HI Property & Casualty common mistakes
HI Property & Casualty · Understand the traps and how to avoid them.
On insurable-interest questions, the candidate marks the answer that requires insurable interest only at the time the policy is written, regardless of whether the question is about property or life/health coverage.
Life insurance rules (insurable interest at inception only) get memorized first and then applied to every insurable-interest item, including fire and homeowners questions where the loss date is the controlling point.
What to do instead
Before answering, label the question 'property' or 'life.' Property and casualty: insurable interest must exist at the time of loss, and the insured must suffer actual financial detriment. Life: interest is required only at inception. Write the two words 'LOSS' or 'INCEPTION' next to the stem before selecting.
Any false statement on an application is treated as a breached warranty, so the candidate picks 'the policy is void from inception' even where the misstatement was minor or unrelated to the loss.
The terms representation, warranty, concealment and fraud blur together in study material, and the exam stems deliberately use wording like 'stated that' to imply a representation.
What to do instead
Run a three-part test: (1) Was the statement a representation (believed true, must be material to rescind) or a warranty (must be literally true)? (2) Was it concealment (intentional nondisclosure of a material fact)? (3) Was it innocent, negligent or fraudulent? Only a material misrepresentation or intentional concealment supports rescission; an immaterial or innocent misstatement generally does not.
The candidate assumes damage from any water source is excluded under the homeowners form, or conversely assumes a named storm that causes flooding is covered because wind is a covered peril.
Exclusion lists are memorized as blobs ('water damage excluded') without separating the excluded event (flood, surface water, seepage, continuous leakage over weeks) from the covered event (sudden and accidental discharge from a plumbing system).
What to do instead
Classify the cause before reading the answers: sudden/accidental discharge from a plumbing, heating or appliance system = covered; flood, surface water, waves, seepage, or repeated leakage over time = excluded and needs a separate flood policy. In a hurricane, damage from wind-driven rain is treated differently from rising water; identify which one the stem describes.
On coinsurance items the candidate eyeballs the choices and picks the figure closest to the loss amount instead of computing the penalty.
The formula is memorized as a jumble and the candidate does not realize that if the limit carried equals or exceeds the limit required, there is no penalty and the loss is paid up to the limit.
What to do instead
Write three numbers first: limit carried, limit required (percentage x value x coinsurance basis), and the loss. If carried >= required, pay the loss up to the limit. If carried < required, pay (carried / required) x loss, never more than the policy limit. Use replacement cost as the value when the coinsurance clause is written on a replacement cost basis, not depreciated value.
On a replacement cost loss, the candidate depreciates the full loss amount and also subtracts the deductible twice, or applies the deductible to each coverage item separately.
'Actual cash value' and 'replacement cost' get fused into one step, and it is easy to mentally apply the settlement steps once for the building and once for the contents.
What to do instead
Use one sequence per loss: determine the loss amount, apply the loss settlement basis (RC = no depreciation; ACV = replacement cost minus depreciation), then subtract the deductible once for the occurrence, then cap at the limit. Depreciation touches only the ACV calculation, never the deductible.
The candidate adds Coverage C special limits (for money, securities, jewelry theft, silverware, firearms) on top of the personal property limit, or assumes a single special limit applies to every peril.
The phrase 'special limit' sounds like extra coverage, and the forms bury the words 'this is not additional insurance' inside the coverage itself.
What to do instead
Treat special limits as sublimits carved out of Coverage C, not additions to it. Then check the trigger word: some sublimits apply to theft only (and sometimes only theft away from the residence premises), while others apply to all perils. Match the peril in the stem to the sublimit that names that peril.
On a commercial general liability item involving a claim reported after the policy expired, the candidate applies the per-occurrence limit and treats the policy as responding, ignoring whether the form is occurrence or claims-made and what the aggregate already paid.
Most study time goes to the occurrence form, so the claims-made trigger (act date inside the retroactive date, claim reported during the policy period or extended reporting period) and the role of the general aggregate are under-practiced.
What to do instead
Ask two questions in order: (1) What triggers coverage - injury during the policy period (occurrence) or claim reported during the policy period (claims-made)? (2) Is the limit per occurrence, per claim, or an aggregate? On claims-made, check the retroactive date and whether an extended reporting period was purchased before concluding the policy responds.
The candidate treats medical payments coverage as requiring negligence, or selects medical payments under a homeowners policy for an injury to the named insured or a regular household resident.
Medical payments sits next to liability on the policy and both are read as 'liability' coverages, but medical payments is a no-fault coverage with an explicit exclusion for the insured and regular residents.
What to do instead
Remember: medical payments pays medical expenses regardless of fault, to guests and others, without a lawsuit; it is not liability and no negligence is needed. It does not pay the named insured or regular household residents. For auto injuries, separate first-party coverage - Hawaii no-fault personal injury protection - applies to the insured and passengers; know which first-party coverage the stem is describing before answering.
On personal auto items, the candidate classifies an animal strike, glass breakage or aftermarket equipment damage as 'collision' because the car was physically damaged while moving.
Collision is understood simply as 'car hit something,' so every impact event is grouped under collision without checking whether the other object was a vehicle or the ground.
What to do instead
Apply the definition, not the feeling: collision = impact with another vehicle or object, or overturn. Other than collision (comprehensive) = fire, theft, vandalism, glass, hitting a bird or animal, flood, hail. Then check use: carrying goods or making deliveries for pay is business use and is excluded under a personal auto policy unless the policy is endorsed.
The candidate assumes the Hawaii Insurance Commissioner is elected by voters or that insurance is regulated primarily by a federal agency, and picks the 'federal regulation' answer on licensing and rate-filing items.
Insurance regulation is state-based under the McCarran-Ferguson Act, but that framework is easy to forget when the stem mentions federal statutes or national insurers.
What to do instead
Anchor Hawaii facts: insurance is regulated by the state through the Insurance Division of the Department of Commerce and Consumer Affairs, headed by the Insurance Commissioner, who is appointed by the Governor (not elected). Rate and form filing, producer licensing, market conduct, and unfair trade practice enforcement all run through that office, not a federal agency.
The candidate answers Hawaii property items using mainland assumptions - treating the homeowners deductible as a single flat dollar amount and assuming high-risk coastal or lava-zone property can simply be written by any admitted insurer.
Study material is often national in scope, so percentage hurricane/wind deductibles and residual-market mechanisms are unfamiliar, and Hawaii's exposure to hurricanes and lava zones makes both topics testable.
What to do instead
For Hawaii homeowners questions: look for a separate percentage hurricane or wind deductible (a percentage of the dwelling limit, not a flat dollar figure) in addition to the all-other-perils deductible, and remember the Hawaii Property Insurance Association as the residual market that writes basic property coverage for properties in high-risk areas such as lava zones that the voluntary market will not accept. Read the deductible and eligibility facts in the stem before choosing.