Download Texas Insurance Licensing Exam: Key Concepts and Definitions and more Exams Commercial Law in PDF only on Docsity!
USAA Licensing Exam 2023
Insurance - ANS-Transfer of risk from one person or organization to an insurance company Indemnity - ANS-The principle to restore the insured to the pre-loss economic or financial condition. Law of Large numbers - ANS-Mathematical principle used by insurers to predict losses to charge the appropriate premiums Insurable Interest - ANS-Proof that someone stands to lose financially if a loss occurs; must exist at the time of the loss in property and casualty insurance Binder - ANS-Temporary insurance contract; commits the company to act as if a policy has been issued Peril - ANS-Cause of loss Direct Loss - ANS-Immediate actual physical damage to tangible property Indirect loss - ANS-Inability to use property as a result of a direct loss Risk - ANS-Chance of loss; uncertainty of loss What are the two types of risk? - ANS-Speculative and Pure Speculative Risk - ANS-Involves the simultaneous chance of gain or loss: is not insurable Pure Risk - ANS-a risk that presents the chance of loss but no opportunity for gain (insurable) What are two examples of speculative risk? - ANS-Gambling Investing What is an example of your risk? - ANS-Car accident Physical hazards include - ANS-Visible condition that increases the chance of loss Morale Hazard - ANS-Attitude of carelessness or indifference to loss Insurer - ANS-The insurance company (a.k.a. second party to the contract) Named Insured - ANS-A party named on the declarations who is purchasing the insurance policy (a.k.a. first party to the contract)
Insured - ANS-Who the insurer promises to protect in addition to the named insured Limit of Liability - ANS-The maximum amount that can be paid for a covered loss Consideration - ANS-An exchange of value between parties to a contract Waiver - ANS-The voluntary relinquishment of a known right What is Estopple? - ANS-When an agent tells an insured/makes the statement there is coverage for a loss when there is no such coverage, then the insurer is prevented from denying the claim as a result of what precedent? Concealment - ANS-Insured or prospect deliberately withholding material information from the insurer, this voids coverage Material Misrepresentation - ANS-Insured or prospect giving incorrect material information to the insurer, this voids coverage Warranty - ANS-A written condition in the policy that must be true at the time of the loss Texas Department of Insurance - ANS-In Texas, the insurance industry is regulated by the Commissioner - ANS-The (_______) is appointed by the governor and heads the Texas Department of Insurance Adjuster - ANS-According to the Texas Insurance Code, any person who investigates or adjusts losses, or any person who supervises the handling of claims must be licensed as an (_______________) A Staff Adjuster - ANS-A (_____) is on the payroll of an insurance company and is paid a salary or by the hour Independent Adjuster - ANS-A () handles claims for one or more insurance companies and receives a fee based on time and expense. Public Adjuster - ANS-A () works on behalf of the insured in negotiating a claim settlement. In Texas a (______) requires another separate license called a "public adjusters license". Insurance Agent - ANS-Persons marketing (Selling) insurance products are called (__) Alien Insurer - ANS-An insurer organized and domiciled outside the United States is called an (_____)
A- Aircraft V- Vehicle not owned by the insured V- Volcano activity E- Explosion R- Riot M- Malicious Mischief What hazards are covered under "Named Peril Broad" coverage? - ANS- (FLI+WCSHAVVERM) & B- Burglary Damage I- Ice/Sleet/Snow G- Glass Coverage A- Accidental Discharge/Overflow F- Falling Objects F- Freezing Pluming E- Electric Current C- Collapse Coverage T- Tearing Appart What hazards or perils are listed in the "Special Exclusions" policy? - ANS-Building Ordinances Mechanical Breakdown War & Nuclear Power Surge - Offcite International Acts Earthquake Flood Temporary/ Emergency License - ANS-A special allowance that can be made by the Texas Insurance Commissioner for an insurance company employee during an emergency for the purposes of training? Five day's notice - ANS-How many days notice must a company give the Commissioner to issue a temporary license or emergency license to an individual for the pruposes of training? Who is responsible for the actions of the licensee once an emergency or temporary license has been issued? - ANS-The firm requesting the license is responsible.. A Property and Casualty Adjuster licenses allows? - ANS-This license allows a person to adjust or supervise claims in all areas of property and casualty insurance EXECPT workers' compensation. Domestic Insurer - ANS-An insurance company that is incorporated in the state.
Foreign Insurance Company - ANS-An insurance company that is incorporated outside the state where it is conducting business Who is the Chief Executive Officer of the Texas Department of Insurance? - ANS-The Commissioner How long does the Commissioner serve? - ANS-A term of two years What are the basic qualifications for adjusters in Texas? - ANS-a. 18 years of age b. Citizen of Texas or approved by a nonresidents home state c. If a nonresident of the U.S., he must comply with all federal laws pertaining to employment in the U.S. d. Trustworthy e. Sufficient training or experience to be a competent adjuster f. Must pass an examination to qualify for adjusters licensing. Who is exempt from Examination? - ANS-Those individuals with are:
- Chartered Property and Casualty Underwriter (CPCU)
- Associate in Claims (AIC) designation
- A persons who's adjusters license has expired within a period of less than one year How long after the change of a business location must a licensee notify the Commissioner? - ANS-30 days How long is an adjusters license good for? - ANS-Two years on the licensee birthday How much does is an adjuster required to pay to renew a license that has expired within less than 90 days? - ANS-The renewal fee PLUS a 50% penalty How many hours of continuing education are requested to renew a license? - ANS- 24 hours every two year cycle How much of continuing education must be conducted in a classroom environment? - ANS-50% of the 24 hours How many hours of ethics training are required during continuing edcuation? - ANS- 2 hours of 24 total hours. What authority does the Commissioner of Insurance have? - ANS-To police the activities of two entities:
- Insurance companies
- Insurance professionals, including the licensing of insurance agents and adjusters How often is a domestic headquartered insurance company audited by the office of the Commissioner? - ANS-Once every 5 years
When does the duty to "defend in court"? - ANS-Only once the law suit has been filed in court. What are the three requirements for a compintent party? - ANS-Age 18 Sane Sober What are the essential elements of a contract? - ANS-Competent Parties Agreement Lawful Objectives Consideration The principle that states that an insured should be restored after a loss to approximately the same financial position as before the loss is know as? - ANS-Indemnity What part of an insurance policy personalizes the policy as to whom and what are insured? - ANS-Declarations An insurance policy is prepared by the insurance company, with little or no input from the insured. This means that an insurance police is - ANS-An adhesion contract In liability policies, supplementary payments are? - ANS-Payable in addition to the policy limit of liability. Endorsements are used to do all of the following EXECPT - ANS-Cancel the entire policy. Who writes an endorsement? - ANS-Underwriter's do What are Endorsements? - ANS-They are changes to a policy by an underwriter and have a direct link to an increase in premiums. Are endorsements done verbally? - ANS-No they are done in writing What are Supplementary payments? - ANS-payments applied to policies that are paid in addition to policy limits What does the term BAILED stand for? - ANS-B- Bonds A- Aid (First aid...) I- Interest on judgments against insured with no limits L- Loss of earnings, 250 per day E- Expenses incurred at the request of the insurer D- Defense and investigation costs-paid with no limit What is an endorsement? - ANS-The only way to modify or change a policy
What are the five elements of an endorsement? - ANS-1. Add, delete, or modify coverage
- Must be in writing
- Added to the back of a policy
- Not used to cancel a policy
- Only the underwriter has authority to issue endorsement.
- Requires an additional premium for expanded coverage If more than one policy covers the same property, the payment of claims would be based on what liability principle? - ANS-Pro-rata liability What does the acronym C.L.A.C. represent? - ANS-- Competent Parties
- Legal (in public interest)
- Agreement Acceptance by Insurer
- Consideration (Insured=Premium, Insurer=Promise to indemnify) D.I.C.E.E - ANS-D- Declaration Page= 5 P's I- Insurance Agreement/Promise to pay C- Conditions= Rules/Requirements- Both insured and insurer E- Exclusions=(Perils, not covered) or (Property not covered) E- Endorsements= Only way to modify a policy, completed by underwriter and costs an additional premium. When an insurance policy is canceled, what consideration is used in determining the refund of the premiums? - ANS-Insurer = Pro-rated Insured = Short Rate penalty BAILED - ANS-B- Bonds A- First Aid at the scene of the accident I - Interest on judgments against insured L- Loss of earnings for the first policyholders E- Expenses determined by the adjuster D- Defense and investigation costs Supplementary Payments - ANS-Paid policyholder and insurance company expenses Law of large numbers - ANS-Predict losses to charge the appropriate premiums Limit of Liability also known as - ANS-Policy limits Face Amount Independent Adjuster - ANS-Works for a firm or breau Public Adjuster - ANS-Requires an additional license
How many days maximum to complete proof of loss form? - ANS-91 days What is mortgagee? - ANS-A mortgagee is the financial institution that lended the insured the money to buy the home. What are the rights of the lender/mortgagee? - ANS-a. May act like the insured by paying premiums/making a claim b. Has the full right of recovery to the amount under mortgage c. Has a right to receive advance written notice of coverage cancellation (10 days in Texas) What is replacement costs? - ANS-The money or cost associated to rebuild based on current material and labor costs. What is the coinsurance clause? - ANS-Most commonly the requirement is 80%. What is the purpose of coinsurance? - ANS-To carry insurance coverage to the full replacement value to ensure the insurer receives adequate premiums. Face amount is? - ANS-The policy limit, or limit of liability. The declarations page includes what information? - ANS-Policy limits and exclusions. What is the coinsurance penalty formula? - ANS-Insurance Carried
Insurance Required * (Loss amount)= Equals amount paid by insurer/coinsurance. Liability is synonymous - ANS-Casualty Personal injury liability includes? - ANS-Libel Slander Invasion of privacy Faulse arrest Social media Negligence is determined when what four requirements are met? - ANS-A failure to act reasonable and prudent. There is a four-step test to negligence.
- A duty owed
- The duty must have been breached
- The breach of that duty is the proximate cause
- Actual loss- an actual injury or PD must occur What is a TORT? - ANS-A tort is a civil wrong, not a criminal wrong.
Absolute Liability - ANS-Liability without fault; duty owed and duty breached; established by society (Personal Exposure) Pools, pets, firearms Strict Liability is - ANS-All defective products; Tires, Legal Drugs, TOYS Liability coverage is for what "party" coverage? - ANS-Third party coverage. Aggregate limit is? - ANS-Business or commercial limit. Maximum coverage during the entire policy period. Accident is? - ANS-A sudden and unforeseen event at a fixed time and place that causes BI or PD loss What is an Occurence? - ANS-A term broader than accident that is expanded to include BI or PD loss caused by continued and repeated exposure to the same peril or conditions What are Compensatory Damages? - ANS-money paid to make an injured person whole What are special damages? - ANS-Monetary expense paid based on a receipt for the expense are considered special damages. What are general damages? - ANS-Expenses paid for non-economic losses these include; pain, suffering, and malice. No receipt is provided or required. Define the term Punitive - ANS-Punishes the wrongdoer because of actions greater than simple negligence; gross negligence Intended as a deterrent Awarded in a civil court Not considered to be a fine or penalty which would not be paid by the liability insurance - ANS-The threat of punitive damages are designed to do what? Liability is what line of insurance? - ANS-The second line of insurance Who does liability pay? - ANS-Always pays the third party claimant. Deductibles never apply to whom? - ANS-The third party.
- Coverage is not listed for the peril/hazard
- The insured is not liable for the damage - ANS-What are the two reasons a claim would be denied?
What is negotiation? - ANS-Conferring with someone to arrive at an agreement about some matter. What is Subrogation? - ANS-Is the transfer by the insured by to the insurance company of the legal right of the insureds' right of recovery against the party that caused the harm. Only after insurer has paid first party When does a claim go to Arbitration? - ANS-Dispute over weather or not a claim is valid. If there is a total loss by fire in the state of Texas? - ANS-requires insurer pay the face amount immediatly (limited to the value of the structure ONLY) Intangible Damages - ANS-Non-economic, general damages including pain and suffering and mental anguish Why is negotiation important? - ANS-Negotiation is a critical factor in meeting a companies goals. To promptly, fairly, and accurately settle a claim. When the insurer and the insured cannot agree on the value of a loss, the matter is submitted to disinterested parties for resolution. Under a standard appraisal clause, how many parties are involved in determining the value of the loss? - ANS-3 Parties What legal principles allows insurance companies to collect from the party at fault? - ANS-Subrogation Arbitration involves what type of issue? - ANS-Coverage Issues To whom might an insured abandon her property to be paid for a total loss? - ANS- Abandonment is not allowed in Texas The adjuster must always do which of the following regarding claims practices? - ANS- Investigate the claim The condition that provides a means to settle the amount of a loss when the insured and the insurance company cannot agree is? - ANS-The appraisal condition. What is the split limit in the State of Texas? - ANS-30/60/ In Texas, coverage may be purchased with? - ANS-Split limits or combined single limits $60,000? - ANS-The most BI liability paid as a result of any one accident, regardless of the number of BI claims
$25,000? - ANS-The most PD liability that will be paid for any one accident. ##/##/## - ANS-BI-any one person/BI-for the whole accident/Property Damage for any one accident What is the out-of-state clause? - ANS-If the insured is involved in a accident in a state that requires higher financial responsibility limits than Texas does, the policy will be interpreted to provide the higher limit. What is combined-single-limit? - ANS-CSL combines the two per accident figures stated previously. It does not distinguish between BI and PD liability. Persons insured include? - ANS-Named insured Resident Spouse Resident Relatives *Any person driving an insured car with the insured's or spouse's permission. Liability Coverage provides coverage for? - ANS-Bodily injury(BI) and property damage (PD) for which any insured becomes legally responsible because of an auto accident. What is P.I.P? - ANS-Personal Injury Protection What is UM coverage? - ANS-Uninsured motorist. What is UIM coverage? - ANS-Underinsured Motorist Coverage. Uninsured motorist (UM) coverage applies to? - ANS-A hit-and-run driver is considered to be uninsured. UM coverage pays for the compensatory BI and PD's for which the insured is legally entitled but unable to collect from the at-fault driver. What does Part D of auto insurance cover? - ANS-This is coverage purchased by the insured to indemnify for physical losses that have occurred to an insured's car. Dwelling Policy Form - ANS-Structures where the actual owners live daily. This is also a mono-line policy. This only insures the property. Home owner policy form - ANS-Structures where the actual owners do NOT live there. Think "Land Lords" Dwelling Policy states - States - ANS-Property is insured up to a four unit dwelling. Home owners Policy States- - ANS-Single family to the maximum of four units
BAILEY is excluded from what commercial coverage? - ANS-Commercial General Liability General Aggregate Limit under a CGL is? - ANS-The most the insurer will pay per policy period (aggregate), regardless of the number of claims or losses under Coverage A, B, and C combined. CGL has two claim form versions, what are they? - ANS-Occurrence and claims-made forms. An occurrence form involves the what coverage company? - ANS-The company providing the insurance at the time of the occurrence. What does the acronym BOP stand for? - ANS-Business Owners Policy Commercial Package Policy can insure what type of business? - ANS-Totally flexible....small to HUGE corporations. B.O.P is restricted to what type of business? - ANS-Small businesses policy, think mom and pop with tight supervision and low claims, low risk. What is the benefit of a BOP? - ANS-Low premium for excellent coverage. BOP provides what type of coverage? - ANS-Both liability and property line coverage. What is the purpose for BOP? There are three general purposes - ANS-1. Property coverage for buildings and business personal property
- Business income and extra expense coverage; and
- General liability coverage Section 1 of the BOP provides coverages for what type of businesses? - ANS-Retail 25,000 or less sqft Office buildings not taller than six stories Apartment buildings not taller than six stories Service contractors-single service line, Carpentry, Residential Painting What type of businesses are not eligible for BOP? - ANS-Automotive industry is not eligible School or government offices Places of amusement Large restaurants Banks and financial institution Manufacturing operations What is the definition of burglary - ANS-1. The taking of property from inside the premises by a person unlawfully entering or leave the premises.
- There must be evidence of forcible entry or exit
- Business must be closed Who is a custodian? - ANS-The person who has custody of the insured property while inside the premises What is a performance bond? - ANS-it guarantees the work will be completed to specifications of the contract by the contractor. What is a payment bond? - ANS-The payment bond (labor and material bond) guarantees the payment of all bills incurred by the contractor for labor and materials incurred or supplied on the project. What is a fiduciary? - ANS-A fiduciary occupies a high level of trust. What is a fidelity bond? - ANS-Protects an employer against a dishonest employee The primary purposes of the business income coverage forms is to reimburse the insured for? - ANS-Loss of income resulting from property damage at the insured's property, provided the peril is covered by the policy. Which of the following losses to covered equipment would be covered under the equipment breakdown protection coverage form? - ANS-Damage from an explosion caused by the centrifugal force of moving parts. Under the commercial package policy, who may cancel the policy in writing and make changes to policy with the consent of the insurer? - ANS-The first named insured Which of the following would be covered under the building coverage of the building and personal property coverage form? - ANS-Fixtures Under the commercial property coverage part, the Cause of Loss-Broad Form insures against - ANS-Perils in the Cause of Loss- Basic Form and additional perils Which commercial property coverage form covers damage to the property of others in the insured's care, custody, or control when a fee is exchanged? - ANS-It is always excluded-BAILED What is CGL? - ANS-Commercial General Liability What is covered in CGL under Coverage A, part a? - ANS-Coverage A is bodily injury (BI) and property damage (PD) liability. What does Coverage A, of CGL represent? - ANS-Premises and operations, think slip and fall claims
What is a custodian? - ANS-A person having custody of insured property inside the premises What is a Surety? - ANS-The party that guarantees fulfillment of the obligor's promise. Suretyship is? - ANS-Bonding contract guaranteeing a principles promise The "penalty" on a bond is equal to what amount? - ANS-The face amount What is a performance bond used for? - ANS-Used to guarantee that work will be completed to specifications. What is a payment bond used for? - ANS-Used to guarantee that bills for labor and materials will be paid by the contractor. What is Hull coverage in Ocean Marine Insurance? - ANS-coverage for the ship itself and all onboard equipment; comprehensive and collision for the ship. What is a peril? - ANS-A cause of loss or hazard. What protection does Barratry cover? - ANS-Any illegal act by the master or crew to defraud the ownders of the ship or cargo. What does the Inchmaree Clause cover? - ANS-applies to loss resulting from negligence by the captain or crew as well as defects in the ship's hull or machinery What is hangerkeepers liability coverage used for? - ANS-Aviation coverage Which surety bond guarantees that bills for labor and materials will be paid by the contractor as they are due? - ANS-Payment bond The party to a surety bond who promises to do or not do a specific thing is? - ANS-The principle A surety bond protects the? - ANS-The obligee Who pays losses under bond contacts? - ANS-Surety
