Personal Lines Insurance Terminology

Personal Lines Insurance

• Insurer: The company providing insurance coverage.
• Insured: The person or entity protected by the insurance (customer).
• Named Insured: The primary insured; typically holds the broadest coverage.
• Additional Insured: An individual or entity added to the policy after the named insured.
• Principle of Indemnity: Compensation for damages at a fair market value.
• Underwriting: Assessing the insurer's ability to pay potential claims.
• Insurable Interest: Ensuring the insured isn't benefiting from the insurance.
• Accident: Unexpected event causing damage.
• Occurrence: Ongoing damages over time, such as from a leak.
• Cancellation: Discontinuing a policy before its expiration without renewal.
• Non-renewal: Policy not renewed due to high risk. Typically tied to factors like a poor driving record, or frequent claims.
• Binder: Temporary proof of insurance; details the coverage and payment terms.
• Certificate of Insurance: Official proof of insurance; includes coverage types, start dates, and payments.
• Endorsement: Modifying the existing policy.
• Arbitration: Settling disputes outside of court.
• Appraisal: Determining the value of property, often involving a vehicle.
• Commissioner of Insurance (Texas): Oversees the insurance industry, creating rules, and ensuring fairness.

Insurance Regulations and Compliance

• Examination of Records (Insurers): Periodic financial evaluations every five years.
• Investigation/Notice of Hearing: Examining suspicious insurer activities (unfair competition).
• Cease and Desist Order: Preventing policy violations. Maximum penalty: $1,000/violation.
• Penalties: Financial consequences for policy violations.
• Civil Penalty Details: Can range from $50 to $500 per violation.
• Reinsurance Reserves: Funds held by insurers to cover potential liabilities (bankruptcy).
• Domicile of Insurer: Classifies insurer locations as domestic, foreign, or alien.
• Admitted Insurer: Licensed to sell insurance within a state (authorized).
• Non-admitted Insurer: Unlicensed insurer. This may use surplus lines.
• Surplus Lines Insurance: Provides coverage unavailable through admitted insurers.
• Texas Property and Casualty Guaranty Association: Non-profit to handle bankrupt insurer claims.
• Certificate of Authority: Insurance license for the insurer.
• Stock Insurer: Owned by shareholders, returning dividends.
• Mutual Insurer: Owned by policyholders, returning refunds.
• Lloyds of Texas: Group of underwriters forming syndicates to spread risks.
• Joint Underwriting Association (JUA): Insurer collaboration for specific needs.

Licensing and Agents

• General Lines Property & Casualty Agent: Standard insurance license, requiring specific qualifications and background checks.
• Agent Licensing as a Corporation: At least one licensed officer/partner required. Restrictions on suspensions and disciplinary actions.
• Temporary Agent: Limited-time license, valid for 180 days. Maximum one renewal within any six months. Mandatory training required.
• Non-Resident Agent: Agent residing outside of Texas, licensed to sell insurance in Texas. Requires a reciprocal licensing agreement with the home state.
• Limited Lines Agent: Specific license for certain insurance types.
• Emergency License: Emergency license for circumstances of agent death or disability, limited to 90 days within a 12-month period.
• Surplus Lines License: License to place insurance with non-admitted insurers.
• Managing General Agent (MGA) License: Covers oversight of insurer field operations.
• Risk Manager License: Exams risks associated with property and casualty insurance.
• Adjuster: Settling insurance claims for insurers.
• Appointment: Producers need an appointment with insurers to sell insurance in Texas.

Additional Requirements

• Continuing Education: License renewal requires specific continuing education hours. (24 total hours; including ethics). 20 consecutive-year license holders are exempt.
• Records Maintenance: Keeping records of continuing education completion.
• Notification to the Department: Reporting changes of address, felony convictions, or administrative actions.
• Producer Responsibilities: Agents act as fiduciaries, separating funds, promptly forwarding premiums, and reporting all relevant facts.