Property and Casualty Insurance Fundamentals
Property Concepts
Know the perils versus risks distinction and the difference between named peril and open peril (all-risk) policies. Understand actual cash value (replacement cost minus depreciation), replacement cost, and functional replacement cost. Master coinsurance in property insurance: the insured must carry a percentage of the property's value or face a penalty at claim time.
Homeowners and Auto
For homeowners, know Coverage A (dwelling), B (other structures), C (personal property), D (loss of use), E (liability), and F (medical payments). For auto, distinguish liability, collision, comprehensive, medical payments, uninsured/underinsured motorist, and personal injury protection. Understand no-fault states.
Liability Concepts
Know negligence elements (duty, breach, causation, damages), strict liability, vicarious liability, and the comparative versus contributory negligence doctrines. Understand occurrence versus claims-made liability policies and aggregate limits.
Traps
Questions often misapply the coinsurance penalty formula or confuse collision (impact with another vehicle/object) with comprehensive (theft, weather, vandalism). Watch for additional living expense being mislabeled as a liability coverage.
Rule of Thumb
Coinsurance penalty = (amount carried ÷ amount required) × loss, capped at the policy limit.