Insurance 101 Glossary Quiz

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Questions and Answers

What is a Cease and Desist Order intended to do?

Provide a legal framework for business operations

Encourage individuals or organizations to operate freely

Warn against specific activities and demand their cessation (correct)

Permit ongoing activity without restrictions

What is the maximum administrative penalty for each violation of a Cease and Desist Order?

$2,500

$500

$5,000

$1,000 (correct)

What defines a Domestic insurer?

An insurer that operates under federal regulations

An insurer that operates offshore

An insurer based in another country

An insurer with its home office in the state it operates in (correct)

What distinguishes a Non-Admitted insurer?

It is not allowed to sell insurance policies in Texas Signup and view all the answers

What is the purpose of the Texas Property & Casualty Guaranty Association?

To ensure consumers do not lose coverage if their insurer fails Signup and view all the answers

What is likely to occur if an insurer does not meet the requirements set by the commissioner?

Their permission to operate could be revoked Signup and view all the answers

Which term refers to an insurance company based outside the United States?

Alien Signup and view all the answers

What does Surplus Lines insurance allow customers to do?

Access insurance coverage for high-risk or unusual situations Signup and view all the answers

What is the role of the First Named Insured in a business insurance policy?

The business owner with full rights and responsibilities Signup and view all the answers

Which of the following best describes the Principle of Indemnity?

Restoring the insured to the financial position before the loss occurred Signup and view all the answers

What is the purpose of an endorsement in an insurance policy?

To update or modify terms of an existing policy Signup and view all the answers

What does insurable interest ensure in an insurance context?

Insurance serves as a protection tool, not for gambling Signup and view all the answers

What is the role of the commissioner of insurance?

To regulate and oversee the insurance industry in a state or territory Signup and view all the answers

What action results in the non-renewal of an insurance policy?

Frequent claims or high risk behavior Signup and view all the answers

What is a binder in insurance terminology?

A temporary proof of insurance until the formal policy is issued Signup and view all the answers

What is the purpose of an appraisal in relation to insurance?

To determine the amount of a vehicle’s coverage value Signup and view all the answers

Study Notes

Insurance 101

Insurer: The main insurance company
Insured: The person who purchased the insurance (the customer)
Named Insured: The person whose insurance is covered by the company (owner of the property)
First Named Insured: The business owner with full rights and responsibilities
Additional Insured: People added to the policy with an interest (e.g., mortgage holder)
Principle of Indemnity: Insurance covers losses to restore the insured to their prior state, not to profit from them
Underwriting: The process of making sure the insurer can pay the claim
Insurable Interest: The principle that insurance is used for protection, not profit
Accident: An unplanned event causing damage (e.g., car accident)
Occurrence: Damage resulting from prolonged exposure (e.g., mold growth)
Cancellation: Policy termination due to non-payment
Non-renewal: Deciding not to renew the policy
Binder: Temporary insurance until the final policy is issued
Certificate of Insurance: Proof of coverage, including details about the policy

Endorsements, Arbitration, and Appraisal

Endorsement: Modifies an existing policy to adapt to changing needs
Arbitration: A third-party process to settle insurance claims (determines if a claim is valid and how much)
Appraisal: Process determining the value of damaged property
Commissioner of Insurance: Public official overseeing the insurance industry in a state
Examination of Records: Regular review of insurer operations
Investigation/Notice of Hearing: Investigating claims of bad practices by an insurer

Cease and Desist Orders, Penalties, and Civil Penalties

Cease and Desist Orders: Orders issued by agencies to stop specific activities (and serves as warning)
Administrative Penalty: Fines for violating cease and desist orders (up to $1000 per violation, and up to $5000 in aggregate)
Civil Penalty: Penalties imposed by a court if cease and desist orders are not followed
Reinsurance Reserved: Fund to protect policyholders
Domicile of Insurer: State/country laws applicable to an insurance company
Domestic: Insurance company with its home office in the same state

Foreign, Alien, Admitted Insurers, Sanctions

Foreign Insurers: Insurance companies based outside of the state
Alien Insurers: Insurance companies based outside of the US
Admitted Insurer: Insurance companies licensed to operate within a specific state
Certificate of Authority: Official permission from a state to conduct insurance business
Sanctions and Penalties: Action taken when insurers fail to meet regulations

Non-Admitted Insurers, Surplus Lines, and Associations

Non-Admitted Insurers: Insurance companies not licensed to operate within a specific state
Surplus Lines: Insurance for unusual or high-risk situations unavailable from standard insurers
Texas Property & Casualty Guaranty Association: Protects consumers if their insurer fails (provides partial compensation)

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Description

Test your knowledge about key terms in the insurance industry with this Insurance 101 quiz. From understanding the roles of insurers and insureds to grasping concepts like indemnity and underwriting, this quiz covers essential terminology. Perfect for beginners and those looking to refresh their understanding of insurance basics.