Your FREE Property & Casualty (P&C) Insurance Flashcards 2026 – 200+ Cards

A financial relationship to the insured property or person such that a loss causes the insured genuine harm. In property/casualty it must exist at the TIME OF LOSS.

At the TIME OF LOSS (in life insurance, only at the time of application). This timing distinction is heavily tested.

Restoring the insured to the same financial position as just before a loss — no profit, no penalty. P&C policies are indemnity contracts.

The insurer's right, after paying a covered claim, to recover that amount from the third party who actually caused the loss. It enforces indemnity and prevents a double recovery.

No. If the insured releases the at-fault party before being paid, they can destroy the insurer's recovery right and jeopardize their own claim.

The actual CAUSE of a loss — fire, windstorm, theft, collision, hail, vandalism.

A CONDITION that increases the chance or severity of a loss. Types: physical, moral, morale, and legal.

A tangible condition that increases the chance of loss — icy steps, worn wiring, oily rags by a furnace.

A DISHONEST tendency or intent to cause or exaggerate a loss — e.g., deliberately burning insured property. (Contrast morale = carelessness.)

Carelessness or indifference to loss because insurance exists — e.g., leaving keys in an unlocked car. (Contrast moral = dishonest intent.)

Moral = dishonest intent (fraud). Morale = careless indifference (laziness). The one extra 'e' flips it from fraud to laziness.

A risk involving only the chance of loss or no loss, with no chance of gain. It is the ONLY insurable type of risk.

A risk with a chance of loss, no loss, OR gain (gambling, investing). It is NOT insurable.

As the number of similar, independent exposure units grows, actual losses come closer to predicted losses — the statistical basis that makes insurance possible.

The tendency of higher-risk individuals to seek or keep insurance more than lower-risk ones, threatening loss predictions. Underwriting combats it.

Avoidance, Retention, Reduction (loss control), Sharing, and Transfer. Insurance is the chief risk-TRANSFER device.

Eliminating the risk entirely — the only method that reduces the chance of loss to zero (e.g., never building on a floodplain).

Keeping the risk and paying losses yourself — planned (a high deductible, self-insurance) or unplanned.

Insurance bought by an insurer (the cedant) to transfer part of its risk to a reinsurer — letting it write larger books and limit catastrophe accumulation.

Treaty = an automatic, portfolio-level agreement. Facultative = negotiated risk by risk.

Offer and acceptance, consideration, competent parties, and a legal purpose.

The parties exchange UNEQUAL amounts depending on an uncertain event — an insured may pay little and collect much, or vice versa.

A 'take it or leave it' contract drafted entirely by one party (the insurer). Ambiguities are construed against the drafter — in favor of the insured.

The insurer's duty to pay is subject to conditions the insured must first meet (notice, proof of loss, cooperation).

Only ONE party — the insurer — makes a legally enforceable promise. Only the insurer can be sued for breach.

The contract is between the insurer and a specific person; selling the property doesn't transfer the policy without the insurer's consent.

Aleatory, Adhesion, Conditional, Unilateral, and Personal.

The duty (uberrimae fidei) of both parties to deal honestly and disclose all material facts — a higher standard than ordinary contracts.

A statement believed true, made on the application. It must be substantially true; only a MATERIAL misstatement matters.

A statement guaranteed true and made part of the contract — a stricter standard than a representation.

Failure to disclose a known MATERIAL fact (silence/omission). If intentional and material, the insurer may void coverage.

A false statement of a material fact (an active falsehood). If material, the insurer may rescind or void the policy.

Representation = believed true. Warranty = guaranteed true (stricter).

Concealment = what you DIDN'T say (silence). Misrepresentation = what you said FALSELY (active).

The voluntary surrender of a known legal right.

Being barred from asserting a right because someone relied on your prior conduct.

Declarations, Insuring agreement, Conditions, Exclusions — the four core parts of a P&C policy (plus Definitions and Endorsements).

The fact page: WHO is the named insured, WHAT property/risk is covered, the policy period, limits, deductibles, and premium. The 'D' in DICE.

The insurer's core promise to pay for covered losses — the heart of the policy. The 'I' in DICE. Written as named-peril or open-peril.

The rules and duties of both parties: notice of loss, proof of loss, cooperation, cancellation, appraisal, and subrogation. The 'C' in DICE.

A policy provision stating what is NOT covered — it narrows the insuring agreement (e.g., flood, earth movement, war, intentional acts). The 'E' in DICE.

An attachment that adds, deletes, or modifies policy provisions — e.g., a replacement-cost or scheduled-property endorsement.

A temporary contract providing immediate, unconditional coverage before the policy is issued — common in P&C.

The amount the insured pays out of pocket before insurance applies. A higher deductible lowers the premium.

A peril is the CAUSE of a loss (fire, theft); a hazard is a CONDITION that makes that loss more likely or severe.

An insurer owned by shareholders that issues nonparticipating policies (no policyowner dividends).

An insurer owned by its policyowners that may issue participating (dividend-paying) policies.

Admitted = state-licensed and backed by the guaranty fund. Non-admitted (surplus lines) = not licensed in the state; used for hard-to-place risks.

The process of evaluating, classifying, and pricing risks to decide whether and how to insure an applicant. It guards against adverse selection.

The primary, efficient cause that sets in motion an unbroken chain of events leading to a loss.

Pays only for losses caused by perils specifically LISTED. The INSURED must prove the loss was a listed peril. Narrower, cheaper.

'All-risk'/special — pays for all causes of loss EXCEPT those excluded. The INSURER must prove an exclusion applies. Broader, costlier.

The burden of proof. Named-peril: the insured proves coverage. Open-peril: the insurer proves the exclusion.

The Basic homeowners form — covers a minimal list of named perils. Largely obsolete today.

The Broad form — named-peril coverage on BOTH the dwelling and personal property for an owner-occupant.

The Special Form — the MOST COMMON. Open-peril on the dwelling, named-peril on personal property. 'Open on the house, named on your stuff.'

The renters/tenants form. Covers personal property and liability but NO dwelling, because the tenant doesn't own the building.

The Comprehensive form — the broadest standard homeowners policy. Open-peril on BOTH the dwelling and personal property.

The condominium unit-owner form. Covers interior improvements and personal property; the association master policy covers the exterior.

The modified form for older homes whose replacement cost exceeds market value — typically a functional/ACV settlement.

The HO-5 (Comprehensive). The HO-3 is open on the dwelling but named on contents.

Dwelling — the house plus attached structures. The base limit; B, C, and D are percentages of Coverage A.

Other Structures (detached garage, fence, shed) — usually 10% of Coverage A.

Personal Property (your belongings) — usually 50% of Coverage A (often raisable to 70%).

Loss of Use / Additional Living Expense — usually 30% of Coverage A.

Personal Liability — pays bodily injury and property damage you're legally liable for, plus defense costs. A flat limit (e.g., $100,000).

Medical Payments to Others — pays others' medical bills regardless of fault (a small goodwill coverage). A flat limit.

No. B, C, and D are all percentages of Coverage A — never of each other. Memorize 10 / 50 / 30.

Properties not eligible for a full homeowners policy — rentals, seasonal cabins, vacant or older homes. No automatic liability or contents.

Basic dwelling form — named-peril (~9 perils), settled at ACV. Cheapest; older or vacant homes.

Broad dwelling form — named-peril (broader list), settled at replacement cost.

Special dwelling form — open-peril on the dwelling, replacement cost on the structure. The broadest/most common for rentals.

DP-1 and DP-2 are named-peril; DP-3 is open-peril. DP-1 settles at ACV; DP-2 and DP-3 at replacement cost.

A pre-packaged bundle of commercial property + general liability for small/mid eligible businesses; often written without a coinsurance penalty.

A modular policy combining two or more standalone coverage parts under one declarations page, for larger businesses needing higher limits.

Basic, Broad, and Special, attached to a commercial property form. Special is open-peril (broadest); basic and broad are named-peril.

Replacement cost MINUS depreciation — the depreciated value of property at the time of loss. ACV pays less on older, worn property.

The cost to repair or replace property with like kind and quality, with NO deduction for depreciation.

Dwelling at replacement cost; personal property at ACV — unless a replacement-cost endorsement is added on contents.

It requires the insured to carry insurance equal to a stated % of value (often 80/90/100%); carrying less makes them a co-insurer of a partial loss.

Payment = (Did / Should) x Loss - Deductible, where Should = coinsurance % x value, and Did = the amount carried.

Only to PARTIAL losses. A total loss simply pays the policy limit — coinsurance is ignored.

An endorsement that suspends the coinsurance clause because the insurer and insured agree on the property's value in advance.

Should = 80% x $500,000 = $400,000. Did / Should = $300,000 / $400,000 = 0.75. A partial loss is paid at 75% (minus deductible).

A policy that pays a pre-agreed amount on a total loss, rather than ACV or replacement cost.

Rebuilding with modern, less costly equivalents (common on HO-8) when full replacement cost would exceed market value.

No — flood is EXCLUDED. It is bought separately, usually through the National Flood Insurance Program (NFIP), administered by FEMA.

No — earthquake is excluded. It is added by endorsement or a separate policy.

Up to $250,000 on the building and up to $100,000 on contents; a new policy generally has a 30-day waiting period.

Inland marine coverage that travels WITH movable property (jewelry, fine art, instruments) — usually open-peril and often worldwide.

Pays lost income (and extra operating cost via extra expense) while operations are suspended by a covered property loss.

Covers sudden, accidental breakdown of boilers, pressure vessels, and electrical equipment.

Because older homes' replacement cost can far exceed market value; HO-8 pays a functional/ACV settlement to avoid over-insuring.

Section I = Property (Coverages A-D). Section II = Liability (Coverages E-F).

The HO-4 (renters form) — personal property and liability, no dwelling coverage.

A civil wrong (other than breach of contract) that causes injury, remedied by damages.

Failure to use the care a reasonably prudent person would. It requires four elements: duty, breach, proximate cause, and damages.

Duty owed, breach of that duty, proximate cause, and actual damages. Missing any one defeats the claim.

A legal obligation to act with reasonable care toward another person.

Failing to meet the reasonable-care standard (e.g., mopping a floor but posting no warning sign).

A new, independent cause that breaks the chain of proximate cause and can defeat liability.

A strict rule (only a few states: AL, MD, NC, VA, DC) that bars all recovery if the plaintiff was even slightly at fault.

Recovery is reduced by the plaintiff's percentage of fault — they can recover even if 99% at fault.

The plaintiff recovers only if their fault is below a 50%/51% threshold; recovery is barred at or above it.

A defense: the plaintiff knowingly accepted a known danger, barring recovery within the assumed risk.

Liability imposed WITHOUT proving fault — for ultra-hazardous activities (blasting, wild animals) and defective products.

Liability of one party for another's acts based on their relationship (employer/employee, parent/child), regardless of the held party's own care.

The employer-for-employee form of vicarious liability — an employer is liable for an employee's acts within the scope of employment.

Damages that reimburse the injured party for actual loss — special (measurable) and general (intangible).

Special = measurable economic loss (medical bills, lost wages). General = intangible loss (pain & suffering, loss of consortium).

Damages that punish reckless or willful conduct and deter others. Often excluded or uninsurable as a matter of public policy.

Compensatory damages. Punitive damages are often excluded or uninsurable by law.

The most the insurer pays for any single accident/occurrence (e.g., $1,000,000 per occurrence).

The most the insurer pays for ALL losses in the policy period (e.g., $2,000,000 aggregate).

Three separate liability limits: BI per person / BI per accident / PD per accident (e.g., 100/300/50).

One liability limit covering bodily injury and property damage combined, per accident, in any mix.

Commercial General Liability — the core business-liability coverage for bodily injury, property damage, and personal & advertising injury.

Bodily Injury & Property Damage liability from an occurrence — premises/operations and products/completed operations; includes defense.

Personal & Advertising Injury — libel, slander, defamation, false arrest, wrongful eviction, advertising/copyright infringement.

Medical Payments — others' medical expenses regardless of fault (no-fault goodwill coverage).

Covers injury/damage that HAPPENS during the policy period, no matter when the claim is filed — even years later.

Covers only claims first MADE during the policy period, subject to a retroactive date; may need an Extended Reporting Period (a 'tail').

On a claims-made policy, the date before which injuries are NOT covered, even if the claim is made during the policy period.

An extension on a claims-made policy that extends the time to REPORT a claim for past work — it does not cover new occurrences.

Occurrence costs more (simpler, covers late claims). Claims-made starts cheaper and rises as it 'matures.'

A statutory, no-fault system: an injured employee gets benefits regardless of fault and, in exchange, gives up the right to sue the employer.

The workers' comp bargain ('grand bargain'): the employee gets no-fault statutory benefits and gives up the right to sue the employer.

Pays all benefits the state WC law requires — with NO dollar limit (statutory benefits).

Employers Liability — covers work-injury suits OUTSIDE the WC statute, and HAS limits.

Other States Insurance — extends coverage to listed states the employer might expand into.

Medical care, a portion of lost wages, death benefits, and rehabilitation.

Excess liability above primary policies (CGL, auto, employers liability) that adds limits, drops down when an underlying aggregate is exhausted, and can broaden coverage.

An umbrella adds limits AND can broaden coverage (subject to a self-insured retention). A plain excess policy adds limits only.

An amount the insured pays out of pocket before an umbrella responds to a gap not covered by an underlying policy.

Errors & Omissions (professional liability) — covers service errors, faulty advice, or negligence by a professional. Usually claims-made.

Directors & Officers liability — covers corporate directors and officers (and often the entity) for wrongful acts in their management decisions.

Employment Practices Liability Insurance — covers employment claims such as wrongful termination, discrimination, and harassment.

The part of a liability policy that defines, beyond the named insured, which additional persons and organizations qualify for coverage.

Amounts a liability insurer pays IN ADDITION to the limit — such as defense costs, bonds, and court costs.

Outside — defense costs are a supplementary payment paid in addition to the policy limit.

Four: Part A Liability, Part B Medical Payments, Part C UM/UIM, Part D Damage to Your Auto.

Liability (BI/PD) — damages you're legally liable to others for. Defense is paid IN ADDITION to the limit.

Medical Payments — reasonable medical/funeral expenses regardless of fault, incurred within 3 years.

Uninsured/Underinsured Motorist (UM/UIM) — your bodily injury from an at-fault driver with no or insufficient insurance, or a hit-and-run.

Damage to Your Auto — first-party physical damage: Collision and Other-Than-Collision, minus a deductible.

Uninsured Motorist — pays your bodily injury when the at-fault driver has NO insurance, is a hit-and-run, or is insolvent.

Underinsured Motorist — pays when the at-fault driver has insurance but NOT ENOUGH to cover your injuries; it pays the gap.

UM = the at-fault driver has NO insurance. UIM = they have insurance but NOT ENOUGH.

Your vehicle's upset, rollover, or striking another object (another car, a tree, a pole, a guardrail).

Non-collision losses — fire, theft, hail, flood, vandalism, falling objects, glass breakage, and hitting an animal.

Comprehensive (other-than-collision), NOT collision. The classic auto exam trap.

Comprehensive (other-than-collision).

$25K bodily injury per person / $50K BI per accident / $25K property damage per accident.

In no-fault states, your own insurer pays your medical and lost wages through Personal Injury Protection (PIP) regardless of fault, and your right to sue is limited by a threshold.

PIP (no-fault states) is broader — it covers medical, lost wages, and related expenses. Medical Payments covers medical/funeral expenses only.

Requires proof of the ability to pay AFTER an accident or violation (via insurance, a bond, or a deposit).

Requires a driver to carry liability insurance UP FRONT.

A certificate the INSURER files verifying minimum coverage (not a policy itself); often required after a DUI.

A higher-limit version of the SR-22 — used in Florida and Virginia only.

Commercial auto coverage that uses covered-auto SYMBOLS (not a vehicle schedule) to say which autos a coverage applies to.

'Any auto' — the broadest covered-auto designation; it closes every gap, including temporary substitute vehicles.

No. Only Symbol 1 ('any auto') truly closes every gap. 2+8+9 do NOT equal 1.

Auto dealerships and similar auto businesses — it blends liability and physical damage and includes garage operations.

Protects a garage, repair shop, or storage operation against liability for damage to CUSTOMERS' autos left in its care, custody, or control.

The named insured and family members, anyone using the covered auto with permission, and others liable for that use.

Coverage for movable property, property in transit, and high-value scheduled items (jewelry, fine art) — usually open-peril.

Hull, Cargo, Freight, and Protection & Indemnity (liability) for vessels and their cargo.

Covers loss of money/securities from employee dishonesty, theft, robbery, burglary, and forgery.

Reimburses an EMPLOYER if an employee steals money or property. A two-party arrangement (employer + insurer).

A three-party guarantee that a contractor (principal) will COMPLETE the job per the contract for the project owner (obligee).

Fidelity = two-party, reimburses an employer for employee theft. Surety = three-party, guarantees a contractor completes the job.

The principal (who must perform), the obligee (who is protected), and the surety (who guarantees performance).

No — it is a three-party guarantee of performance, not a two-party indemnity insurance contract.

A residual-market mechanism providing basic PROPERTY coverage to applicants who can't obtain it in the standard market.

A residual-market mechanism making AUTO coverage available to high-risk drivers who can't obtain it normally.

Covers a business's data-breach and cyber-incident liability, including notification and recovery costs.

An HO endorsement that pays a condo/co-op unit-owner's proportionate share of an assessment levied by the association for a covered loss.

Provides high excess liability limits above an insured's underlying auto and homeowners coverage and can fill some coverage gaps.

Mechanisms that provide coverage to risks the voluntary market won't write — FAIR plans (property) and assigned-risk plans (auto).

A schedule of specific high-value movable items (jewelry, cameras, instruments) covered usually open-peril and often worldwide.

A person licensed to sell, solicit, or negotiate insurance. The NAIC Producer Licensing Model Act merged 'agent' and 'broker' into 'producer.'

The INSURER — and an agent can typically bind coverage.

The APPLICANT/client — and a broker generally cannot bind coverage.

Authority explicitly granted in writing in the agent's contract or appointment (e.g., authority to bind auto up to a stated limit).

Authority not written but reasonably necessary to carry out express authority (e.g., renting an office, collecting premiums).

Authority the public reasonably believes an agent has based on the insurer's conduct, even where no actual authority was granted.

Producers hold client premiums in trust; commingling client funds with their own personal funds is a violation.

A producer is resident in their home state and obtains non-resident licenses elsewhere by reciprocity, usually without retaking the exam.

Making false/misleading statements about a policy's benefits, terms, or the insurer's financial condition.

Offering an inducement NOT specified in the policy (cash, gifts, services) to persuade someone to buy — a prohibited unfair trade practice.

Inducing a policyholder to drop or replace a policy through MISREPRESENTATION, usually between different insurers.

Replacing a policy using the EXISTING policy's own values, with the SAME insurer, to generate commissions.

Twisting uses misrepresentation (often between different insurers). Churning uses the existing policy's own values with the SAME insurer.

Making false, malicious statements that injure a competitor's or an insurer's reputation.

Charging different premiums or terms to individuals of the same class and equal risk.

Acts that restrain trade or tend to create a monopoly — a prohibited unfair trade practice.

The official (also Director or Superintendent) who heads the state Department of Insurance — licensing, disciplining, examining, and issuing cease-and-desist orders.

No. The NAIC is NOT a regulator — it drafts MODEL LAWS that states must adopt to have legal force.

Federal law leaving the regulation of insurance to the states (15 U.S.C. 1011-1015).

Notice to a consumer when a consumer/inspection report is obtained, and an adverse-action notice when that report drives an underwriting decision.

Privacy notices to consumers and safeguarding of nonpublic personal financial information.

An NAIC model act prohibiting unfair claim-handling practices, such as misrepresenting policy provisions or failing to act promptly on claims.

An insurer's authorization for a licensed producer to transact business and bind coverage on its behalf.

Required ongoing coursework (hours plus an ethics requirement set by each state) that a producer must complete to renew a license.

Each state's Department of Insurance, delivered through a testing vendor (PSI, Pearson VUE, or Prometric). There is no national P&C license.

Improperly mixing client premium funds with the producer's own personal or business funds — a breach of fiduciary duty.

An order from the Commissioner directing a person to stop a prohibited act, such as an unfair trade practice.

A regulator's review of how an insurer treats policyholders — sales, underwriting, and claims practices — for compliance with state law.