CHAPTER 1. Property and Casualty Exam
Texas, With Complete Verified Solution
2023/2024
INSURANCE
The method of spreading the risk of a financial loss among a large number of people.
When spreading the risk reduces the financial impact of an individual loss.
INSURANCE COMPANY
entity that agrees to indemnify (make financially whole again) Insureds against covered
losses
PROPERTY
Various types of insurance designed to insure property from financial loss. D.H.C.I.O.C
1.Dwelling
2.Homeowners
3.Commerical Property
4.Inland marine
5.Ocean marine
6.Crime
Actuaries
1.insurance statistician: a statistician who calculates insurance premiums, risks,
dividends, and annuity rates
CASULTY INSURANCE
Protects you against liabilty for BODILY INJURY (BI) and PROPERTY DAMAGE (PD)
LIABILITY OR CASUALTY COVERAGE
Will pay for accidental damage you cause to another person or their property. There are
three parties to Liability insurance contract.
1.you
2.your insurance company
3.the injured party
PERSONAL LINES INSURANCE
Property and casualty insurance for an individual. Policies include Property and
Casualty coverages.
COMMERCIAL LINES INSURANCE
Refers to property and casualty insurance to cover a BUSINESS as opposed to
personal lines
PURCHASING INSURANCE
The money you pay in exchange for insurance coverage is known as the
CONSIDERATION. It is also the PREMIUM, and the statements you make in the
application along with the payment of the initial premium are part of the consideration.
DEDUCTIBLE
Portion of covered loss that is not paid by the insurance company.The company will pay
for the remaining portion up to the policy limits. The higher the deductible, the lower
premium.
, BINDER
An ORAL or WRITTEN agreement that provides TEMPORARY evidence of insurance
until a policy can be issued. It does not guarantee that a policy will be issued, but it is
temporary until a contract can be underwritten from home or office.
Insured on a policy
Person or entity that is listed first on the declarations page is referred to as the first
named insured. The first named insured is the primary and holds the highest rank and
has broader rights and obligations under the contract.
RISK
Possibility or Uncertainty of loss. It is not actual loss. It is the possibility (risk) that an
accident may occur.
SPECULATIVE RISK VS PURE RISK
SPECULATIVE RISK offers the chance of loss as well as the oppurtunity for gain.
PURE RISK offers only the chance of loss no gain. Only PURE RISKS are insurable.
CHARACTERISTICS (ELEMENTS) OF INSURABLE RISKS
To be Insurable, the risk must:
1.Be PREDICTABLE-an insurer must be capable of statistically predicting the possibility
of loss.
2.Be a CHANCE OCCURRENCE- the risk must be outside the insureds control. It must
be unexpected, accidental, or uncertain.
3.Not be CATASTROPHIC-Insurers typically will not insure risks that will expose them
to losses that may occur to large number of insureds at the same time.
4.Be MEASURABLE and DEFINITIVE- an insurable risk is a loss that has a definite
monetary value. The insurer must be able to measure or value a potential loss.
5.Be AFFORDABLE- Loss must cause a financial or economic hardship to the insured
or to the insureds family.
INDIRECT LOSS
(or consequential) loss occurs as the result of a direct loss. For example your home
burns down and you have to stay in a temporary place until it is fixed.
LAW OF LARGE NUMBERS
To accurately predict what will happen to a large group of similiar risks. The larger the
group becomes, the more accurate the predictions become.
PERIL
a PERIL is the cause of a LOSS
some examples
Fire
Accidents
Explosions
Flood
Disease
Death
HAZARDS
is a condition or the source that increases the chance and/or severity of a peril. It will be
present before a peril occurs, but it is the PERIL that acutually causes the loss.
MORAL HAZARD
Texas, With Complete Verified Solution
2023/2024
INSURANCE
The method of spreading the risk of a financial loss among a large number of people.
When spreading the risk reduces the financial impact of an individual loss.
INSURANCE COMPANY
entity that agrees to indemnify (make financially whole again) Insureds against covered
losses
PROPERTY
Various types of insurance designed to insure property from financial loss. D.H.C.I.O.C
1.Dwelling
2.Homeowners
3.Commerical Property
4.Inland marine
5.Ocean marine
6.Crime
Actuaries
1.insurance statistician: a statistician who calculates insurance premiums, risks,
dividends, and annuity rates
CASULTY INSURANCE
Protects you against liabilty for BODILY INJURY (BI) and PROPERTY DAMAGE (PD)
LIABILITY OR CASUALTY COVERAGE
Will pay for accidental damage you cause to another person or their property. There are
three parties to Liability insurance contract.
1.you
2.your insurance company
3.the injured party
PERSONAL LINES INSURANCE
Property and casualty insurance for an individual. Policies include Property and
Casualty coverages.
COMMERCIAL LINES INSURANCE
Refers to property and casualty insurance to cover a BUSINESS as opposed to
personal lines
PURCHASING INSURANCE
The money you pay in exchange for insurance coverage is known as the
CONSIDERATION. It is also the PREMIUM, and the statements you make in the
application along with the payment of the initial premium are part of the consideration.
DEDUCTIBLE
Portion of covered loss that is not paid by the insurance company.The company will pay
for the remaining portion up to the policy limits. The higher the deductible, the lower
premium.
, BINDER
An ORAL or WRITTEN agreement that provides TEMPORARY evidence of insurance
until a policy can be issued. It does not guarantee that a policy will be issued, but it is
temporary until a contract can be underwritten from home or office.
Insured on a policy
Person or entity that is listed first on the declarations page is referred to as the first
named insured. The first named insured is the primary and holds the highest rank and
has broader rights and obligations under the contract.
RISK
Possibility or Uncertainty of loss. It is not actual loss. It is the possibility (risk) that an
accident may occur.
SPECULATIVE RISK VS PURE RISK
SPECULATIVE RISK offers the chance of loss as well as the oppurtunity for gain.
PURE RISK offers only the chance of loss no gain. Only PURE RISKS are insurable.
CHARACTERISTICS (ELEMENTS) OF INSURABLE RISKS
To be Insurable, the risk must:
1.Be PREDICTABLE-an insurer must be capable of statistically predicting the possibility
of loss.
2.Be a CHANCE OCCURRENCE- the risk must be outside the insureds control. It must
be unexpected, accidental, or uncertain.
3.Not be CATASTROPHIC-Insurers typically will not insure risks that will expose them
to losses that may occur to large number of insureds at the same time.
4.Be MEASURABLE and DEFINITIVE- an insurable risk is a loss that has a definite
monetary value. The insurer must be able to measure or value a potential loss.
5.Be AFFORDABLE- Loss must cause a financial or economic hardship to the insured
or to the insureds family.
INDIRECT LOSS
(or consequential) loss occurs as the result of a direct loss. For example your home
burns down and you have to stay in a temporary place until it is fixed.
LAW OF LARGE NUMBERS
To accurately predict what will happen to a large group of similiar risks. The larger the
group becomes, the more accurate the predictions become.
PERIL
a PERIL is the cause of a LOSS
some examples
Fire
Accidents
Explosions
Flood
Disease
Death
HAZARDS
is a condition or the source that increases the chance and/or severity of a peril. It will be
present before a peril occurs, but it is the PERIL that acutually causes the loss.
MORAL HAZARD
