Texas All lines adjuster license insurance
terms and related concepts Chapter 1
Law of Large Numbers Correct Answer: the more examples used to develop any statistic, the
more reliable the statistic will be
Underwriting Correct Answer: The process and insurance company uses to decide whether to
except or reject an application for a policy insurance. underwriters evaluate the risk and exposure
of a potential policyholders they decide how much coverage the policyholder should receive how
much they should pay for it or whether even to except the risk and insure them. underwriting
involves measuring risk exposure and determining the premium that needs to be charged to
ensure that risk.
peril Correct Answer: A cause of property losses I.E, fire, lightning, explosion, windstorm,
hurricane, collapse of building, vandalism, accidental discharge, theft.
hazard Correct Answer: Is a situation that poses a level of threat to life, Heath, property, or
environment.
Direct loss Correct Answer: Direct physical loss to property
Indirect loss Correct Answer: A loss that arises as a result of damage to property, other than the
direct loss to the property. If you own a taxi and someone totals out your taxi, you can't make
money because you can't drive your taxi for fares.
Principle of indemnity Correct Answer: Insurance will not pay more than the cost of the incident
Property insurance Correct Answer: Covers the loss of real and personal property from perils
such as fire, theft, windstorm
Insuring Agreement Correct Answer: Summarizes the major promises of the insurer in exchange
for premium payments by their customer.
Deductible Correct Answer: Amount you must pay before you begin receiving any benefits from
your insurance company
Cancellation Correct Answer: Termination of an insurance policy by insurance company or
insurer before the renewal date. All notices must be done in writing.
Limit of Liability Correct Answer: The maximum amount for which an insurer is liable. The
policy of declarations specifies limits.
Loss settlement Correct Answer: The process used to determine the amount of the loss.
, Methods used to settle losses Correct Answer: Actual cash value- value of the property, based
on the current cost to replace it, minus applicable depreciation.
Replacement cost- the cost associated with replacing property at current market prices.
Agreed value- the amount that the insured and insurer agree upon during the time of policy
inception.
Market value- the amount the property is worth in a competitive market. This amount is accepted
by the buyer and seller.
Casualty insurance Correct Answer: Protects a person from financial loss arising from bodily
injury or property damage to others arising out of : ownership of property, operation of a motor
vehicle, personal activities, business activities, robbery, and Worker's comp.
liability Correct Answer: A person is legally liable for an accident if that person is found
responsible for bodily injury or property damage to another party. Usually based upon the
negligent acts of that person.
negligence (n) Correct Answer: carelessness
Tort Correct Answer: A civil wrong committed against someone else. This breach would
determine if that person is negligent. The essential elements used to determine negligence :
duty owed
Duty breached
Proximate cause
Damages
Punitive Damages Correct Answer: Money a court requires a defendant to pay in order to punish
and make an example of the defendant. "Punitive" (punished or punishment by the court)
Comparative Negligence Correct Answer: Is a partial legal defense that reduces the amount of
damages that a person can recover based upon the amount that this person's own negligence
contributed to the loss. (Two or more people Sharing fault in a negligent situation)
Contributory Negligence Correct Answer: Is a law defense where a person's own negligence
contributed to the harm that he or she sustained
assumption of risk Correct Answer: Is a defense which bars a person that voluntarily and
knowingly subjected oneself to danger.
3 types of negligent defenses / acts Correct Answer: Comparative negligence (compare or
compared two or more)
Contributory negligence (contribute, you contributed to negligent acts causing harm.)
terms and related concepts Chapter 1
Law of Large Numbers Correct Answer: the more examples used to develop any statistic, the
more reliable the statistic will be
Underwriting Correct Answer: The process and insurance company uses to decide whether to
except or reject an application for a policy insurance. underwriters evaluate the risk and exposure
of a potential policyholders they decide how much coverage the policyholder should receive how
much they should pay for it or whether even to except the risk and insure them. underwriting
involves measuring risk exposure and determining the premium that needs to be charged to
ensure that risk.
peril Correct Answer: A cause of property losses I.E, fire, lightning, explosion, windstorm,
hurricane, collapse of building, vandalism, accidental discharge, theft.
hazard Correct Answer: Is a situation that poses a level of threat to life, Heath, property, or
environment.
Direct loss Correct Answer: Direct physical loss to property
Indirect loss Correct Answer: A loss that arises as a result of damage to property, other than the
direct loss to the property. If you own a taxi and someone totals out your taxi, you can't make
money because you can't drive your taxi for fares.
Principle of indemnity Correct Answer: Insurance will not pay more than the cost of the incident
Property insurance Correct Answer: Covers the loss of real and personal property from perils
such as fire, theft, windstorm
Insuring Agreement Correct Answer: Summarizes the major promises of the insurer in exchange
for premium payments by their customer.
Deductible Correct Answer: Amount you must pay before you begin receiving any benefits from
your insurance company
Cancellation Correct Answer: Termination of an insurance policy by insurance company or
insurer before the renewal date. All notices must be done in writing.
Limit of Liability Correct Answer: The maximum amount for which an insurer is liable. The
policy of declarations specifies limits.
Loss settlement Correct Answer: The process used to determine the amount of the loss.
, Methods used to settle losses Correct Answer: Actual cash value- value of the property, based
on the current cost to replace it, minus applicable depreciation.
Replacement cost- the cost associated with replacing property at current market prices.
Agreed value- the amount that the insured and insurer agree upon during the time of policy
inception.
Market value- the amount the property is worth in a competitive market. This amount is accepted
by the buyer and seller.
Casualty insurance Correct Answer: Protects a person from financial loss arising from bodily
injury or property damage to others arising out of : ownership of property, operation of a motor
vehicle, personal activities, business activities, robbery, and Worker's comp.
liability Correct Answer: A person is legally liable for an accident if that person is found
responsible for bodily injury or property damage to another party. Usually based upon the
negligent acts of that person.
negligence (n) Correct Answer: carelessness
Tort Correct Answer: A civil wrong committed against someone else. This breach would
determine if that person is negligent. The essential elements used to determine negligence :
duty owed
Duty breached
Proximate cause
Damages
Punitive Damages Correct Answer: Money a court requires a defendant to pay in order to punish
and make an example of the defendant. "Punitive" (punished or punishment by the court)
Comparative Negligence Correct Answer: Is a partial legal defense that reduces the amount of
damages that a person can recover based upon the amount that this person's own negligence
contributed to the loss. (Two or more people Sharing fault in a negligent situation)
Contributory Negligence Correct Answer: Is a law defense where a person's own negligence
contributed to the harm that he or she sustained
assumption of risk Correct Answer: Is a defense which bars a person that voluntarily and
knowingly subjected oneself to danger.
3 types of negligent defenses / acts Correct Answer: Comparative negligence (compare or
compared two or more)
Contributory negligence (contribute, you contributed to negligent acts causing harm.)
