General Insurance Principles
10%of exam
Homeowners
25%of exam
HO FormsSection ISection IICoverages A-FEndorsements
Personal Auto (PAP)
25%of exam
Dwelling Fire
10%of exam
DP FormsDwelling CoveragesACV vs RCRental Dwellings
Umbrella, Flood, Specialty
20%of exam
Personal UmbrellaInland MarineNFIP FloodWatercraft RVEarthquake
Regulation + Claims
10%of exam
Producer LicensingUnfair PracticesClaims HandlingGLBA FCRAState CE
Quick Facts
- Exam
- Personal Lines (PL)
- Questions
- 75-100
- Pass
- 70%
- Time
- 1.5-2 hours
- Fee
- $50-75
- Provider
- Pearson VUE or PSI
- Pre-license
- 20 hours typical
- Scope
- Personal P&C only
Policy DICE
DICE: Declarations, Insuring, Conditions, Exclusions
D: who/what/limitsI: coverage promiseC: insured dutiesE: not covered
Risk Concepts
- Risk
- Chance of loss
- Pure risk
- Loss or none
- Speculative risk
- Loss or gain
- Peril
- Cause of loss
- Hazard
- Increases loss chance
- Moral hazard
- Dishonest behavior
- Morale hazard
- Careless attitude
- Physical hazard
- Tangible condition
Hazards: PhMM
Physical, Moral, Morale hazards
Physical: conditionMoral: dishonestMorale: careless
Contract Law
- Adhesion
- Take it or leave
- Aleatory
- Unequal exchange
- Unilateral
- Only insurer promises
- Conditional
- Duties trigger pay
- Utmost good faith
- Honest disclosure
- Insurable interest
- Financial loss exposure
- Indemnity
- Make whole only
- Law large numbers
- Predict losses statistically
Policy Parts (DICE)
- Declarations
- Who, what, limits
- Insuring agreement
- Coverage promise
- Conditions
- Insured duties
- Exclusions
- Not covered
- Endorsement
- Written policy change
- Definitions
- Quoted policy terms
- Binder
- Temporary coverage proof
HO Coverages
A dwelling, B other, C contents, D loss-of-use
A: 100%B: 10% of AC: 50% of AD: 30% of A
HO-3 vs HO-5
HO-3
- Open dwelling
- Named contents
- Standard
HO-5
- Open dwelling
- Open contents
- Premium
Contents perils differ
Homeowners Form Picker
- Owner-occupied house→HO-3(Most common)
- Want open contents→HO-5(Upgrade)
- Tenant renting→HO-4(Contents only)
- Condo unit owner→HO-6(Unit + contents)
- Older home, ACV→HO-8(Modified)
- Budget named perils→HO-2(Broad form)
Property Valuation
- ACV
- Replacement minus depreciation
- Replacement cost
- New-for-old cost
- Functional replacement
- Modern equivalent only
- Stated amount
- Listed maximum
- Agreed value
- Pre-set claim payment
- Coinsurance 80%
- Insure-to-value rule
- Deductible
- Insured pays first
HO Form Sequence
2 broad, 3 special, 4 rent, 5 comp
2: broad3: special4: renters5: comprehensive6: condo8: older
ACV vs Replacement Cost
ACV
- Depreciation deducted
- Lower payout
- DP-1 default
Replacement Cost
- New-for-old
- Higher payout
- DP-2/3 standard
Old value vs new
Homeowners Forms
- HO-2
- Broad named perils
- HO-3
- Open dwelling, named contents
- HO-4
- Renters contents only
- HO-5
- Open dwelling and contents
- HO-6
- Condo unit owner
- HO-8
- Modified older home (ACV)
Named vs Open Perils
Named
- Only listed perils
- Insured proves cause
Open
- All except exclusions
- Insurer proves exclusion
Listed vs excluded
HO Coverages A-F
- Coverage A
- Dwelling
- Coverage B
- Other structures (10%)
- Coverage C
- Personal property (50%)
- Coverage D
- Loss of use (30%)
- Coverage E
- Personal liability ($100K)
- Coverage F
- Medical payments ($1K)
HO Special Sublimits
- Jewelry theft
- $1,500 limit
- Firearms theft
- $2,500 limit
- Silverware theft
- $2,500 limit
- Cash on-premises
- $200 limit
- Securities
- $1,500 limit
- Business property
- $2,500 on-premises
- Watercraft
- $1,500 limit
- Trailers
- $1,500 limit
PAP A-B-C-D
A liability, B med, C UM, D damage
A: BI/PDB: med payC: UM/UIMD: physical damage
Liability vs UM
Liability (A)
- You hurt others
- Third-party claim
UM/UIM (C)
- Uninsured hits you
- First-party claim
You at fault vs they
Auto Loss Picker
- Hit another car→PAP Part A(BI/PD)
- Passengers injured, own fault→PAP Part B(Med pay)
- Hit by uninsured driver→PAP Part C(UM)
- Theft of your car→PAP Part D(OTC)
- Collision with pole→PAP Part D(Collision)
- Hail damages car→PAP Part D(OTC)
- Limits exhausted→Personal umbrella(Excess)
PAP Parts A-F
- Part A
- Liability (BI/PD)
- Part B
- Medical payments
- Part C
- UM/UIM
- Part D
- Damage to your auto
- Part E
- Duties after loss
- Part F
- General provisions
- Collision
- Impact or upset
- Other-than-collision
- Theft, fire, glass
Med Pay vs PIP
Med Pay (B)
- Medical only
- Optional
- Tort states
PIP
- Medical + wages
- Mandatory
- No-fault states
Optional vs no-fault
PAP Liability Limits
- Split limits
- Per-person/per-accident/PD
- 100/300/100
- Common split limit
- 25/50/25
- Common state minimum
- CSL
- Combined single limit
- Stacking
- Add limits per vehicle
- No-fault PIP
- First-party medical
PAP Exclusions
- Intentional acts
- Excluded
- Owned-not-insured auto
- Excluded
- Public/livery use
- Excluded (rideshare endorsed)
- Racing
- Excluded
- Business use
- Limited coverage
- Property in care
- Excluded
- Radar detector
- No physical damage
- Wear and tear
- Excluded
DP Forms 1-2-3
DP-1 basic ACV, DP-2 broad RC, DP-3 open RC
DP-1: ACVDP-2: broad/RCDP-3: open/RC
Dwelling Fire Forms
- DP-1
- Basic named perils, ACV
- DP-2
- Broad named perils, RC
- DP-3
- Open perils, RC
- Coverage A
- Dwelling
- Coverage B
- Other structures
- Coverage C
- Personal property
- Coverage D
- Fair rental value
- Coverage E
- Additional living expense
Primary vs Umbrella
Primary
- First dollar
- Underlying limit
Umbrella
- Above primary
- Drops down for gaps
Base vs excess layer
Property Loss Picker
- Rising water damage→NFIP flood(Separate)
- Pipe burst inside→Homeowners(Section I)
- Ground shaking→Earthquake endorsement(Separate)
- Sewer backup→Backup endorsement(Add-on)
- Jewelry stolen $5K→Personal articles floater(Scheduled)
- Wildfire burns home→Homeowners(Open peril)
Umbrella + Inland Marine
- PUP limit
- $1M to $5M+
- Underlying home
- $300K liability typical
- Underlying auto
- 250/500/100 typical
- SIR
- Self-insured retention
- Drop-down
- Fills uncovered gap
- PAF
- Personal articles floater
- Scheduled property
- Open-perils, no deductible
- Appraisal required
- Jewelry, fur, art
Homeowners vs Flood
Homeowners
- Wind/fire/theft
- Excludes flood
- ISO form
NFIP Flood
- Rising water/mudflow
- Separate policy
- FEMA-backed
Wind vs water
Flood + Earthquake
- NFIP
- FEMA flood program
- 30-day wait
- Standard NFIP waiting
- Building limit
- $250K residential max
- Contents limit
- $100K residential max
- WYO
- Write Your Own insurer
- Earthquake
- Separate endorsement/policy
- Quake deductible
- 10-25% of Cov A
- Mudflow
- Covered as flood
Watercraft + RV
- HO boat liability
- Under 26ft, 25HP outboard
- Boatowners policy
- Larger or faster boats
- Hull coverage
- Boat physical damage
- P&I
- Protection and indemnity
- RV policy
- Motorhome auto + property
- Snowmobile
- Off-premises HO excluded
- ATV
- Off-premises HO excluded
- Personal watercraft
- Jet ski endorsement
Regulation + Producer
- Producer
- Licensed seller
- Appointment
- Insurer authorization
- Fiduciary
- Holds client premium
- NAIC
- Model regulator group
- Rebating
- Illegal premium kickback
- Twisting
- Misleading replacement
- Sliding
- Forced add-on coverage
- Redlining
- Geographic discrimination
Claims Provisions
- Subrogation
- Insurer recovers from third party
- Salvage
- Insurer takes damaged property
- Mortgagee clause
- Lender named on loss
- Loss payable
- Lienholder paid first
- Appraisal clause
- Resolve value disputes
- Abandonment
- Cannot dump on insurer
- Suit limit
- Sue within 1-2 years
- Proof of loss
- Sworn 60-day statement
Common Traps
Flood vs homeowners
Flood not in HO ≠ Need separate NFIP
Earthquake exclusion
Excluded by HO ≠ Endorsement or DIC
Pet liability vs med pay
Dog bite uses E ≠ Not Coverage F
Med pay needs no fault
F pays regardless ≠ Liability needs fault
HO-3 contents
Contents are named ≠ Only dwelling is open
Owned-not-insured auto
No PAP coverage ≠ Add it to policy
Rebating banned
No premium kickbacks ≠ Includes any gift inducement
Indemnity limit
No profit from loss ≠ Restore not enrich
Last Minute
- 1.DICE = policy parts
- 2.HO-3 = open dwelling, named contents
- 3.HO-5 = open dwelling and contents
- 4.DP-1 ACV, DP-2/3 replacement cost
- 5.PAP: A liability, B med
- 6.PAP: C UM, D damage
- 7.HO Coverage B = 10% of A
- 8.HO Coverage C = 50% of A
- 9.Flood needs separate NFIP policy
- 10.Earthquake needs separate endorsement
- 11.Umbrella requires underlying limits
- 12.Rebating, twisting, sliding banned
- 13.Subrogation lets insurer recover
- 14.Coinsurance 80% rule on homeowners
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