Podcast
Questions and Answers
What is the main purpose of a Limited Lines Agent license?
What is the main purpose of a Limited Lines Agent license?
What does an Emergency License allow an individual to do?
What does an Emergency License allow an individual to do?
What is required for someone to act as a Managing General Agent (MGA)?
What is required for someone to act as a Managing General Agent (MGA)?
What is the total number of continuing education hours required to maintain an insurance license in Texas?
What is the total number of continuing education hours required to maintain an insurance license in Texas?
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What happens if a producer misses appointments with their insurer?
What happens if a producer misses appointments with their insurer?
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What is the principle of indemnity?
What is the principle of indemnity?
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What is the difference between cancellation and non-renewal of an insurance policy?
What is the difference between cancellation and non-renewal of an insurance policy?
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What is an endorsement in an insurance policy?
What is an endorsement in an insurance policy?
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What is the role of the Commissioner of Insurance?
What is the role of the Commissioner of Insurance?
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What is the main purpose of insurable interests?
What is the main purpose of insurable interests?
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What is the difference between an accident and an occurrence?
What is the difference between an accident and an occurrence?
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What is underwriting in the insurance context?
What is underwriting in the insurance context?
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Why is a binder considered temporary proof of insurance?
Why is a binder considered temporary proof of insurance?
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What is the maximum administrative penalty for each violation of a Cease and Desist Order?
What is the maximum administrative penalty for each violation of a Cease and Desist Order?
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What are the three categories of domicile for insurers?
What are the three categories of domicile for insurers?
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Which type of insurer is owned by policyholders and offers non-taxable dividends?
Which type of insurer is owned by policyholders and offers non-taxable dividends?
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What is the role of the Texas property and casualty guaranty association?
What is the role of the Texas property and casualty guaranty association?
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What is a key requirement for an individual to obtain a temporary insurance agent license?
What is a key requirement for an individual to obtain a temporary insurance agent license?
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Which of the following is true regarding non-admitted insurers?
Which of the following is true regarding non-admitted insurers?
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What is the purpose of a cease and desist order in the insurance industry?
What is the purpose of a cease and desist order in the insurance industry?
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What distinguishes a Surplus Lines insurance policy?
What distinguishes a Surplus Lines insurance policy?
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What is the function of a Joint Underwriting Association (JUA)?
What is the function of a Joint Underwriting Association (JUA)?
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What happens if an insurer breaks a law or rule?
What happens if an insurer breaks a law or rule?
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What is a Certificate of Authority in the insurance industry?
What is a Certificate of Authority in the insurance industry?
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What distinguishes a stock insurer from a mutual insurer?
What distinguishes a stock insurer from a mutual insurer?
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What does it mean for an insurer to be admitted?
What does it mean for an insurer to be admitted?
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Which entity is primarily responsible for investigating suspicious insurance activities?
Which entity is primarily responsible for investigating suspicious insurance activities?
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Study Notes
Insurance Fundamentals
- Insurer: The company providing coverage.
- Insured: The person who receives protection (the customer).
- Named Insured: The customer with the broadest coverage. Often the first named on the policy and the one who chose or pays for the plan; however, this depends on the coverage and situation.
Coverage Levels
- Broad Coverage: The most comprehensive coverage.
- Intermediate Coverage: An intermediate level of protection.
- Minimum Coverage: The least amount of coverage available.
Policy Insureds
- Additional Insured: A person or company added to a policy after the first insured.
Indemnity
- Principle of Indemnity: Compensation for damages at a fair market value.
Underwriting
- Underwriting: An assessment of the insurer's ability to pay damages. This involves considering the insurer's financial capacity to handle potential claims.
Insurable Interest
- Insurable Interest: Ensuring that the insured will not benefit from the loss or damage. A policyholder must have a legitimate stake in the insured item.
Policy Events
- Accident: An unexpected event that causes damage.
- Occurrence: Ongoing damages over time, such as a leaking roof causing eventual damage.
- Cancellation: Discontinuation of the policy before the expiration date, typically due to non-payment.
- Non-renewal: The policy is not renewed, often due to high risk factors (e.g., a poor driving record).
- Binder: A temporary proof of insurance, outlining the coverage terms and agreement. Includes the price and what it covers.
- Certificate of Insurance: Official form that proves insurance coverage. Includes the effective date, type of coverage, and the amount paid for the policy.
- Endorsement: A modification to the insurance policy.
- Arbitration: Resolving disputes by a neutral third party.
- Appraisal: Determining the value of an item, especially for damaged property involved in claims.
Regulatory Oversight
- Commissioner of Insurance: Sets regulations for insurers, evaluates their financial stability, and oversees claims processes.
- Examination of Records: A thorough financial review of an insurer done every five years.
- Investigation/Notice of Hearing: Examination of suspicious activities, often related to unfair business practices and policy violations.
- Cease and Desist Order: An order preventing the continuation of a policy violation.
- Penalties: Fines or other financial consequences for violating insurance regulations.
- Civil Penalty: Financial penalties for policy violations, spanning anywhere from $50 to $500.
- Reinsurance Reserves: Funds set aside to cover insurer liabilities in case of bankruptcy.
Insurer Types
- Domestic Insurer: An insurer headquartered in Texas.
- Foreign Insurer: An insurer headquartered in another U.S. state.
- Alien Insurer: An insurer headquartered outside the U.S.
- Admitted Insurer: An insurer authorized to sell insurance in a particular state (in this instance, Texas.)
- Non-admitted Insurer: An insurer unlicensed to sell in a certain area that may offer insurance in high-risk situations (i.e. surplus lines).
- Surplus Lines: Handles insurance for individuals/businesses that cannot get coverage with regular admitted insurers.
Insurance Associations and Organizations
- Texas Property and Casualty Guaranty Association: A non-profit association, mandated for all admitted insurers, that reimburses claims in cases of insurer insolvency.
- Certificate of Authority: Official license for an insurer to operate in a particular state, including Texas, issued by state regulators to ensure adherence to laws.
Insurer Structures
- Stock Insurer: Owned by shareholders, pays dividends (taxable), and profits are not guaranteed.
- Mutual Insurer: Owned by policyholders, pays refunds (nontaxable). Profits are not guaranteed.
- Lloyd's of Texas: Made-up of syndicates (groups) of underwriters (individuals with expertise in insurance). Members share risk responsibility and are liable for the risks they take.
- Joint Underwriting Association (JUA): Formed of insurers to collectively manage coverage for risks or high-risk scenarios that may be too complicated for single insurers.
Insurance Agents
- General Lines Property & Casualty Agent: A general license to sell all types of property and casualty insurance in Texas.
- Agent Licensing as a Corporation: Must have at least one licensed officer to sell insurance in Texas.
- Temporary Agent: A temporary license given to an individual for 180 days pending license approval. This should not be renewed more than once in a six-month timeframe.
- Non-Resident Agent: Insurers in other states who want to conduct business in Texas, needing a valid Texas license to do so.
- Limited Lines Agent: Agent with a license restricted to certain policy types or situations like prepaid legal services or basic auto insurance.
- Emergency License: An immediate license granted under certain circumstances like death or disability, valid for 90 days, and cannot be renewed multiple times per year.
- Surplus Lines License: Required of agents who will place insurance coverage with non-admitted insurers.
- Managing General Agent (MGA): License to manage an insurer's field operations and underwriting decisions.
- Risk Manager: Provides loss-prevention advice for insurers.
- Adjuster: Investigates and settles insurance claims on behalf of insurers.
- Appointment: Insurer agreement permitting an insurance producer to sell their products.
Licensing and Regulations
- Continuing Education: Insurance license renewal necessitates continuing education, requiring 24 hours of education, with 12 from classroom setting and 3 focused on ethics. A 90-day grace period exists for completing the required hours.
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Description
Test your knowledge on insurance terminology and concepts including levels of coverage, policy specifics, and the principle of indemnity. This quiz covers essential definitions that are crucial for understanding the insurance industry.
