Casualty Insurance Basic Course Definitions

Principles and Concepts Example Review
Insurable Interest

The insurance applicant must have a potential for financial loss if some person or entity suffers damages as the result of using the insured's property, goods, or services. In Property and Casualty insurance, insurable interest must be present at the time of both application and loss. In Life insurance, insurable interest is only required at the time of application.


Once an insurance application is received by the insurance company, underwriters review the application to verify information and to decide if this risk is one acceptable by the company. There are several categories under which an application can fall:

Acceptable with standard rates - The insurance policy will be issued as applied for, subject to full premium payments.

Acceptable with substandard rates or with exclusions - The application will be issued, but the insured must sign an endorsement showing that he or she accepts the changes and/or increased premium and must pay the increased premium to keep the policy in force.

Unacceptable and denied coverage - If the insurer denies coverage to an applicant, the insurer must give a detailed, written explanation as to why the coverage was denied. Any paid/unearned premium is returned. The insured must seek insurance elsewhere, either through a high risk insurer or through state FAIR plans.

Loss Ratio

An insurer's loss ratio is one way of measuring the insurer's profitability. It takes claim expenses and compares them to premiums. The lower the ratio, the better claims experience of the insurer and the more profitable the company. This ratio does not include profits the insurer makes from interest on collected premiums. Premium rates generally need to be submitted to or approved by state insurance departments before they may be used in sales.

Becoming a Licensed Property and Casualty Agent

At CPMI Professional Development, we offer a number of Property and Casualty Insurance License Courses to help you become a licensed insurance agent.

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