Exam Weight Dashboard
Ch 3 + Ch 4 = 64% of your exam
These two chapters alone account for ~48 of 76 questions. Prioritize them.
Ch 1: Insurance Terms
~13 Qs / 17%Risk & Hazards
- Pure Risk - Loss or no loss only; INSURABLE
- Speculative Risk - Could gain; NOT insurable
- Physical Hazard - Physical condition (icy steps, bad wiring)
- Moral Hazard - Dishonesty/fraud (arson for insurance money)
- Morale Hazard - Carelessness ("insurance will pay")
- Law of Large Numbers - More data = better predictions
Valuation & Key Concepts
- ACV = Replacement Cost minus Depreciation
- Replacement Cost - New item, same kind/quality, no depreciation
- Indemnity - Restore to pre-loss condition, no profit
- Subrogation - Insurer sues at-fault party after paying claim
- Insurable Interest - Financial stake; must exist at time of LOSS
- Binder - Temporary coverage; can be oral OR written
Warranty vs Representation
Warranty - Must be literally true (100% accurate); breach can void policy
Representation - Substantially true; to best of your knowledge (application answers)
Ch 2: Policy Provisions
~11 Qs / 14%Policy Structure: D-I-C-E
- Declarations - Who, what, when, how much
- Insuring Agreement - Insurer's promise of coverage
- Conditions - Obligations, cancellation rules, claim duties
- Exclusions - What is NOT covered
Contract Characteristics
- Aleatory - Unequal exchange (small premium, large payout)
- Adhesion - Take it or leave it; ambiguity favors insured
- Conditional - Both parties have obligations
- Unilateral - Only insurer can be sued to perform
Key Rules
- Pro-Rata - Proportional sharing (NOT equal)
- Arbitration - Always 3 arbitrators (one each + neutral)
- TRIA - Terrorism; COMMERCIAL policies ONLY
- Gramm-Leach-Bliley - Privacy notice at start AND annually
Perils Coverage Types
- Named Perils - Only listed perils; insured proves cause
- Open / All-Risk - Covers everything EXCEPT exclusions; insurer proves exclusion
- Burden of proof flips between named and open perils
Cancel vs Nonrenewal
- Cancellation - Terminated BEFORE expiration
- Nonrenewal - Terminated AT expiration (full term runs out)
- Mortgagee = bank (lender); Mortgagor = you (borrower)
Duties After Loss
- Notice of Claim - Can be oral initially
- Proof of Loss - MUST be written and sworn
- Protect property from further damage
Concealment
- Concealment - Intentionally hiding a material fact
- Misrepresentation - Stating something false
- Both can void the policy
Ch 3: Types of Policies
~24 Qs / 32%Dwelling Policies (DP) - For Landlords
Owner does NOT live in the property. No liability (add by endorsement). Max 5 boarders.
DP-1 Basic
- Named perils only
- ACV settlement
- NO ALE, NO trees/shrubs
DP-2 Broad
- More named perils
- RC on dwelling, ACV on contents
- 80% coinsurance on A and B
DP-3 Special
- Open perils on dwelling
- Named perils on contents
- Best DP coverage
Homeowners Policies (HO) - Owner-Occupied
Package policy: property AND liability. Section I = Property, Section II = Liability.
HO-2 Broad
Named perils both
HO-3 Special
Open dwelling, named contents. MOST POPULAR
HO-4 Renters
Contents only, no dwelling
HO-5 Comp
Open perils on EVERYTHING
HO-6 Condo
Your unit only, NOT common areas
HO-8 Older
Modified settlement, RC > market value
Coverage Letters (HO Policy)
A
Dwelling
B
Other Structures
10% of A
C
Personal Property
50% of A
D
Loss of Use
ALE or Fair Rental
E
Personal Liability
$100K default
F
Medical Payments
$1K/person, no fault
A-D = Section I (Property) | E-F = Section II (Liability) | Defense costs paid IN ADDITION to limits
Coverage F = THIRD PARTIES ONLY (guests/visitors) -- NEVER covers household members!
Commercial Property
CPP vs BOP
- CPP - Build your own; HAS coinsurance (80%)
- BOP - Pre-packaged for small biz; NO coinsurance
- BOP NOT eligible: Manufacturing, banks, credit unions, bars, auto dealers
Key Rules
- 60-day vacancy - Vandalism = $0; other perils pay only 85%
- Extensions = Extra money added to limit
- Additional coverages = Uses existing limit
- Business Income - 72-hour wait; BOP max 12 months
Inland Marine
- Floaters - Coverage follows item
- Scheduled - Items individually listed
- Scheduled personal property = ACV basis
- Fine arts: 90-day auto coverage for new items
NFIP Flood
- $250K max dwelling / $100K max contents
- 30-day waiting period
- Community MUST participate
- FIA sets rates; federal gov pays claims
- NOT covered: sewer backup (unless caused by flood), seepage
- Exception: No 30-day wait with new mortgage
Earthquake
- Deductible: 10-20% of coverage amount
- Percentage-based, NOT flat dollar
- Fire FOLLOWING earthquake IS covered by standard policy
- The earthquake itself is NOT covered
Causes of Loss Forms
- Basic - ~11 named perils (fire, lightning, etc.)
- Broad - Basic + 3 more (falling objects, snow, water)
- Special - Open perils (most coverage)
- Special = open perils for bldg/BPP, but named for property of others
Equipment Breakdown
- NOT covered by standard property policy
- Must be added separately or by endorsement
- Only SUDDEN failures, NOT gradual wear
- Old name: "Boiler & Machinery"
HO Special Rules
- 30 days contents covered while moving
- Boarders NOT covered (unless related)
- Under construction: NO theft coverage
- Rain only covered if wind/hail first damaged roof
Ch 4: NJ Laws & Regulations
~24 Qs / 32%Insurers & Commissioner
- Agent = compAny (represents insurer)
- Broker = Buyer (represents insured)
- Commissioner - Enforces law, holds hearings, issues C&D orders
- Commissioner does NOT - Set rates, write laws, set commissions
- Fiduciary - Producer handles money in trust
Licensing
- 18 years minimum age
- 1 year to apply after passing exam
- CE: 24 hours every 2 years (3 ethics + 3 NFIP)
- Nonresident - May get license WITHOUT exam if in good standing
- Temporary license - 180 days (death/disability)
Prohibited Trade Practices
Misrepresentation
Misstating dividends or policy terms
Twisting
Misleading to lapse/surrender a policy
Rebating
Giving inducements not in the policy
Defamation
False statements about an insurer
Coercion
Restraint or monopoly acts
Discrimination
By race, creed, color, DNA, ancestry
Stock as Inducement
Offering securities to sell insurance
Pay Unlicensed
No commissions to unlicensed people
Fraud Prevention Act
- Key word: "knowingly" - must be intentional
- 11 types of fraudulent acts defined
- Fines: $5K first / $10K second / $15K subsequent
- Commissioner may: probate, suspend, revoke, refuse to renew
Penalties & Ethics
- $1,000 per violation (unknowing)
- $5,000 per violation (knowing) or C&D violation
- $10,000 each subsequent violation
- 5 years to reapply after revocation
- Cannot advertise Guaranty Association
Critical Time Frames
5 days
Deposit premiums in trust
10 days
Hearing notice
15 days
File appointment
30 days
Address/conviction change
180 days
Temporary license
5 years
Trust records / reapply
Ch 5: NJ Property Laws
~4 Qs / 5%FAIR Plan
- Last resort for high-risk properties
- Membership mandatory for NJ insurers
- $1.5M max (building + contents)
- Binders valid 60 days
Cancellation Rules
- First 60 days: cancel for ANY reason
- After 60 days: listed reasons only
- Standard notice: 30-120 days
- Non-payment: only 10 days
Surplus Lines
- Unlicensed NJ insurers
- Producer needs P&C license
- Used for unusual/high-risk
Commercial Dereg
- Rates: file AFTER effective
- Forms: file BEFORE effective
- $10K+ premium = special risk exempt
- Med mal is NOT exempt
Master Key Numbers
Dollar Amounts
$100
Jewelry per article (HO)
$500
Per tree/plant (commercial)
$1,000
Property of others (HO) / Unknowing fine
$5,000
Knowing/willful fine + 1st fraud
$10K
Subsequent fine / 2nd fraud / Special risk
$15K
3rd+ fraud violation
$100K
NFIP contents / Cov E default / Guaranty cash value
$250K
Max NFIP dwelling
$500K
L&H Guaranty death max
$1.5M
FAIR Plan max (bldg + contents)
Time Periods
5 days
Deposit premiums
10 days
Hearing / Non-pay cancel
15 days
File appointment
30 days
NFIP wait / Cancel min / Address / Contents moving
60 days
Vacancy / Cancel any reason / FAIR binder
72 hrs
Business income wait
90 days
Fine arts auto coverage
180 days
Temporary license
1 year
Apply after exam
2 years
CE cycle / Sue insurer max
5 years
Trust records / Reapply after revoke
12 mo
BOP business income max
Percentages
8%
BOP inflation guard
10%
Cov B = % of Cov A
10-20%
Earthquake deductible
50%
Cov C = % of Cov A
80%
Coinsurance (DP-2, CPP, commercial)
85%
Payout after vacancy
16 Master Exam Traps
CH 3
1. HO-3 contents are NAMED perils
Only the dwelling is open/all-risk. Contents remain named perils.
CH 3
2. BOP has NO coinsurance
CPP has 80% coinsurance. BOP does not penalize for underinsurance.
CH 3
3. Fire FOLLOWING earthquake IS covered
Standard policy covers fire from earthquake; the earthquake itself is NOT.
CH 3
4. Medical payments = third parties ONLY
Never covers household members. Only injured guests/visitors.
CH 3
5. Standard property does NOT cover Equipment Breakdown
Must be added separately. Only covers SUDDEN failures, not gradual wear.
CH 4
6. Commissioner does NOT set rates
Insurers set their own rates. Commissioner regulates and enforces only.
CH 4
7. Mutual dividends are NOT rebating
Dividends stated in the policy are fine. Gift cards or returned commission = rebating.
CH 4
8. Cannot advertise Guaranty Association
Using its existence as a selling point is PROHIBITED.
CH 4
9. 5 years to reapply after revocation
Must wait 5 years, redo prelicensing, pass exam again, and show cause.
CH 4
10. License belongs to the STATE
If suspended/revoked, must return it immediately to the Commissioner.
CH 1
11. Moral vs Morale hazard
Moral = intentional fraud. Morale = carelessness from having insurance.
CH 2
12. Proof of Loss must be WRITTEN and sworn
Notice of claim can be oral, but Proof of Loss must always be in writing.
CH 2
13. Pro-rata does NOT mean equal
It means proportional to each policy's limits, not a 50/50 split.
CH 2
14. TRIA = commercial policies ONLY
Does not apply to homeowners, auto, or other personal lines.
CH 5
15. Rates AFTER, Forms BEFORE
Commercial deregulation: rates filed after effective, forms filed before effective.
CH 5
16. FAIR Plan $1.5M includes BOTH building + contents
It is NOT $1.5M for the building alone. Building and contents combined.
Test Yourself
76 questions weighted exactly like the real exam
15
Quick Quiz
25
Standard Quiz
76
Full Exam Simulation
- - Questions randomized every attempt
- - Weighted by exam percentages (Ch 3 + Ch 4 = 64%)
- - Instant explanations after each answer
- - Chapter breakdown shows your weak areas
You are ready.
You studied the material. You know the traps. Trust your preparation.