Property and Casualty Insurance Basics
Property versus Casualty
Property insurance covers damage to or loss of tangible property. Casualty (liability) insurance covers legal liability for injury or damage to others. Candidates should understand first-party versus third-party claims, occurrence versus claims-made triggers, and the duty to defend versus duty to indemnify.
Coverage Elements
Know the standard perils (fire, lightning, windstorm, hail, explosion, riot, vandalism) and the difference between named-peril and open-peril (all-risk) forms. Understand coinsurance, agreed value, and functional replacement cost. Review liability concepts including negligence, comparative fault, and the definition of occurrence.
Traps
Questions often blur named-peril and open-peril language. A named-peril policy covers only listed causes; an open-peril policy covers all risks except exclusions. Another trap is treating the duty to defend as identical to the duty to indemnify; defense is broader and triggered by potential coverage.
Rule of Thumb
Identify the peril, the cause, and the excluded cause before applying coverage. Proximate cause controls when multiple causes interact.
Worked Example
Wind damages a roof, and rain then enters. If wind is a covered peril and the policy excludes rain damage only when wind is absent, the loss is covered because wind is the proximate cause.