Texas General Lines — Property and Casualty flashcards

An HO-4 policy, also known as a 'renters insurance' policy, provides coverage for a tenant's personal property and liability, but does not cover the dwelling structure itself.

• Designed for renters/tenants.
• Covers personal property on a named perils basis.
• Includes personal liability coverage.

Memory trick: Each HO form fits a different housing situation like a glove.

Insurers must submit proposed rate changes to the TDI for review before implementation.

• Applies to most lines of insurance.
• Ensures rates are not excessive, inadequate, or unfairly discriminatory.
• TDI reviews for compliance with state laws.

Memory trick: Before rates can rise, TDI must authorize with wise eyes.

Provisions in an insurance policy that define the rights and duties of the insured and the insurer, and specify rules of conduct for both parties.

• Outline responsibilities of insured and insurer.
• Specify circumstances for coverage to apply or be suspended.
• Examples include duties after a loss, cancellation provisions, and vacancy clauses.

Memory trick: DICE-E defines every policy's core.

Prohibited actions by insurers or adjusters during the claims handling process that are deemed unfair or deceptive by law.

• Includes delaying payments, misrepresenting coverage, and failing to investigate promptly.
• Protects policyholders from predatory claims handling.
• Violations can lead to fines and license suspension.

Memory trick: Each practice has its own forbidden zone.

Coverage in a Personal Auto Policy that pays for reasonable and necessary medical and funeral expenses incurred by an insured or passengers due to an auto accident, regardless of fault.

• Applies per person, per accident.
• Covers the named insured, family members, and occupants of the insured's vehicle.
• Pays regardless of who was at fault for the accident.

Memory trick: MedPay is like a personal first-aid kit for everyone in your car.

The authority of the Texas Commissioner of Insurance to mandate the delivery of a producer's records when the producer ceases operations or surrenders their license.

• Ensures proper handling of client data.
• Prevents abandonment of records.
• Records may include policy, claim, and financial information.

Memory trick: Records are for 5 years, but if you quit, the Commissioner may seize!

Making false statements of material fact regarding the terms, benefits, advantages, or dividends of any insurance policy.

• Involves providing incorrect information.
• Can be oral or written.
• Prohibited under Texas insurance law.

Memory trick: Don't twist, misrepresent, defame, or unfairly discriminate in Texas insurance.

The DP-2 Dwelling Policy covers all perils included in DP-1 (Basic Form) plus additional 'broad form' perils such as falling objects, weight of ice/snow/sleet, accidental discharge or overflow of water, and sudden and accidental tearing apart of heating/AC systems.

• Includes DP-1 perils (Fire, Lightning, Internal Explosion, EC, V&MM).
• Adds 12 specific broad perils, including plumbing/heating system rupture.
• Excludes common perils like flood, earthquake, and damage from animals.

Memory trick: DP-2 broadens protection, covering more than just the basics.

A type of commercial insurance that covers property that is frequently moved, is in transit, or is at a location other than the insured's primary premises.

• Often provides 'all-risk' coverage.
• Covers property in transit, at temporary locations, or owned by others but in the insured's care.
• Examples include Motor Truck Cargo, Builders Risk, Equipment Floaters.

Memory trick: For 'moving' business goods, 'Inland Marine' is your transit lifeline.

Specific dollar limits applied to certain categories of personal property, restricting the amount an insurer will pay for a loss to those items, regardless of the overall Coverage C limit.

• Applies to specific perils like theft for certain items.
• Limits are often lower than the item's actual value.
• Common categories include jewelry, firearms, stamps, and money.

Memory trick: Special treasures need special limits, like a lock on a jewel box.

A method of valuation that calculates the cost to replace damaged property with new property of like kind and quality, less depreciation.

• Replacement Cost - Depreciation
• Common in property insurance
• Results in lower payout than RCV

Memory trick: ACV: Always Consider Value-Depreciation.

An association that provides basic property insurance coverage to qualified individuals who cannot obtain it in the standard insurance market due to reasons other than coastal catastrophe risk.

• Serves as an insurer of last resort for specific property risks.
• Coverage is typically basic, not comprehensive.
• Aims to ensure availability of essential property insurance statewide.

Memory trick: Fair Plan for hard-to-insure homes, not coastal storms.

Medical Payments coverage in a Personal Auto Policy pays for reasonable and necessary medical and funeral expenses for the insured and passengers injured in an auto accident, regardless of fault.

• Coverage is typically per person, per accident.
• It is a 'no-fault' coverage.
• Covers the insured, family members, and other occupants of the covered vehicle.

Memory trick: Med Pay is like a 'first aid kit' for everyone in your car, no questions asked about fault.

HO-4 (Contents Broad Form) policies primarily provide Coverage C (Personal Property) on a named-peril basis for renters, protecting their belongings.

• Designed for tenants/renters.
• Does not provide Coverage A (Dwelling) or Coverage B (Other Structures).
• Coverage C is the main focus, protecting personal belongings from specified perils.

Memory trick: HO-4 is like a 'box' for your stuff in a rented 'house'.

In a Personal Auto Policy, a 'covered auto' refers to specific types of vehicles for which coverage applies, including scheduled vehicles, newly acquired vehicles, trailers, and temporary substitute vehicles.

• Any vehicle shown in the Declarations.
• A newly acquired private passenger auto or trailer.
• A trailer designed to be pulled by a private passenger auto.
• A temporary substitute auto used while a covered auto is out of service.

Memory trick: Your PAP covers your primary ride, new additions, and temporary wheels.

The practice of offering a discount to a policyholder when they purchase multiple insurance policies (e.g., auto and home) from the same insurance carrier.

• Common and legal marketing strategy for insurers.
• Provides convenience and cost savings for policyholders.
• Must be transparent and not involve unfair discrimination.

Memory trick: Bundling policies is like a package deal for your home and car, saving you money.

A Homeowners policy form designed for older homes where the replacement cost of the dwelling significantly exceeds its market value, providing basic perils coverage and Actual Cash Value (ACV) settlement for both dwelling and personal property.

• For older homes where replacement cost is high relative to market value.
• Provides 'named perils' coverage (similar to HO-1 or DP-1 basic perils).
• Losses are settled on an Actual Cash Value (ACV) basis.
• Often used when meeting strict building codes for replacement would be cost-prohibitive.

Memory trick: HO-8 is for 'Old Homes' needing 'ACV' for 'Basic' protection.

A method of property valuation where the insurer and insured agree on a specific value for the insured property at the time the policy is issued. In the event of a total loss, this predetermined amount is paid.

• Value set at policy inception
• Eliminates depreciation disputes
• Often used for unique or difficult-to-value items (e.g., antiques, fine art)

Memory trick: Agreed Value: We agree on the value beforehand.

The maximum administrative fine imposed by the Commissioner for failing to comply with a cease and desist order.

• Up to $25,000 per violation.
• Reflects the seriousness of defying a direct regulatory order.
• In addition to penalties for the initial violation.

Memory trick: Defy the cease, and pay the twenty-five grand peace.

The timeframe within which a Texas-licensed insurance producer must inform the Commissioner of Insurance about any change to their mailing address.

• Ensures accurate communication from TDI.
• Applies to both residential and business addresses.
• Failure to notify can result in penalties.

Memory trick: Address change? Thirty days or less, for TDI to address your mess!

Split limits in a Personal Auto Policy (PAP) specify three separate maximums: per person for bodily injury, total per accident for bodily injury, and total per accident for property damage.

• Format: BI per person / BI per accident / PD per accident.
• Per person limit applies to each individual injured.
• Per accident limit is the total paid for all bodily injuries in one incident.

Memory trick: Remember 'People, Piles, Property' for your split limits.

Personal Inland Marine policies are designed to provide broad, often 'all-risk' coverage for valuable personal property that is easily movable and may be transported, extending beyond the limited coverage of standard homeowners policies.

• Covers property against perils while in transit or at various locations.
• Can be used for scheduled items (e.g., jewelry, fine art) or unscheduled property.
• Offers broader coverage than standard homeowners policies, which have limitations on property away from premises.

Memory trick: When your 'treasures travel', you need an 'Inland Marine' policy, not just a home shield.

A policy that pays the face amount of insurance if a total loss occurs, regardless of the actual cash value of the property.

• Value is agreed upon at policy inception.
• Typically used for unique or hard-to-value items.
• Applies only in the event of a total loss.

Memory trick: Valued policies pay what was 'valued' not what's 'actual' for total loss.

In a Homeowners policy, Coverage A (Dwelling) insures the main residential structure and attached structures, while Coverage B (Other Structures) insures detached structures on the same premises.

• Coverage A includes attached garages, decks.
• Coverage B includes detached garages, sheds, gazebos.
• Coverage B limit is typically a percentage of Coverage A.

Memory trick: A is for 'Attached' home, B is for 'By itself' buildings.

While DP-2 (Broad Form) covers many perils, it still contains specific exclusions, notably for earth movement, flood, and war.

• DP-2 covers more perils than DP-1 but fewer than DP-3 (for the dwelling).
• Common exclusions include earth movement, flood, ordinance or law, war, nuclear hazard, and intentional loss.
• The 'Broad Form' refers to the list of named perils, not 'all risks'.

Memory trick: DP-2 covers many 'broad' perils, but 'Earth's wrath' (earthquakes, floods) is usually out.

An association that protects Texas policyholders in the event that a property and casualty insurance company becomes insolvent and cannot pay its claims.

• Pays covered claims up to statutory limits.
• Funded by assessments on member insurers.
• Ensures continuation of coverage for a limited period.

Memory trick: When an insurer goes bust, TPCIGA steps up to pay the claims, like a financial safety net.

A Personal Umbrella Policy (PUP) provides excess liability coverage over underlying policies once their limits are exhausted. The Self-Insured Retention (SIR) only applies when there is no underlying coverage for a loss.

• PUP is secondary to underlying policies (e.g., auto, homeowners).
• SIR is a 'deductible' for losses not covered by underlying policies but covered by the umbrella.
• The umbrella 'kicks in' after the underlying policy pays its maximum or if no underlying coverage exists.

Memory trick: The umbrella 'catches' what the primary policy 'misses', but only if the primary is empty, or it's a new type of rain.

The DP-1 Basic Form Dwelling Policy values dwelling losses on an Actual Cash Value (ACV) basis, meaning replacement cost less depreciation.

• ACV is the standard payment method for dwelling losses.
• Covers basic named perils like fire and lightning.
• Does not offer replacement cost coverage for the dwelling.

Memory trick: DP-1 is basic, so it pays 'ACV' for the house, not shiny new parts.

A specialized insurance policy designed to cover recreational boats, yachts, and personal watercraft for physical damage, liability, and other perils.

• Provides specific coverage for boats, unlike limited homeowners endorsements.
• Covers hull, machinery, equipment, and liability.
• Tailored for various types and sizes of watercraft.

Memory trick: When your boat sails, consider its specific needs, not just your house's.

The minimum advance notice an insurer must provide to the Texas Commissioner of Insurance when withdrawing from a line of business or conducting a mass non-renewal.

• Applies to withdrawal from a market segment, not individual policies.
• Allows the TDI to manage market impact.
• Failure to comply can result in penalties.

Memory trick: Withdrawals need ample notice, so the market doesn't feel the shock.

The period for which a former licensee must keep insurance transaction records accessible for review.

• Minimum of 5 years from transaction or policy termination.
• Applies even after license is surrendered or revoked.
• Ensures regulatory oversight and consumer protection.

Memory trick: Five years of files, even after your license beguiles.

A formula used to determine the amount paid for a partial loss when the insured has not carried the required percentage of insurance to value.

• Formula: (Amount Carried / Amount Required) x Loss Amount.
• Amount Required = Property Value x Coinsurance Percentage.
• Applies to partial losses only.

Memory trick: CAR/AR * LOSS = Payout. Remember the 'CAR' you drive to get paid.

A policy provision found in property insurance that protects the interest of the mortgagee (lender) in the insured property, ensuring they receive payment for covered losses even if the insured breaches policy conditions.

• Protects lender's interest in real property
• Lender's coverage is separate from insured's
• Requires notice to lender for cancellation or material change

Memory trick: Mortgagee Clause: Mortgage lender gets paid, protected.

The section of an insurance policy that contains the insurer's promise to pay for covered losses and defines the perils or types of losses covered.

• Core promise of coverage
• Outlines what is covered
• Often includes definitions of key terms

Memory trick: Insuring Agreement: I AGREE to cover THIS.

An 'Other Insurance' clause that specifies how multiple policies covering the same loss will share the payment, based on the proportion of each policy's limit to the total insurance carried.

• Prevents insured from collecting more than actual loss
• Calculated as (Policy Limit / Total Insurance) * Loss
• Common way for multiple policies to contribute

Memory trick: Pro Rata: Share Proportionally by Ratio.

A deductible-like amount in a Personal Umbrella Policy that the insured must pay out-of-pocket when a loss is covered by the umbrella but not by any underlying primary insurance.

• Applies when the umbrella policy acts as primary coverage.
• Does NOT apply if an underlying policy covers the loss, even if the underlying limit is exhausted.
• Functions like a deductible for specific types of claims.

Memory trick: The SIR is your personal 'deductible' when the umbrella is the first responder.

The period within which a Texas-licensed insurance agent or agency must notify the Department of Insurance (TDI) of a change to their principal business address.

• Ensures accurate contact information for regulatory communication.
• Applies to both individual licensees and agencies.
• Failure to notify can result in administrative penalties.

Memory trick: Keep TDI informed; 30 days for an address transformation.

A deductible-like amount that a Personal Umbrella Policy (PUP) policyholder must pay out-of-pocket for a covered loss that is not covered by any underlying primary insurance policy.

• Applies when the PUP acts as primary coverage.
• Does not apply when underlying policies pay their full limits.
• Higher SIRs can lead to lower PUP premiums.

Memory trick: SIR is the 'self-starter' deductible when your umbrella opens first.

An insurance policy that provides coverage only for losses caused by perils specifically listed in the policy.

• Burden of proof is on the insured to show loss by a named peril.
• Typically less expensive than open peril coverage.
• Common in basic dwelling policies.

Memory trick: Named is a LIST, Open is ALL BUT.

Policy provisions that outline the methods and criteria an insurer will use to determine the amount of payment for a covered loss.

• Common options include Actual Cash Value, Replacement Cost, Repair Cost.
• Often specify the 'lesser of' clauses.
• Determines the financial payout to the insured.

Memory trick: Loss Settlement Offers: How much, how fast, how fair.

While HO-3 policies cover wind damage, specific deductibles (e.g., hurricane deductibles, windstorm deductibles) may apply, especially in coastal or high-risk areas, differing from the standard deductible.

• Standard HO-3 generally covers windstorm.
• Hurricane deductibles are usually a percentage of Coverage A, not a flat dollar amount.
• Tornado damage typically falls under the standard AOP (All Other Perils) deductible.

Memory trick: Wind deductibles are like 'two gates' – one for normal wind, a bigger one for hurricanes.

A Personal Umbrella Policy provides additional liability coverage beyond the limits of underlying policies (e.g., auto, homeowners). It 'sits over' these policies, paying when their limits are exhausted.

• Provides high limits of liability coverage.
• Acts as excess over underlying policies.
• Self-Insured Retention (SIR) applies when no underlying policy covers the loss.

Memory trick: The umbrella catches what the smaller policies can't hold.

A federal program providing flood insurance to property owners, renters, and businesses in communities that participate in the program by adopting and enforcing floodplain management ordinances.

• Managed by the Federal Emergency Management Agency (FEMA).
• Policies are sold by private insurers or directly through the NFIP.
• Covers direct physical loss by flood to buildings and/or contents.
• Typically has a 30-day waiting period.

Memory trick: NFIP is a federal flood Shield, with limits and a wait.

A separate, often higher deductible that applies specifically to damages caused by a hurricane, typically calculated as a percentage of the dwelling's insured value.

• Applies only when a hurricane is declared.
• Usually a percentage of the dwelling's coverage A amount.
• Replaces the standard deductible for hurricane losses if higher.

Memory trick: Hurricane's bite takes a bigger piece, then the policy pays the rest.

A tax levied on premiums for insurance policies placed with unauthorized (surplus lines) insurers, which the surplus lines agent is responsible for collecting and remitting to the state.

• Ensures revenue collection for the state from these transactions.
• Helps regulate the surplus lines market.
• Agent acts as a fiduciary for the tax funds.

Memory trick: Surplus lines agent: special risks, special tax duties.

The maximum period a temporary insurance binder can be effective in Texas before a formal policy must be issued.

• Provides temporary proof of coverage.
• Must be replaced by a formal policy or cancelled.
• Typically 60 days, but can vary for certain types or with extensions.

Memory trick: Binders are short-term, like two months in the sun.

A method of resolving disputes between an insurer and an insured regarding the amount of a property loss, where each party hires an appraiser, and an umpire is selected if they cannot agree.

• Used when parties agree on coverage, but not value.
• Appraisers (and umpire) determine the amount of loss.
• Decision on value is typically binding.

Memory trick: Appraisers call the value, Arbitrators call the whole case.

The minimum period an insurer must notify a policyholder before canceling a commercial property policy in Texas, which varies based on policy duration and reason for cancellation.

• Less than 60 days: 10 days notice (for specific reasons like non-payment or material misrepresentation).
• More than 60 days: 10 days notice for increased hazard; 30 days notice for other reasons.
• Non-renewal typically requires 60 days notice.

Memory trick: Notice periods protect, giving time to select.

Under an HO-6 policy, Coverage A (Dwelling) is specifically designed to cover the parts of the condominium unit for which the unit-owner is responsible, such as alterations, appliances, fixtures, and improvements, which are not covered by the master association policy.

• Coverage A applies to the interior structure of the unit.
• The scope of Coverage A depends on the master policy's coverage type ('bare walls in', 'single entity', 'all-in').
• Often includes improvements and betterments made by the unit owner.

Memory trick: HO-6 covers *your* stuff and *your* walls inside the condo.

A Homeowners policy form designed for tenants (renters) that provides broad perils coverage for personal property and includes personal liability coverage.

• Does NOT cover the dwelling structure itself, as the tenant does not own it.
• Covers personal property against named 'broad form' perils.
• Includes Coverage C (Personal Property) and Coverage E & F (Liability and Medical Payments).

Memory trick: Each HO form fits a different 'home' owner, from house to condo to renter.

The legal right of an insurance company to seek recovery from a third party who was responsible for a loss, after the insurer has paid the insured for that loss.

• Prevents double recovery by insured
• Transfers insured's rights to insurer
• Common in liability and property insurance

Memory trick: Subrogation: Insurer steps in to get what's due.

The cost to replace damaged or destroyed property with new property of like kind and quality, without any deduction for depreciation.

• Does not factor in depreciation.
• Reflects current market prices for new materials/labor.
• Typically higher than Actual Cash Value.

Memory trick: RCV is 'Rebuilding New', ACV is 'Used Value'.

The HO-6 policy is specifically tailored for condominium unit owners, providing coverage for their personal property, improvements made to their unit, and personal liability.

• Covers personal property (Coverage C) on a named-peril basis.
• Provides limited dwelling coverage (Coverage A) for improvements and alterations within the unit.
• Includes personal liability (Coverage E) and medical payments (Coverage F).

Memory trick: Each home type has its 'HO' number – HO-6 for 'condo-six'.

A Dwelling Policy form that provides open perils coverage for the dwelling and other structures, and broad perils coverage for personal property.

• Dwelling: Open Perils (all risks of direct physical loss unless excluded).
• Personal Property: Broad Perils (named perils only).
• Includes additional coverages not found in DP-1 or DP-2, like damage to lawns, trees, shrubs, and plants.

Memory trick: Each DP form adds more protection, from basic to special.

An assessment by independent rating agencies (e.g., A.M. Best, S&P, Moody's, Fitch) of an insurance company's financial strength and ability to meet its policyholder obligations.

• Indicates an insurer's solvency and claims-paying ability.
• Ratings range from superior to vulnerable.
• Crucial for policyholders evaluating insurer reliability.
• A.M. Best is a prominent rating agency for the insurance industry.

Memory trick: Ratings tell you if an insurer's wallet is fat or flat.

The oversight by state insurance departments of how insurers and agents conduct their business with consumers, focusing on fair and ethical practices.

• Covers sales, advertising, underwriting, and claims handling.
• Aims to protect consumers from unfair or deceptive practices.
• Enforced by state insurance departments.
• Complements solvency and rate regulation.

Memory trick: Regulators keep insurers in line: Solvency, Rates, and Conduct.

A financial ratio that measures an insurer's overall profitability by subtracting net investment income from the combined ratio.

• Formula: Combined Ratio - Investment Income Ratio.
• Provides a holistic view of an insurer's financial performance.
• Includes both underwriting results and investment returns.

Memory trick: Ratios reveal if the insurance ship is sinking or sailing.

Criteria that a risk must meet to be considered suitable for insurance coverage by an insurer.

• Loss must be definite and measurable.
• Loss must be accidental and unintentional.
• Loss exposure must be large enough to be statistically predictable.
• Loss must not be catastrophic to the insurer.

Memory trick: For a risk to be 'IN', it needs to fit these 'IN'surance criteria.

A financial ratio that measures an insurer's operational efficiency by comparing underwriting expenses to earned premiums.

• Formula: (Underwriting Expenses / Earned Premiums).
• Indicates efficiency in acquiring and servicing policies.
• Lower ratio generally indicates better efficiency.

Memory trick: Losses and Expenses make an OPERATING COMBINATION.

A risk management technique that involves implementing measures to decrease the frequency or severity of potential losses.

• Aims to reduce the impact of a risk.
• Examples include safety programs, physical barriers, sprinkler systems.
• Can be implemented before a loss (loss prevention) or after a loss (loss reduction).

Memory trick: STARR: Share, Transfer, Avoid, Retain, Reduce.