).
Indirect Loss - Loss that is a result of an direct loss.
Ex. Additional living expenses when home is destroyed or loss of income due to injury.
Loss Valuation - How pay out for a loss claim is determined.
Actual Cash Value - The cost to replace an item or original cost at the time of the loss MINUS
depreciation for the condition or age of the item.
*Often used for valuation of PERSONAL PROPERTY AND CONTENTS.
, Replacement Cost - Cost to replace a damaged or destroyed item of property without deducting
depreciation.
*Often used for valuation of BUILDINGS/ DWELLINGS
**Can be added as an endorsement for PERSONAL PROPERTY/ CONTENTS.
Market Value - The amount for which something can be sold in a given market.
Stated Value - Value of an item of property as declared in the insurance contract.
Assignment - Insured can't transfer policy ownership without the written consent of the insurer.
Subrogation - After insurer pays a loss, the insured's rights to seek recovery from responsible
party is transferred to insurer.
Salvage Value - Value of damaged property that may be retrieved, reconditioned, and sold to
reduce an insured loss.
Proximate Cause - Unbroken chain or connection between an occurrence and damage.
*Fundamental doctrine of property insurance.
Deductible - the amount INSURED must PAY on each loss.
*Reduces number of frivolous or small claims.
ANSWERS GUARANTEE A+
Physical Hazard - Physical condition that increases probability of loss.
Ex. Flammable material stored near the furnace.
Peril - The cause of the loss.
*Listed in the INSURING AGREEMENT
Loss - Disappearance of value.
Direct Loss - Loss that is a direct result of a peril (cause of loss).
Indirect Loss - Loss that is a result of an direct loss.
Ex. Additional living expenses when home is destroyed or loss of income due to injury.
Loss Valuation - How pay out for a loss claim is determined.
Actual Cash Value - The cost to replace an item or original cost at the time of the loss MINUS
depreciation for the condition or age of the item.
*Often used for valuation of PERSONAL PROPERTY AND CONTENTS.
, Replacement Cost - Cost to replace a damaged or destroyed item of property without deducting
depreciation.
*Often used for valuation of BUILDINGS/ DWELLINGS
**Can be added as an endorsement for PERSONAL PROPERTY/ CONTENTS.
Market Value - The amount for which something can be sold in a given market.
Stated Value - Value of an item of property as declared in the insurance contract.
Assignment - Insured can't transfer policy ownership without the written consent of the insurer.
Subrogation - After insurer pays a loss, the insured's rights to seek recovery from responsible
party is transferred to insurer.
Salvage Value - Value of damaged property that may be retrieved, reconditioned, and sold to
reduce an insured loss.
Proximate Cause - Unbroken chain or connection between an occurrence and damage.
*Fundamental doctrine of property insurance.
Deductible - the amount INSURED must PAY on each loss.
*Reduces number of frivolous or small claims.
