Texas Insurance License Exam Prep
P&C Questions and Answers
What are 3 subjects an auto policy covers? - ANS-1. Body
2. The vehicle
3. Assets
Bodily Injury Types - ANS-Personal Injury
Med Pay
Uninsured Motorist
No Fault Insurance - ANS-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 - ANS-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 - ANS-Personal Automotive Policy
Negligence - ANS-The failure to act as a prudent person would under similar
circumstances
Legal Liability - ANS-Involves proven negligence or fault
Vicarious Liability - ANS-Being responsible for the negligent acts of someone else. Ex.
Your children
Absolute or Strict Liability - ANS-Stems from hazardous or dangerous activities that
makes the owner liable WITHOUT the requirement of proof of negligence.
Liability - ANS-Being responsible for the damages or injury you or someone else you're
responsible for has done.
The 7 Characteristics of a Contract - ANS-1. Personal Contract
2. Conditional Contract
3. Adhesion
4. Indemnity
5. Aleatory
6. Unilateral
7. Utmost Good Faith
,Personal Contract - ANS-Is stipulation of a contract that says the contract is for the
name person and cannot be transferred to another.
Conditional Contract - ANS-Stipulates set by a contract. "You can do this, but...."
Adhesion - ANS-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 - ANS-The contract agrees to indemnify, or make whole again the customer.
Makes them no better, nor worse, just whole.
Aleatory - ANS-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 - ANS-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 - ANS-Parties believe that both will deal with eachother honestly and
fairly, without misleading or withholding
Insurance - ANS-A contract by which an Insurance company agrees to compensate an
insured for a covered loss in return for a premium payment.
Underwriting - ANS-Process of evaluating policyholders to determine eligibility for
coverage and pricing
Law of Large #'s - ANS-Principle that the larger the examples of data, the more
accurate the information
Speculative Risk - ANS-Risk of Gain OR Loss Ex. Gambling or Investment Insurance
Pure Risk - ANS-No chance of gain or benefit. The only kind that insurance deals with.
Exposure - ANS-An opportunity for risk or loss
Risk - ANS-Possibility of financial loss
Peril - ANS-The direct cause of a loss
Representation - ANS-Statements on an insurance contract that the insured BELIEVES
to be true
, 4 Means of Managing Risk - ANS-1.Reduction
2.Retain
3.Avoid
4.Transfer
Reduction - ANS-reduce the risk shared by the insured and insurer Ex. Good
maintenance
Retain - ANS-Taking risks by retaining the risk to ones self. Ex. Not reporting an
accident to the insurance company, or not getting insurance at all.
Avoid - ANS-Avoiding risk all together. Ex. Not driving at all
Transfer - ANS-Transferring risk. Ex. Getting insurance in the first place transfers risk
from the insured to the insurer
Insurable Interest - ANS-To 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 - ANS-Event increases likelyhood of loss. Ex. Texting while driving, weather.
Insurance Agreement - ANS-Agreement by insurance to provide coverage in exchange
for a premium
Conditions in an Insurance Contract - ANS-Assigns:
Duties after a loss
Defines Policy Terms
Outlines how to cancel
Stipulates on multiple contracts (primary & secondary)
Insurance Exclusions - ANS-Things not covered. Ex. Intentional Acts
Coverage - ANS-Defines what is covered and what is insured against within an
insurance contract
Premium - ANS-Monetary amount charged by insurer in exchange for coverage
Casualty Insurance - ANS-A broad term for insurance that covers PROPERTY and
LIABILITY losses.
Property Insurance - ANS-Specifically to protect from financial losses on property that is
owned, damaged or destroyed.
Ex. Dwelling Insurance
Liability Insurance - ANS-Protects insured from the risk they might be held legally liable
due to injury, harm or negligence
P&C Questions and Answers
What are 3 subjects an auto policy covers? - ANS-1. Body
2. The vehicle
3. Assets
Bodily Injury Types - ANS-Personal Injury
Med Pay
Uninsured Motorist
No Fault Insurance - ANS-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 - ANS-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 - ANS-Personal Automotive Policy
Negligence - ANS-The failure to act as a prudent person would under similar
circumstances
Legal Liability - ANS-Involves proven negligence or fault
Vicarious Liability - ANS-Being responsible for the negligent acts of someone else. Ex.
Your children
Absolute or Strict Liability - ANS-Stems from hazardous or dangerous activities that
makes the owner liable WITHOUT the requirement of proof of negligence.
Liability - ANS-Being responsible for the damages or injury you or someone else you're
responsible for has done.
The 7 Characteristics of a Contract - ANS-1. Personal Contract
2. Conditional Contract
3. Adhesion
4. Indemnity
5. Aleatory
6. Unilateral
7. Utmost Good Faith
,Personal Contract - ANS-Is stipulation of a contract that says the contract is for the
name person and cannot be transferred to another.
Conditional Contract - ANS-Stipulates set by a contract. "You can do this, but...."
Adhesion - ANS-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 - ANS-The contract agrees to indemnify, or make whole again the customer.
Makes them no better, nor worse, just whole.
Aleatory - ANS-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 - ANS-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 - ANS-Parties believe that both will deal with eachother honestly and
fairly, without misleading or withholding
Insurance - ANS-A contract by which an Insurance company agrees to compensate an
insured for a covered loss in return for a premium payment.
Underwriting - ANS-Process of evaluating policyholders to determine eligibility for
coverage and pricing
Law of Large #'s - ANS-Principle that the larger the examples of data, the more
accurate the information
Speculative Risk - ANS-Risk of Gain OR Loss Ex. Gambling or Investment Insurance
Pure Risk - ANS-No chance of gain or benefit. The only kind that insurance deals with.
Exposure - ANS-An opportunity for risk or loss
Risk - ANS-Possibility of financial loss
Peril - ANS-The direct cause of a loss
Representation - ANS-Statements on an insurance contract that the insured BELIEVES
to be true
, 4 Means of Managing Risk - ANS-1.Reduction
2.Retain
3.Avoid
4.Transfer
Reduction - ANS-reduce the risk shared by the insured and insurer Ex. Good
maintenance
Retain - ANS-Taking risks by retaining the risk to ones self. Ex. Not reporting an
accident to the insurance company, or not getting insurance at all.
Avoid - ANS-Avoiding risk all together. Ex. Not driving at all
Transfer - ANS-Transferring risk. Ex. Getting insurance in the first place transfers risk
from the insured to the insurer
Insurable Interest - ANS-To 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 - ANS-Event increases likelyhood of loss. Ex. Texting while driving, weather.
Insurance Agreement - ANS-Agreement by insurance to provide coverage in exchange
for a premium
Conditions in an Insurance Contract - ANS-Assigns:
Duties after a loss
Defines Policy Terms
Outlines how to cancel
Stipulates on multiple contracts (primary & secondary)
Insurance Exclusions - ANS-Things not covered. Ex. Intentional Acts
Coverage - ANS-Defines what is covered and what is insured against within an
insurance contract
Premium - ANS-Monetary amount charged by insurer in exchange for coverage
Casualty Insurance - ANS-A broad term for insurance that covers PROPERTY and
LIABILITY losses.
Property Insurance - ANS-Specifically to protect from financial losses on property that is
owned, damaged or destroyed.
Ex. Dwelling Insurance
Liability Insurance - ANS-Protects insured from the risk they might be held legally liable
due to injury, harm or negligence
