Texas Property and Casualty insurance study guide LATEST VERSIONS 2024 (VERSION A AND B) COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS

What is a deductible in an insurance policy? - ANSWERS,A specified dollar amount that the insured must pay before the insurer will pay the policy benefits In property insurance, what is actual cash value? - ANSWERS,Replacement cost at the time of loss, minus depreciation Wagering on a sporting event is known as what type of risk? - ANSWERS,Speculative What term defines an exact, direct, and uninterrupted cause of loss? - ANSWERS,Proximate cause What is subrogation? - ANSWERS,An insurer's legal right to seek damages from third parties after reimbursing insureds for a loss What provision found in property policies prevents an insured from collecting twice for the same loss: once from the insurer and again from a third party? - ANSWERS,Subrogation What law protects consumers from the circulation of inaccurate or obsolete information? - ANSWERS,The Fair Credit Reporting Act What doe indemnify mean in insurance? - ANSWERS,To restore an insured to the same financial status as before a loss In property insurance, what is the purpose of a coinsurance clause? - ANSWERS,To encourage insureds to insure property close to its value The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what? - ANSWERS,Loss What provision states that if a policy allows for greater benefits than the financial loss incurred, the insured may be compensated only for the amount lost? - ANSWERS,Indemnity An insurer discovers that an applicant for a policy has submitted a fraudulent insurance claim in the past. What type hazard does this represent? - ANSWERS,Moral How are direct and indirect losses related? - ANSWERS,Direct losses an cause indirect losses. What term describes a loss caused by continuous exposure to a condition? - ANSWERS,Occurrence If an insured peril was the proximate cause of loss, what type of loss is it? - ANSWERS,Direct An insured's business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income? - ANSWERS,Indirect or consequential What type of policy insures all property at multiple locations for a single amount? - ANSWERS,Blanket policy If a manufactured product is unsafe, what type of liability applies to the manufacturer? - ANSWERS,Strict liability What are the two types of compensatory damages? - ANSWERS,special and general What is additional coverage in an insurance policy? - ANSWERS,A provision that adds more coverage for a specific loss at no additional premium What is consideration in an insurance contract? - ANSWERS,Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding. In property and casualty policies, what is required for an assignment to be valid? - ANSWERS,A written consent of the insurer What does the term unilateral contract mean? - ANSWERS,A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise Who is an insured in property and casualty insurance? - ANSWERS,Anyone covered under the policy, even if not specifically named What is a binder? - ANSWERS,A temporary insurance contract that goes in effect prior to the policy issue What section personalizes an insurance policy? - ANSWERS,Declarations What is a warranty in an insurance contract? - ANSWERS,An absolutely true statement upon which the validity of the policy depends In insurance contracts, when does acceptance usually occur? - ANSWERS,When the insurer approves a prepaid application What is the difference between cancellation and nonrenewal? - ANSWERS,Cancellation is the termination of an insurance policy by either party prior to the policy's expiration date. Nonrenewal is the termination of a policy at its expiration date by not offering a continuation of the existing policy. What part of an insurance policy indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy? - ANSWERS,Conditions Persons who are not named on the declaration page of a policy but who are protected by the policy are known as what type of insured? - ANSWERS,Additional insured What part of a policy shows the amount of insurance, premium, and policy terms? - ANSWERS,Declaration What provision defines how a policy respond if there is more than one insurance policy written on the same risk? - ANSWERS,Other insurance What part of an insurance policy contains the insurer's promise to pay a claim? - ANSWERS,Insuring agreement In commercial property policies, who has control of the policy, and who can cancel it? - ANSWERS,First named insured When does pro rata liability apply? - ANSWERS,When an insured has more than one policy covering a loss Where are the four elements of an insurance contract? - ANSWERS,Agreement (offer and acceptance), consideration, competent parties, and legal purpose Which method of loss valuation is contrary to the principle of indemnity? - ANSWERS,Replacem