Insurance Principles and Concepts
Get the vocabulary right first
Risk is uncertainty about loss; a peril is the cause of loss (fire, windstorm, collision); a hazard is a condition that increases the chance or severity of loss. Hazards come in four flavors: physical (icy steps), moral (intentional loss creation), morale (indifference, such as leaving keys in a car), and legal (adverse court rulings). Expect at least one item that swaps peril and hazard.
Contract characteristics
An insurance policy is a contract of adhesion (insurer drafts it, so ambiguity is construed against the insurer), aleatory (unequal exchange of value), unilateral (only the insurer makes an enforceable promise), conditional (the insured must comply with duties after loss), and a contract of utmost good faith. That last one is two-way: it produces the insured's duties of representation (believed true), warranty (must be literally true), and no concealment or fraud, and the insurer's duty of fair dealing.
Insurable interest and indemnity
In property insurance, insurable interest must exist at the time of loss; in life insurance, at the time of application. Indemnity means restoring the insured to approximately the pre-loss financial position, never better. Actual cash value (replacement cost minus depreciation) enforces indemnity; replacement cost coverage is the negotiated exception, and valued policies are another.
Agency authority
Agents act for the insurer through express, implied, and apparent authority. Waiver (voluntary surrender of a known right) and estoppel (preventing a party from asserting a right after the other relied on its conduct) are also fair game.
Rule of thumb: when a question asks who is bound after an agent acts beyond written instructions, look for apparent authority - if a reasonable person in the insured's position would believe the agent had authority, the insurer is bound.