Free SC P&C Exam Flashcards

A peril is the direct cause of a loss (fire, windstorm, theft). A hazard is a condition that increases the likelihood or severity of a peril. Policies insure against perils; underwriters evaluate hazards to price and accept the risk.

Physical hazard is a tangible condition (frayed wiring, icy steps). Moral hazard is dishonesty, such as deliberately causing a loss. Morale hazard is carelessness because insurance exists. Only physical hazard is a property condition; the other two stem from the insured's attitude.

Insurance restores the insured to the financial position held just before the loss, no better. It bars profiting from a claim and underlies actual cash value settlement, subrogation, and the insurable interest requirement.

A financial stake such that the person suffers a measurable loss if the property is damaged. For property coverage it must exist at the time of loss, unlike life insurance where it must exist when the policy is issued.

A valid contract needs offer and acceptance, consideration, competent parties, and legal purpose. Insurance contracts are also adhesion (drafted by the insurer, so ambiguity favors the insured), aleatory, conditional, and unilateral.

A representation is a statement believed true; it voids coverage only if materially false. A warranty must be literally true. Concealment is intentionally withholding a material fact. Material misstatements can let the insurer rescind the policy.

ACV pays replacement cost minus depreciation, so the insured absorbs wear and tear. Replacement cost pays to repair or replace with new property of like kind and quality with no depreciation deducted, usually requiring the building to be insured to a stated percentage of value.

A named perils form covers only listed perils, and the insured must prove the loss came from one. An open/all-risk form covers all direct physical loss except stated exclusions, so the insurer must prove an exclusion applies. Open perils is broader and shifts the burden of proof.

Requires the insured to carry coverage equal to a stated percentage of property value (often 80%, 90%, or 100%). Payment = (carried limit / required limit) x loss, minus deductible. Underinsuring triggers a penalty even on partial losses.

Common exclusions include flood, earth movement, war, nuclear hazard, intentional acts, ordinance or law, and wear and tear. In coastal South Carolina, flood is bought through the NFIP and wind may be excluded and placed with SCWHUA.

The most common homeowners form. The dwelling and other structures are covered on an open-perils basis, while personal property is covered on a named-perils basis. It also includes liability and medical payments to others.

HO-4 is the tenant (renters) form, covering personal property and liability but not the building. HO-6 is the condominium unit-owner form, covering personal property, interior improvements, and liability, coordinating with the association's master policy.

A Dwelling policy (DP-1/DP-2/DP-3) covers the structure and is used for rentals, seasonal, or seacoast risks; it has no required liability and limited contents. A Homeowners policy is an owner-occupant package adding contents, liability, and additional living expense.

South Carolina requires an insurer to give the policyholder at least 60 days' written notice before non-renewing a homeowners policy. This protects coastal owners by giving time to find replacement coverage, including through SCWHUA if wind coverage is the issue.

South Carolina coastal homeowners policies commonly apply a separate percentage deductible (a stated percent of the dwelling limit) for hurricane or named-storm losses rather than a flat dollar amount. The percentage deductible can far exceed an ordinary all-other-perils deductible.

South Carolina's residual market providing wind and hail coverage to property owners in designated coastal beach areas who cannot get wind coverage in the voluntary market. It is shared by all licensed property insurers and writes wind/hail only, not full property coverage.

To buy a SCWHUA policy the applicant must show an inability to obtain wind and hail coverage in the standard voluntary market and that the property lies in the association's designated coastal area. SCWHUA is the wind insurer of last resort, not a first choice.

Under S.C. Code 38-75-20, on a total loss by fire the insurer must pay the full face amount of the policy regardless of the property's actual cash value at the time of loss. The insurer cannot argue the value down after a total fire loss.

For a partial fire loss, the South Carolina Valued Policy Law lets the insured recover the actual amount of the loss but never more than the policy limit. The full-face-amount rule applies only to total fire losses, not partial ones.

Standard property and homeowners policies exclude flood. South Carolina coastal owners obtain flood coverage separately through the National Flood Insurance Program (NFIP) or private flood insurers. Flood, wind, and the underlying property policy are three distinct contracts on the coast.

A package policy bundling commercial property and general liability for eligible small to mid-size businesses, often cheaper than separate policies. It typically excludes workers' compensation, professional liability, and auto, which are bought separately.

Pays lost net income and continuing expenses while operations are suspended after a covered direct physical loss, during the period of restoration. It generally requires a covered property peril first; pure economic loss without physical damage is not covered.

The core commercial property form covering the building, business personal property, and personal property of others. Coverage can be written on a replacement cost or ACV basis and is subject to a coinsurance condition that penalizes underinsurance.

Commercial property is rated against a Causes of Loss form: Basic (named perils, fewest), Broad (adds perils like water damage and weight of ice/snow), and Special (open-perils, broadest, all risk except exclusions). The form chosen sets how much is covered.

Coverage A is bodily injury and property damage liability, Coverage B is personal and advertising injury, and Coverage C is medical payments paid regardless of fault. Defense costs are usually paid in addition to the limits of insurance.

An occurrence policy responds to injury or damage that happens during the policy period no matter when the claim is filed. A claims-made policy responds only to claims first made during the policy period (subject to a retroactive date), often needing tail coverage at cancellation.

The per-occurrence limit is the most paid for any single covered event. The aggregate limit is the most paid for all covered losses during the policy period. Once the aggregate is exhausted, no further claims are paid even if the per-occurrence limit remains.

A negligence claim requires duty, breach of that duty, proximate cause, and actual damages. All four must be present. Liability policies respond to negligence claims, which is why understanding the elements is central to casualty insurance.

South Carolina follows modified comparative negligence with a 51% bar: an injured party may recover reduced damages only if 50% or less at fault. A claimant who is 51% or more at fault recovers nothing. This directly affects auto and liability claim payouts.

Absolute liability applies regardless of fault or care (ultrahazardous activities). Strict liability holds a party liable without proving negligence, common in product liability. Vicarious liability holds one party responsible for another's acts, such as an employer for an employee.

South Carolina requires minimum liability limits of $25,000 bodily injury per person, $50,000 per accident, and $25,000 property damage (S.C. Code 38-77-140). Producers must know these exact figures and that South Carolina is a tort, not no-fault, state.

Every South Carolina auto policy must include UM coverage at least equal to the 25/50/25 minimum liability limits. UM cannot be rejected; it pays when an at-fault driver has no insurance. This mandatory status is a frequently tested South Carolina distinction.

UIM is optional in South Carolina, but the insurer must offer it up to the insured's liability limits and obtain a signed selection or rejection form (S.C. Code 38-77-160). If no signed form is on file, UIM is added to the policy by default.

South Carolina drivers must maintain proof of liability coverage; the insurer reports coverage to the DMV. Driving uninsured can lead to license and registration suspension, an uninsured-motorist fee, and reinstatement penalties under Title 38 and the motor vehicle laws.

SCAIP is South Carolina's residual auto market, the insurer of last resort for high-risk drivers (poor records, DUI, new drivers) who cannot get coverage in the standard market. Licensed auto insurers share SCAIP losses proportionally, and rates are higher than standard.

The PAP has Part A liability, Part B medical payments, Part C uninsured/underinsured motorists, Part D damage to your auto (collision and other-than-collision), and Part E/F duties and general provisions. Each part is a distinct grant of coverage.

Collision pays for impact with another vehicle or object or overturn of the insured auto. Other-than-collision (comprehensive) pays for fire, theft, hail, flood, glass, and animal strikes. In coastal South Carolina, hurricane-driven flooding of a vehicle is a comprehensive loss.

The PAP covers private passenger autos owned by an individual or married couple. It extends to the named insured, resident family members, and permissive users for liability. Vehicles used for delivery or livery and most business use need a commercial auto policy instead.

South Carolina requires workers' compensation insurance for employers with four or more employees. Below that threshold coverage is generally optional. The South Carolina Workers' Compensation Commission administers the system.

Workers' compensation is no-fault and is normally the employee's exclusive remedy: in exchange for guaranteed benefits regardless of fault, the employee generally gives up the right to sue the employer for a work injury. It is the central trade-off of the system.

Standard benefits are medical care, disability income (temporary or permanent, total or partial), rehabilitation, and death benefits to dependents. Disability classification drives how wage-replacement benefits are calculated.

After paying a claim, the insurer takes over the insured's right to recover from the at-fault third party. It supports the indemnity principle by preventing double recovery and shifting the cost back to the responsible party.

When more than one policy covers a loss, a pro rata clause splits it in proportion to each policy's limit. An excess clause makes one policy pay only after other valid coverage is exhausted. Both prevent the insured from collecting more than the actual loss.

An endorsement is a written change adding, removing, or modifying coverage; if it conflicts with the base policy, the endorsement controls as the more specific later agreement. A binder is temporary proof of coverage effective until the policy is issued or coverage is declined.

The state agency that regulates all insurance under Title 38: licensing producers, reviewing rate filings, conducting market-conduct examinations, handling consumer complaints, and disciplining licensees. It is the primary South Carolina regulatory authority on the exam.

South Carolina's Director of Insurance is appointed by the Governor, not elected by voters. This differs from states such as California with an elected commissioner and is a commonly tested distinction. The Director enforces Title 38 and adopts regulations.

South Carolina generally uses a file-and-use system, meaning an insurer may put new property and casualty rates into use after filing them with the SCDOI, subject to later Department review. This differs from prior-approval states that must wait for approval first.

South Carolina has no mandatory pre-licensing education; an applicant must be 18, pass the Pearson VUE exam, and complete fingerprinting and a background check. Licenses run 2 years and require 24 CE hours, including 3 hours of ethics or law; the first renewal is CE-exempt.

Rebating, twisting, misrepresentation, and unfair discrimination are prohibited. The Director may impose administrative penalties up to $15,000 per violation, or $30,000 if willful, plus license suspension or revocation and possible criminal prosecution for fraud.

SCPCIGA pays covered claims of an insolvent admitted P&C insurer, generally limited to $300,000 per claim (S.C. Code Title 38, Chapter 31), with workers' compensation handled separately. Producers may not advertise SCPCIGA protection as an inducement to buy insurance.