TEXAS PROPERTY AND CASUALTY EXAM AND PRACTICE QUESTIONS STUDY GUIDE & ACTUAL EXAM QUESTIONS AND VERIFIED DETAILED ANSWERS ||ALREADY GRADED A+|| GUARANTEED PASS BRAND NEW VERSION

TEXAS PROPERTY AND CASUALTY EXAM AND PRACTICE QUESTIONS STUDY GUIDE & ACTUAL EXAM QUESTIONS AND VERIFIED DETAILED ANSWERS ||ALREADY GRADED A+|| GUARANTEED PASS BRAND NEW VERSION which of the following legal principles allows insurance companies to collect from a negligent third party damages it paid to an insured? - ANSWER Subrogation transferring is a method of handling risk. which of the following best describes the concept of transfer? - ANSWER purchasing insurance the insured has a named peril policy that covers hail, fire, wind, and lightning. which one of the following events would be covered? - ANSWER A roof that is damaged in an electrical storm (TRIPRA) the federal govt's share of compensation that exceeds the insurer's TRIPRA deductible is - ANSWER 80% why do ins. policies usually define who is considered an insured under the policy? - ANSWER to specify who is covered in addition to the named insured the federal govt. is not obligated under the TRIA to make payments for any portion of losses that exceed how much annually? - ANSWER $100 BILLION in the insurance business, the insurance comp. is also known as the? - ANSWER principle an insurance company that sells insurance only to people who meet specific membership requirements is known as what kind of ins. comp? - ANSWER Fraternal what is the actual cause of a loss? - ANSWER peril the purpose of insurance is to - ANSWER Transfer risk a warranty is a statement made by the applicant regarding the risk to be insured. which of the following statements is NOT true about warranties? - ANSWER A warranty must be refer to a material fact all of the following are basic ways in which underwriters assign rates EXCEPT? a) manual (class) rating b) judgement rating c) application rating d) experience (merit) rating - ANSWER c) application rating Bob has a liability policy in the amount of 300/500/100 how much coverage does he have per occurrence for property damage liability? - ANSWER 100,000 an insurance binder is best described as - ANSWER temporary, short-term evidence of coverage. an insured owns a pet lion that is caged on the homeowner's property. the owner takes great care to warn neighbors of the possible danger by posting signs, fencing the yard, and locking the cage at all times. when a neighbor's child manages to open the cage and is bitten, what type of liability would apply to the lion owner? - ANSWER Absolute liability which of the following risks are insurable? a) pure b) whole c)partial d) speculative - ANSWER a) pure methods of handling risk - ANSWER STARR Sharing Transfer Avoidance Retention Reduction exposure - ANSWER possibility that a loss will occur Direct - ANSWER direct loss is a physical loss to property with no intervening cause indirect - ANSWER a consequential loss as the result from direct loss law of large numbers - ANSWER the larger the group, the more accurately losses can be predicted. elements of an. insurable risk - ANSWER CANHAM calculable affordable non-catastrophic Homogeneous Accidental Measurable a flood is an example of? - ANSWER a peril adverse selection - ANSWER risks that have a greater than avg. chace of loss adverse selection - ANSWER not wanted by insurers, high-risk individuals. this is why insurers go through underwriting reinsurance - ANSWER an insurance company's insurance company. this helps insurers spread their risk stock insurers - ANSWER -owned by stockholders -dividends not guaranteed -dividends are paid to stockholders -dividends are taxable to stockholders -nonparticipating policies mutual insurers - ANSWER -owned by policyholders -dividends not guranteed -dividends paid to policyholder -dividends not taxable -issue participating policies fraternal benefit societies - ANSWER benefit of members, provide insurance and other benefits, and must be a member to get benefits. reciprocal insurers - ANSWER unincorporated groups of people, subscribers (members) - members are assessed if loss occurs lloyds of london - ANSWER ins. provided by individual underwriters, not companies, insure unusual risk. like an athletes arm risk retention groups - ANSWER insurance company for policyholders from the same industry risk purchasing groups - ANSWER group of businesses are not insurance company. self insurers - ANSWER a business that pays its own claims, reserves funds to cover losses self insurance - ANSWER -business that pays its own claims -reserves funds to cover losses -retains risk rather than transfer certificate of authority - ANSWER state license for an ins. comp - authorized (admitted) certificate of authority- sell, place, and service. unauthorized - ANSWER no certificate of authority, sell surplus lines ins. products surplus lines insurers - ANSWER high risk insureds AGENCY SYSTEMS (methods of marketing) - ANSWER 4 types - independent (brokers) -exclusive or captive(1 comp) -general agents or managing general agents -direct-writing companies direct response - ANSWER no agent/producer involved -ads, tv, media insurance agent acts on behalf of the - ANSWER principle(ins. comp) express - ANSWER written authority implied - ANSWER authorities not written (passing out business cards) apparent - ANSWER agent works for that comp and sells that companies policies fiduciary - ANSWER best interest principle -position of financial trust -promptly sends premiums to insurer Elements of a legal contract (CLOAC) - ANSWER Consideration legal purpose offer acceptance competent parties consideration= value - ANSWER money and statements made on the app legal purpose - ANSWER transfer of a legal risk offer and acceptance - ANSWER offer (made by insured) -offer to buy has 2 parts, the premium and application... insurer accepts or declines the risk counter offer (made by insurer) - ANSWER agrees to issue a policy, but with a higher premium or restrictions/exclusions adhesion - ANSWER -policy written by the ins. comp -insured has no input'; if not clear, court will take insured side Aleatory - ANSWER unequal value -pay a small premium and have large claims, or pay premiums for many yrs w/o a claim unilateral ( 1 ) - ANSWER insured can cancel contract any time, insurer must pay covered losses personal - ANSWER contract btwn ins. comp and insured -cannot be changed to someone else indemnity - ANSWER no profit -pay for the loss with no gain -no more, no less fraud - ANSWER void -intentional warranty - ANSWER a guarantee that something is true DICEE - ANSWER -Declarations -Insuring agreement -Conditions- rules for the policy -Endorsements changes to the original policy -Exclusions insuring agreement - ANSWER promise to pay and perlis covered additional insured - ANSWER added by endorsement policy territory - ANSWER where a loss must occur deductible - ANSWER amount of the loss paid by the insured -the higher the deductible , the lower the premium Pro Rata - ANSWER -prevents overpayment of a claim -non identical coverage -primary and excess -pro rata: ea. insurer is liable for a portion of the loss Duties After loss ( named insured's duties after loss) PPC+MSC - ANSWER -Prompt notice to insurer -Protect property from further damage -Complete proof of loss (if asked) -Make property available for inspection -Submit to examination under oath -Cooperate with insurer Coverage for water backup or sump pump overflow is excluded from the Dwelling Policy. However, with the purchase of the water backup and sump pump overflow endorsement, coverage for up to $5,000 in loss or damage can be provided for an additional premium. What is the deductible associated with this coverage? - ANSWER $250 Coverage for up to $5,000 in loss or damage, subject to a $250 deductible, can be provided for an additional premium with this endorsement. An insured relocated to another state for work. However, she still owns and insures a house in this state, but has had no one living in it for 3 months. She is also storing some furniture and clothes in the house. From an insurance standpoint, the insured's house is considered - ANSWER Unoccupied Unoccupancy refers to an insured structure in which no people have been living or working within the required period of time, but the structure contains contents. Individuals in the business of selling construction equipment and mobile equipment should insure with a/an - ANSWER Equipment dealers coverage form An equipment dealer's coverage form covers a dealer's stock in trade consisting primarily of mobile agricultural equipment and construction equipment. It also covers property of others in the dealer's care, custody, or control. It excludes coverage for autos, motorcycles, aircraft, and watercraft. All of the following are true regarding deposit premium - ANSWER It must be paid in advance. It is an estimated premium paid at the policy issue. It could be adjusted by the audit. Deposit premium is an estimated premium paid in advance at the time the policy is issued that may be adjusted by the audit based on actual exposures. Which of the following is NOT an essential element of an insurance contract? - ANSWER counteroffer To purchase insurance, the policyowner must have financial interest in the property being insured. This is known as - ANSWER Insurable Interest The insured must have an insurable interest in the person or property covered by an insurance policy. In property insurance, this means the insured would incur a financial loss if the insured property was damaged. What type of property does a Personal Floaters policy cover? - ANSWER Movable personal property, wherever it may be located Events or conditions that increase the chances of an insured loss occurring are referred to as - ANSWER Hazards