PA P&C Exam Flashcards

Q: How does Pennsylvania's choice no-fault auto system work?

Pennsylvania is a choice no-fault state. Every driver must select either full tort (unrestricted right to sue for pain and suffering) or limited tort (right to sue only for a 'serious injury,' in exchange for a lower premium). Pennsylvania law defines serious injury as death, serious impairment of body function, or permanent serious disfigurement. All policies must include at least $5,000 in first-party medical benefits.

Q: What are Pennsylvania's minimum auto liability limits?

Pennsylvania requires 15/30/5: $15,000 bodily injury per person, $30,000 bodily injury per accident, and $5,000 property damage per accident, plus a mandatory $5,000 in first-party medical benefits. These are among the lower minimums in the country, so candidates should not confuse them with the higher 25/50/25 minimums used by many other states.

Q: What is the Pennsylvania FAIR Plan?

The PA FAIR Plan, formally the Pennsylvania Property Insurance Association, is a shared-market mechanism that provides basic property insurance to owners who cannot obtain coverage in the voluntary market. It writes dwelling fire and extended coverage. All licensed property insurers in Pennsylvania must participate in proportion to their market share.

Q: How much continuing education does Pennsylvania require for a P&C license?

Pennsylvania producers must complete 24 hours of approved continuing education each biennial (two-year) renewal period, including at least 3 hours of ethics. Failing to complete CE by the renewal deadline causes the license to lapse with no automatic extension. A lapsed license can be reinstated without re-examination if the producer applies within 12 months.

Q: Is workers' compensation insurance required in Pennsylvania?

Yes. Workers' compensation is mandatory for nearly all Pennsylvania employers, with very limited exceptions. Coverage can be obtained from a private carrier or the State Workers' Insurance Fund (SWIF), the insurer of last resort. Employers may establish a medical provider panel of at least six providers that an injured worker must use for the first 90 days of treatment.

Q: What does the Pennsylvania Insurance Guaranty Association cover?

The Pennsylvania Insurance Guaranty Association (PIGA) pays covered property and casualty claims when an admitted insurer becomes insolvent and is liquidated, up to a statutory limit of $300,000 per covered claim. PIGA is funded by assessments on solvent admitted insurers. It does not cover policies written by surplus lines (non-admitted) carriers.

Question 1

Pennsylvania Insurance Department (PID)

Accepted Answer

The state agency that regulates insurers and producers in Pennsylvania, led by the Insurance Commissioner. It enforces the Insurance Code, licenses producers, and handles consumer complaints. It is the primary authority tested on PA-specific questions.

Question 2

Insurance Commissioner (Pennsylvania)

Accepted Answer

The official who heads the Pennsylvania Insurance Department. In PA the Commissioner is appointed by the Governor (not elected). The Commissioner has authority to investigate, hold hearings, and impose penalties for Insurance Code violations.

Question 3

PA Producer Continuing Education Requirement

Accepted Answer

24 hours of approved CE every biennial (two-year) renewal period, including at least 3 hours of ethics. Missing the deadline causes the license to lapse — there is no automatic warning or grace extension.

Question 4

Lapsed License Reinstatement (PA)

Accepted Answer

A PA producer whose license lapses may reinstate it WITHOUT retaking the licensing exam if they apply within 12 months, pay applicable late fees, and complete outstanding CE. After 12 months, full re-application and re-examination are required.

Question 5

Producer Appointment

Accepted Answer

The authorization by an insurer allowing a licensed producer to transact business on its behalf. A producer must hold a valid PA license AND be appointed by the carrier before soliciting that company's products.

Question 6

Pennsylvania Choice No-Fault System

Accepted Answer

PA requires every auto policyholder to choose between full tort and limited tort. This 'choice' framework — rather than pure no-fault or pure tort — is the single most heavily tested PA auto concept.

Question 7

Full Tort Option (PA)

Accepted Answer

Preserves the insured's unrestricted right to sue an at-fault party for all damages, including pain and suffering, for any injury. It carries a higher premium than limited tort.

Question 8

Limited Tort Option (PA)

Accepted Answer

Lowers the premium in exchange for giving up the right to sue for pain and suffering UNLESS the insured sustains a 'serious injury.' Economic damages (medical bills, lost wages) can still be recovered.

Question 9

'Serious Injury' Definition (PA Limited Tort)

Accepted Answer

Under PA law a serious injury is death, serious impairment of body function, or permanent serious disfigurement. Only a serious injury lets a limited-tort insured sue for pain and suffering. Being merely 'not at fault' does not qualify.

Question 10

PA Minimum Auto Liability Limits (15/30/5)

Accepted Answer

$15,000 bodily injury per person / $30,000 per accident / $5,000 property damage. Among the lowest minimums in the U.S. — do not confuse with the 25/50/25 common in many other states.

Question 11

PA First-Party Medical Benefits

Accepted Answer

Every PA auto policy must include a minimum of $5,000 in first-party medical benefits, paying reasonable medical expenses for the insured and passengers regardless of fault. Higher limits may be purchased.

Question 12

UM/UIM Stacking (Pennsylvania)

Accepted Answer

In PA, stacking of uninsured/underinsured motorist coverage applies automatically across vehicles on a policy UNLESS the insured signs a written anti-stacking waiver. Stacking multiplies the UM/UIM limit by the number of insured vehicles.

Question 13

Uninsured vs. Underinsured Motorist (UM/UIM)

Accepted Answer

UM pays the insured's bodily injury when the at-fault driver has no insurance. UIM pays when the at-fault driver has insurance but limits are insufficient to cover the loss.

Question 14

Pennsylvania FAIR Plan

Accepted Answer

Formally the Pennsylvania Property Insurance Association — a shared-market plan providing basic property coverage (dwelling fire and extended coverage) to owners rejected by the voluntary market. All PA property insurers must participate by market share.

Question 15

Homeowners Policy Forms (HO)

Accepted Answer

HO-2 (broad named perils), HO-3 (special form — open perils on dwelling, named perils on contents — most common), HO-4 (renters/tenants contents), HO-5 (comprehensive open perils), HO-6 (condo unit-owner), HO-8 (modified for older homes).

Question 16

Replacement Cost vs. Actual Cash Value

Accepted Answer

Replacement cost pays to rebuild/replace with no deduction for depreciation. Actual cash value (ACV) is replacement cost minus depreciation. ACV pays less on older property and is the default for many contents settlements.

Question 17

Coinsurance Clause

Accepted Answer

Requires the insured to carry property coverage equal to a stated percentage (often 80%) of replacement value. If underinsured at loss time, the claim payment is reduced proportionally by the coinsurance penalty formula.

Question 18

Builder's Risk Policy

Accepted Answer

A specialized commercial property form covering buildings, structures, and materials during construction against perils such as fire, theft, vandalism, and wind. It is property coverage, not liability coverage.

Question 19

Dwelling Fire Policy (DP)

Accepted Answer

Property coverage for residences not eligible for a homeowners policy (e.g., rentals, vacant or non-owner-occupied homes). DP forms exclude the liability and theft breadth of an HO policy unless endorsed.

Question 20

Flood Insurance (NFIP)

Accepted Answer

Standard homeowners and dwelling policies exclude flood. Flood coverage is purchased separately, primarily through the National Flood Insurance Program (NFIP), with a standard 30-day waiting period before coverage takes effect.

Question 21

Workers' Compensation Mandate (PA)

Accepted Answer

Workers' compensation is mandatory for nearly all Pennsylvania employers, with very limited exceptions (such as certain agricultural and casual domestic workers). It is a no-fault system covering job-related injury and illness.

Question 22

State Workers' Insurance Fund (SWIF)

Accepted Answer

A Pennsylvania government entity that acts as the workers' compensation insurer of last resort, covering employers who cannot obtain coverage in the private market due to claims history or industry class.

Question 23

PA Medical Provider Panel (Workers' Comp)

Accepted Answer

A PA employer may post a list of at least six designated health care providers. If properly posted, an injured worker must use a panel provider for the first 90 days of treatment; after 90 days the worker may choose any provider.

Question 24

Workers' Comp Benefit Types

Accepted Answer

Covers medical expenses, wage-loss (indemnity) benefits, specific-loss benefits for permanent injuries, and death benefits to dependents. Coverage is provided regardless of fault.

Question 25

Commercial General Liability (CGL)

Accepted Answer

Protects a business against third-party claims of bodily injury and property damage from its premises, operations, products, and completed work — e.g., a customer slip-and-fall on the business premises.

Question 26

Occurrence vs. Claims-Made Liability Policy

Accepted Answer

Occurrence form covers injury that happens during the policy period regardless of when the claim is filed. Claims-made form covers only claims first made during the policy period (subject to a retroactive date).

Question 27

Personal/Advertising Injury

Accepted Answer

A CGL coverage part for offenses such as libel, slander, false arrest, malicious prosecution, wrongful eviction, and copyright/slogan infringement in advertising — distinct from bodily injury and property damage.

Question 28

Umbrella / Excess Liability

Accepted Answer

Provides liability limits above underlying auto, homeowners, or CGL policies and can drop down to cover some claims excluded by underlying policies (subject to a self-insured retention).

Question 29

Vicarious Liability

Accepted Answer

Legal responsibility imposed on one party (e.g., an employer) for the negligent acts of another (e.g., an employee acting within the scope of employment). Commonly tested in commercial liability scenarios.

Question 30

Pennsylvania Insurance Guaranty Association (PIGA)

Accepted Answer

Pays covered P&C claims when an admitted insurer becomes insolvent and is liquidated, up to $300,000 per covered claim. Funded by assessments on solvent admitted insurers.

Question 31

PIGA Coverage Exclusion: Surplus Lines

Accepted Answer

PIGA protects only policies issued by ADMITTED (licensed) insurers. Claims under surplus lines (non-admitted) carriers are NOT covered — buyers of surplus lines coverage assume the added insolvency risk.

Question 32

Admitted vs. Non-Admitted (Surplus Lines) Insurer

Accepted Answer

An admitted insurer is licensed by the PID and backed by PIGA. A non-admitted (surplus lines) insurer is not PID-licensed, is used for hard-to-place risks, and is not protected by the guaranty association.

Question 33

Insurer Insolvency / Liquidation

Accepted Answer

When an insurer cannot meet its obligations, the Commissioner can place it in rehabilitation or liquidation. In liquidation, PIGA assumes covered claims up to statutory limits; policyholders are not left fully unpaid on covered losses.

Question 34

PA Unfair Insurance Practices Act

Accepted Answer

Pennsylvania statute prohibiting unfair or deceptive acts in the insurance business, including misrepresentation, false advertising, defamation, boycott, and unfair claims settlement. Enforced by the Insurance Department.

Question 35

Misrepresentation

Accepted Answer

Making a false or misleading statement about a policy's terms, benefits, or conditions, or about a competitor. A core unfair trade practice under PA law that can lead to fines and license action.

Question 36

Twisting

Accepted Answer

Inducing a policyholder to lapse, cancel, or replace an existing policy through misrepresentation or an incomplete/misleading comparison. Prohibited in PA — distinct from a legitimate, fully disclosed replacement.

Question 37

Rebating

Accepted Answer

Offering a customer any inducement (cash, gift, or value) not specified in the policy to purchase insurance. Treating one insured differently from others in the same class is an unfair, prohibited practice.

Question 38

Defamation (Insurance)

Accepted Answer

Making, publishing, or circulating a false statement that is maliciously critical of, or derogatory to, the financial condition of an insurer. A prohibited unfair trade practice under the PA Insurance Code.

Question 39

Unfair Claims Settlement Practices

Accepted Answer

Includes misrepresenting policy provisions, failing to act promptly on communications, not attempting good-faith settlement when liability is clear, and compelling litigation by offering substantially less than amounts ultimately recovered.

Question 40

Fiduciary Duty / Premium Trust

Accepted Answer

Premiums a producer collects belong to the insurer or insured, not the producer. Commingling or converting premium funds for personal use is a serious violation of the producer's fiduciary responsibility.

Question 41

Insurable Interest

Accepted Answer

A financial stake in property or a person such that loss would cause genuine financial harm. For property/casualty it must exist at the time of loss; without it the contract is unenforceable (prevents wagering).

Question 42

Indemnity (Principle of)

Accepted Answer

Insurance restores the insured to the financial position held before the loss — no profit from a loss. It underlies ACV settlement, subrogation, and other-insurance clauses.

Question 43

Subrogation

Accepted Answer

After paying a claim, the insurer assumes the insured's right to recover the amount from the negligent third party. Prevents double recovery and supports the indemnity principle.

Question 44

Utmost Good Faith

Accepted Answer

Both parties must deal honestly and disclose material facts. Breaches include concealment (silence on a material fact) and misrepresentation, which can void coverage.

Question 45

Adhesion, Aleatory & Unilateral

Accepted Answer

Adhesion: insurer writes the contract; ambiguity is construed against the insurer. Aleatory: unequal exchange of value depending on chance. Unilateral: only the insurer makes a legally enforceable promise.

Question 46

Representations vs. Warranties

Accepted Answer

A representation is a statement believed true to the best of the applicant's knowledge; a warranty is guaranteed to be literally true. A material misrepresentation can void coverage; a breached warranty more readily voids the policy.

Question 47

Concealment

Accepted Answer

The intentional failure to disclose a known material fact that the insurer would have considered in underwriting. If material and intentional, it can void the policy.

Question 48

Pro Rata vs. Short-Rate Cancellation

Accepted Answer

Pro rata (insurer-initiated cancellation): the insured receives a full proportional refund of unearned premium. Short rate (insured-initiated): the refund is reduced by an administrative penalty.

Question 49

Binder

Accepted Answer

A temporary, written or oral agreement providing immediate coverage until the formal policy is issued. It contains the essential terms and is fully enforceable while in effect.

Question 50

Deductible

Accepted Answer

The amount the insured pays out of pocket before coverage applies. Higher deductibles lower premiums and discourage small claims; they apply per occurrence on most property policies.

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