General Insurance Principles and Concepts
Risk, indemnity, and insurable interest
Insurance transfers and pools pure risk. The principle of indemnity restores the insured to roughly its pre-loss financial position, never better. Insurable interest must exist at inception for property and at the time of loss for life coverage. Utmost good faith, contracts of adhesion (ambiguity construed against the drafter), subrogation, and contribution round out the fundamentals examiners reuse.
Policy anatomy and cost-sharing
Know declarations, insuring agreement, conditions, exclusions, definitions, and endorsements. Distinguish limits (per occurrence, aggregate, sublimits) and, critically, deductibles versus self-insured retentions: a deductible reduces the loss payment, while an SIR means the insured funds loss and defense up to the attachment point before the insurer responds. In property, a coinsurance clause penalizes underinsurance at the time of loss.
Admitted versus nonadmitted
An admitted insurer is licensed in Colorado and brings guaranty-fund protection plus rate and form regulation. A nonadmitted insurer is not licensed there and is legally reachable only through the surplus lines channel. "Surplus lines" names a regulatory pathway, not a product; the underlying coverage is usually specialty, manuscript, or excess wording.
Traps
Treating nonadmitted as illegal; assuming a surplus lines policy cannot be written on an occurrence form; confusing an SIR with a deductible; and forgetting the broker holds premium as a fiduciary, not as ordinary business revenue.
Worked example
A policy carries a $2M per-occurrence limit and a $500,000 SIR. A $300,000 claim is paid entirely by the insured, including defense. A $750,000 claim is paid $250,000 by the insured and $500,000 by the insurer above the SIR.