Free WA P&C Exam Flashcards

Only pure risk (loss or no loss, no chance of gain) is insurable; speculative risk like gambling or stock trading is not, because insurance exists to restore you to where you were, not to underwrite profit-seeking. If a scenario includes any chance of gain, the carrier will decline it.

A peril is the direct cause of loss (fire, windstorm, theft, collision); a hazard is a condition that makes that peril more likely or more severe (oily rags, icy walkway, faulty wiring). Confusing them flips the answer on every coverage-trigger question.

Moral hazard is intentional dishonesty for gain (arson, inflating a claim, staging an accident); morale hazard is careless indifference because insurance exists (leaving a car unlocked, ignoring a leaky roof). Memory hook: moral = malicious, morale = low effort.

As the pool of similar, independent exposure units grows, actual losses converge toward predicted losses, which is what lets actuaries set a credible pure premium. Catastrophe perils like hurricane and earthquake violate independence because one event hits thousands of policies at once, which is why those perils are excluded from standard forms.

In property and casualty insurance, insurable interest must exist at the time of loss; in life insurance it need only exist at policy inception. A buyer who acquires property after a policy starts can still recover if they hold interest when the loss occurs.

Indemnity restores the insured to roughly the pre-loss position with no profit, enforced by actual cash value, deductibles, subrogation, salvage, and other-insurance clauses. Replacement cost and valued policies are the recognized exceptions that go beyond strict indemnity.

Offer and acceptance (application plus issuance), consideration (premium plus truthful statements and the insurer's promise), competent parties (legal age, sound mind, licensed insurer), and legal purpose. Missing any element means no enforceable contract.

The applicant's consideration is the premium plus the statements in the application, not just money; the insurer's consideration is its promise to indemnify. A common trap lists only the premium as the applicant's side, omitting the truthful statements.

The policy is drafted entirely by the insurer with no negotiation, so the insured merely adheres to its terms. The consequence: ambiguities are construed against the drafter (the insurer), which is why vague exclusions tend to be interpreted in the insured's favor.

Aleatory means the exchange is unequal and depends on chance (a small premium may yield a large payout or nothing); unilateral means only the insurer makes an enforceable promise once premium is paid, while the insured simply pays to keep coverage. Both distinguish insurance from ordinary bilateral contracts.

A representation is a statement believed true to the best of the applicant's knowledge; a warranty is a strict guarantee of literal truth; concealment is the deliberate withholding of a material fact. Only a material misrepresentation or intentional concealment lets the insurer rescind; an immaterial misstatement does not.

The declarations section identifies who is insured, what property is covered, the limits, deductibles, and policy term. It personalizes the otherwise-standard policy form to the specific insured and is the first place to check when a coverage question gives a fact pattern.

The insuring agreement is the broad promise of what the insurer will pay, stating the covered perils and covered losses. It is the heart of the policy and is then narrowed by exclusions and conditions, so reading it alone overstates coverage.

Conditions are clauses the insured must satisfy (pay premium, give prompt notice of loss, cooperate, submit proof of loss) before the insurer's duty to pay triggers. Breach of a condition can suspend or bar coverage even when the loss itself is covered.

Property coinsurance requires insuring to a stated percentage of value (commonly 80%). If underinsured, the insured shares in every partial loss by the penalty: (limit carried / limit required) times the loss, minus any deductible. A $60,000 loss on a $100,000 building with only $40,000 carried against an 80% requirement pays $30,000.

Subrogation lets the insurer recover from the at-fault third party after paying its insured, preventing double recovery; other-insurance clauses (pro-rata or primary/excess) split a loss when two policies cover the same exposure so the insured cannot collect twice. Both enforce the principle of indemnity.

HO-3 covers the dwelling on an open-peril basis but personal contents on a named-peril basis; HO-5 broadens both dwelling and contents to open-peril, making it the widest personal property form. The difference shows up mainly on contents claims, where HO-5 shifts the burden of proof to the insurer for listed exclusions.

DP-1 is a basic named-peril fire and extended-coverage form paying actual cash value; DP-2 is a broad named-peril form; DP-3 is open-peril on the dwelling and pays replacement cost. DP-3 is the most common form for landlord and vacant properties because of its broader dwelling coverage.

Named-peril forms list the perils covered and anything not listed is denied; open-peril (all-risk) forms cover all causes of loss except the listed exclusions. The burden of proof shifts accordingly: on named-peril the insured must show the peril is listed, on open-peril the insurer must show the exclusion applies.

ACV equals replacement cost minus depreciation, the default indemnity settlement for most property. A 6-year-old roof with a 20-year useful life and an $18,000 replacement cost has depreciation of $5,400, so ACV is $12,600 before any deductible is applied.

Replacement cost pays to rebuild with no depreciation deduction, subject to actually rebuilding and to coinsurance compliance. A valued policy pays an agreed face amount regardless of ACV, used for fine arts, antiques, and in states with valued-policy laws for total fire losses to real property.

Washington's compulsory liability limits are $25,000 bodily injury per person, $50,000 bodily injury per accident, and $10,000 property damage. The per-person cap stacks per injured claimant, the per-accident cap is the aggregate for one crash, and PD covers others' property only, not the insured's own vehicle.

Washington follows pure comparative negligence (RCW 4.22.005): each party's recovery is reduced by their own fault percentage with no 50% bar, so even a plaintiff 99% at fault may recover the remaining 1%. This differs from modified comparative negligence states that bar recovery at 50% or 51%.

Personal Injury Protection is first-party medical and wage coverage that pays regardless of fault; under RCW 48.22.085 every auto insurer must offer PIP, but the applicant may reject it in writing. The statutory minimum is $10,000 medical, $2,000 funeral, $10,000 lost income, and $5,000 loss of services.

Uninsured Motorist pays when the at-fault driver has no insurance or is a hit-and-run phantom vehicle; Underinsured Motorist pays the gap when the at-fault driver's limits are too low. Washington requires UIM to be offered at liability limits, and any rejection or lower-limit election must be in writing.

Collision pays for the insured's own vehicle damage from a crash or rollover; comprehensive (other-than-collision) covers theft, fire, vandalism, glass, hail, and animal strikes. Lenders usually require both while a loan is outstanding, but they are optional for owned vehicles.

An SR-22 is not a policy but a certificate the insurer files with the Department of Licensing confirming continuous coverage, typically required for three years after serious violations such as a DUI, a no-insurance accident, or driving on a suspended license. Washington accepts electronic proof of insurance on a smartphone.

Coverage A is bodily injury and property damage liability; Coverage B is personal and advertising injury (libel, slander, copyright infringement); Coverage C is medical payments to others on the insured's premises regardless of fault. A single CGL form provides all three, with separate aggregates applying to B and C.

An occurrence form responds when injury or damage happens during the policy period, no matter when the claim is filed; a claims-made form responds only when the claim is first made during the policy period, subject to a retroactive date and often requiring tail coverage (Extended Reporting Period) when the policy ends.

Symbols on the declarations specify which autos are covered and for what: symbol 1 is all autos, symbol 2 is owned autos, symbol 7 is specifically described autos, symbol 9 is non-owned autos. The symbol drives both liability and physical-damage scope, so the wrong symbol can silently narrow or broaden coverage.

A Businessowners Policy bundles property and liability for small, low-hazard businesses in one prepackaged form with limited customization; a Commercial Package assembles separate monoline forms and is used for larger or more complex risks that need tailored coverage. BOP eligibility is the gatekeeping question.

Washington is one of four monopolistic state-fund states (with ND, OH, WY): workers' compensation is provided only through the Department of Labor & Industries State Fund, and private insurers may not sell it. Employers may use the State Fund or qualify for self-insurance, but cannot buy a commercial workers' comp policy.

Washington is the only state where employees pay part of the workers' comp premium, deducted directly from wages; workers fund roughly 27% of the total. The medical-aid and supplemental-pension portions may be split up to half with the employee, while the accident fund (time-loss and pensions) is employer-only.

Washington sets rates per worker-hour rather than per $100 of payroll as most states do, then adjusts the base rate by the employer's experience factor. Misclassifying employees as independent contractors to avoid premiums is a frequent L&I audit target and can trigger civil penalties and back premiums.

Medical benefits begin immediately with no waiting period, but time-loss wage benefits carry a 3-day waiting period that is paid retroactively only if the worker is still disabled on the 14th day after the injury. Time-loss is calculated as a percentage of the wage at injury, adjusted for marital status and dependents.

Washington's Insurance Commissioner is elected by voters to a four-year term, one of only 11 states with an elected commissioner. The Commissioner adopts WAC rules and enforces the code but cannot write statutes, which is why any question saying the Commissioner writes the insurance statutes is false.

RCW Title 48 is the Insurance Code (statutes passed by the Legislature); WAC Title 284 is the Washington Administrative Code (rules adopted by the Commissioner). The Commissioner implements statutes through WAC rules that have the force of law but must stay within the authority RCW 48 grants.

Effective July 23, 2023, Washington eliminated the pre-licensing education requirement, so candidates may register with PSI and sit the exam with no documented coursework. The content outline was not reduced, so thorough self-study remains essential even though the mandatory hours are gone.

After passing, the candidate must complete fingerprinting (through IdentoGO, approximately $49.25) and file the license application with the OIC or NIPR within 180 days of the passing date. Miss the window and the passing score expires, forcing a full retest rather than a simple late filing.

Washington producers complete 24 hours of approved continuing education every two-year period, including 3 hours of ethics within the 24 (not added on top). Hours do not carry over, the same course cannot be taken twice in one period, and CE must be finished before the renewal application is submitted.

The FAIR Plan is the residual-market property insurer of last resort for dwellings and commercial property the voluntary market declines. It guarantees availability, not affordability, with higher premiums and narrower coverage, and liability is not included, so a separate liability policy must be arranged.

Standard homeowners policies exclude earth movement, so Washington requires insurers to disclose in writing that earthquake is not covered and explain how to add it. Coverage is typically added by endorsement with a high deductible of 10 to 25 percent of the dwelling limit, which can mean the insured absorbs the first $60,000 of a $400,000 dwelling loss.

For homeowners, non-payment of premium requires 10 days' written notice; other cancellations after the first 60 days require 45 days; non-renewal requires 60 days (raised from 45 by SSB 5798 effective July 1, 2025). Notice must state the actual reason in writing and go to any mortgagee shown on the policy.

Risks no admitted insurer will write can be exported to a non-admitted insurer through a licensed surplus-line broker after a documented diligent search. A 2% premium tax plus a 0.30% stamping fee applies, and the insured must be told in writing that the insurer is not licensed in Washington and is not protected by the guaranty fund.

Washington's Model Toxics Control Act imposes strict, joint-and-several, and retroactive liability for contaminated-site cleanup on current and past owners, operators, generators, and transporters. Cleanup costs can dwarf standard CGL limits, which is why the absolute pollution exclusion forces dedicated environmental impairment coverage.

The most heavily tested Washington statute governs misrepresentation, defamation, rebating, twisting, and churning. Under RCW 48.17.530 the Commissioner may impose a fine of up to $10,000 per offense, order restitution, and suspend or revoke the producer license.

Rebating is giving the insured any inducement not specified in the policy, prohibited under RCW 48.30.140-.150. Advertising or promotional items of nominal value (roughly $25 or less), filed group discounts, and contractual dividends are permitted, not rebates, because they are not valuable enough to distort the insurance decision.

Twisting uses misrepresentation to induce a policyholder to lapse, surrender, or replace existing coverage at another insurer; churning is the same conduct against your own book to generate fresh commission. Both are illegal regardless of intent to defraud, and a pattern of churning supports license revocation.

Premiums a producer collects belong to the insurer or the insured and are held in trust. Commingling premium funds with personal or operating accounts, or converting them to any other use, is a violation the instant it happens, even if the carrier is later paid in full. The fix is always a separate fiduciary trust account.

The Washington Insurance Guaranty Association pays covered claims of an insolvent admitted P&C insurer up to $300,000 per claim with a $100 effective deductible, never exceeding the policy face amount. Surplus lines, title insurance, ocean marine, and reinsurance are excluded; the fund is financed by assessments on member insurers, not taxpayers.