Nevada Personal Lines Insurance Exam

Transacting Insurance

Refers to any of the following acts, whether done for profit or not:

-- Soliciting and inducement,

-- Negotiating,

-- Effecting of a contract of insurance,

-- Transaction of matters pertaining to an insurance policy after it is issued.

Hearings:

Written notice of a hearing must be provided to involved parties at least 20 days in advance.

In the case of a person aggrieved by any act, threatened act, regulation, or order of the Commissioner, an application must be filed with the Division within 60 days after the person knew or reasonably should have known of the act, regulation, or order.

If the application is found to be made in good faith, the Commissioner will hold the hearing within 30 days after the application’s filing.

Within 30 days after the hearing, the Commissioner will issue a decision on the matter in the form of a written order.

Insurer

Includes every person engaged as principal and as indemnitor, surety, or contractor in the business of entering into contracts of insurance.

Authorized Insurer

An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

Unauthorized Insurer

An insurance company that has not applied, or has applied and been denied a Certificate of Authority.

Certificate of Authority is NOT required for:

-- Transactions involving surplus lines coverage.

-- Investigations, settlements, or litigations of claims

under a policy that was lawfully written in Nevada in the past, by an insurer that no longer holds a certificate of authority.

-- Transactions involving group life and health coverage for Nevada residents if the master policy was lawfully sold by a foreign insurer under the laws of its home state.

-- Transactions of excess liability insurance for an employer of more than 250 people who has a self-insured retention of at least $25 million and pays at least $1 million in premiums for property and casualty insurance.

-- Issuance of annuities by an affiliate of an unauthorized insurer if the affiliate is approved by the Commissioner, organized as a nonprofit educational corporation, issues annuities only to nonprofit institutions of education and research, and reports and pays any premium taxes on the annuities per state requirement.

Any insurer who transacts insurance business without a certificate of authority is guilty of a misdemeanor.

Any insurer who transacts insurance business without a certificate of authority is guilty of a misdemeanor.

Examinations:

-- Every insurer licensed in Nevada must be examined at least once every 5 years.

-- Commission can examine authorized insurers in Nevada as often as they see fit.

-- Failure to cooperate with an examination is a misdemeanor in the state of Nevada.

-- Examination expenses must be paid at the time of receipt by the insurer or individual examined.

Premiums

The fee for insurance.

Licensing

A Nevada producer license must state the licensee's name, address, personal identification number, the date of issuance, the lines of authority, and the date of expiration, and it must contain any other information the Commissioner deems necessary.

The license must be made available for public inspection upon request.

Persons Required to Be Licensed:

A producer is a person who sells, solicits, or negotiates insurance. A producer may qualify for a license in one or more lines of authority: ƒ

-- Life insurance, which includes benefits from endowments and annuities.

ƒ

-- Accident and health insurance, which may include benefits for disability. ƒ

-- Property insurance. ƒ

-- Casualty insurance, which includes liability coverage and surety indemnifying financial institutions or providing bonds for fidelity, performance of contracts, or financial guaranty. ƒ

-- Variable annuities and variable life insurance.

-- Credit insurance, including credit life, credit accident and health, credit property, credit involuntary unemployment, guaranteed protection of assets, and any other form of insurance offered in connection with an extension of credit that the Commissioner determines should be considered as limited-line credit insurance.

-- Personal lines, consisting of automobile and motorcycle insurance; residential property insurance, including coverage for flood; personal watercraft insurance; and excess liability, written over one or more underlying policies of automobile or residential property insurance.

Producers may also be licensed as limited lines producers. Limited lines include: ƒ

-- Personal property storage insurance. ƒ

--Travel insurance. ƒ

-- Rental car agency insurance. ƒ

-- Portable electronics insurance. ƒ

-- Crop insurance.

Transacting insurance without a license is punishable by a fine of up to $1,000 per violation.

Transacting insurance without a license is punishable by a fine of up to $1,000 per violation.

Nonresident Producer

A person currently licensed in and a resident of another state.

An applicant for a nonresident license must be in good standing in their home state.

Resident producers of other states who move to Nevada may obtain a Nevada resident license for the same lines of authority without having to take any education courses or examination if they apply within 90 days after the cancellation of their previous license or after establishing legal residence.

Managing General Agent

Negotiates and binds ceding reinsurance contracts on behalf of an insurer, or manages all or part of the insurance business of an insurer, including the management of a separate division or department.

Change of Address

A licensee must inform the Commissioner of each change of business or residence address within 30 days after the change.

Premium Reduction for Older Drivers

Insured operators 55 years of age or older must get an appropriate reduction in premium charges for a period of 3 years if they:

-- Have successfully completed a traffic safety. course, approved by the Department of Motor Vehicles, after attaining 55 years of age and every 3 years thereafter.

-- Are not involved in an accident for which they are at fault.

-- Keep their driving record free of violations.

--ƒ Have not been convicted of a moving traffic violation or an offense involving operation of a motor vehicle while intoxicated or any other prohibited conduct.

Midterm Cancellation of a Policy

An insurer may not cancel an insurance policy that has been in effect for at least 70 days before the expiration of the agreed term or 1 year from the effective date of the policy or renewal date, whichever occurs first, except for: ƒ

-- Nonpayment of premium.

--ƒ Discovery of fraud or material misrepresentation in the obtaining of the policy or at the time of a claim.

--ƒ Material change in the nature of the risk, occurring after the first effective date of the current policy, causing the risk of loss to be substantially increased beyond its value at issuance.

-- Determination by the Commissioner that continuation of the policy would be hazardous to the public or the insurer.

--ƒ Discovery of an act or omission, or a violation of any condition of the policy.

--ƒ Conviction of the insured of a crime arising out of acts increasing the hazard insured against.

-- Determination by the Commissioner that continuation of the policy would violate or place the insurer in violation of the Insurance Code.

A policy may not be cancelled until at least 30 days after notice of cancellation, except in cases of nonpayment of premium, which allows for cancellation 10 days after notice.

Anniversary Cancellation

A policy issued for a term longer than 1 year may be cancelled by the insurer as of its anniversary date if the insurer gives notice of the cancellation 30 days before any anniversary date.

Nonrenewal

An insurer that does not intend to renew a policy that has been in force for longer than 1 year must provide notice to the policyholder. For personal lines policies, notice must be provided at least 30 days before the policy’s expiration date.

If the insurer fails to provide a notice of nonrenewal, they must provide a policyholder with an insurance policy with the identical terms as in the expiring policy.

License Requirements

Anyone who wants to be licensed as an insurance producer must submit an application to the Commissioner and meet the following requirements:

--ƒ Be at least 18 years of age ƒ Have not committed any act that is a ground for denial, suspension, or revocation.

-- Pay the required fees.

-- Complete a course of study for the applicable lines of authority.

-- Successfully pass the examinations for the applicable lines of authority.

-- Furnish a set of fingerprints to the Commissioner.

FELONS are okay.

Appointment

An agent is a producer of insurance who is compensated by an insurer and sells, solicits, or negotiates insurance for the insurer.

An insurance producer may not act as an agent unless they are appointed as an agent by the insurer. To appoint an agent, an insurer must file a notice of appointment with the Commissioner within 15 days after the appointment contract is executed or the first application for insurance is submitted. The insurer must pay an appointment fee. When the Commissioner receives a notice of appointment, they must determine within 30 days whether the producer is eligible for appointment. If the Commissioner finds the producer to be ineligible for appointment, they notify the insurer within 5 days after the determination is made.

Every year, the insurer must pay a fee to renew each of its appointed producers.

A producer who is acting as an agent for an insurer may also act as a broker with other insurers they do not represent as an agent.

An insurer who terminates an appointment, employment, or other relationship of a producer must notify the Commissioner within 30 days after the effective date of the termination. Within 15 days after notifying the Commissioner, the insurer must mail a copy of the termination notice to the producer of insurance in question.

License Renewal

Renewal is required every 3 years, on the last day of the month in which the Commissioner originally issued the license.

Producers may request a late renewal for their license within 30 days after their renewal date, but they will be subject to a 50% penalty on all applicable renewal fees.

If the Commissioner does not receive a request for renewal within that 30-day period, the producer’s license expires.

A person who allows their license to expire may reapply for the same license within 12 months after the date specified for a renewal without needing to pass a written examination, but any continuing education requirements must be met. A penalty of twice the renewal fee is required for any request for a renewal of the license after the date for renewal.

If a licensed producer is unable to renew their license because of military service, extended medical disability, or other extenuating circumstance, they may request a waiver of the time limit and of any fine required or imposed for their failure to renew.

Continuing Education

Producers must complete 30 hours of continuing education courses within the 3-year period before the required renewal date of their license, including at least 3 hours of ethics.

Fiduciary Responsibilities and Trusts

Remit received premiums, less applicable commissions, to the insurer within 15 days after receipt.

If a licensee fails to remit any premium they have received within 30 days after the due date, the insurer or agency to which the money is owed must promptly report the failure to the Commissioner.

Any person who diverts or misappropriates fiduciary funds is guilty of embezzlement.

Insurance Fraud

Knowingly and willfully doing any of the following:

-- Presenting any statement to an insurer or their representatives while knowing that the statement conceals facts, omits facts, or contains false or misleading information concerning any fact material to an insurance application or policy claim. This includes assisting, abetting, soliciting, or conspiring to present these kinds of statements.

-- Acting, or failing to act, with the intent of defrauding or deceiving an insurer to obtain an insurance policy.

-- Acting as a medical practitioner or insurer to assist, conspire with, or urge another person to commit any act or omission through deceit, misrepresentation, or other fraudulent means.

-- Accepting any proceeds or other benefits under an insurance policy if the person who accepts them knows that the proceeds are derived from any fraudulent act or omission.

Any person who commits insurance fraud is guilty of a category D felony and, in addition to criminal penalties, may be ordered to pay restitution.

Any person who commits insurance fraud is guilty of a category D felony and, in addition to criminal penalties, may be ordered to pay restitution.

Defamation

Any oral or written statement that is false, maliciously critical, or derogatory.

Twisting

A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage.

Rebating

The practice of giving an individual a premium reduction or some other financial advantage not stated in the policy as an inducement to purchase the policy.

Licensees who engage in rebating are guilty of a misdemeanor.

Nevada Insurance Guaranty Association

The Nevada Insurance Guaranty Association provides protection to property and casualty policyowners and beneficiaries in the event their insurer becomes impaired or insolvent.

The Association covers claims existing:

Before the determination of insolvency and arising within 30 days after the determination of insolvency Before the expiration date of the policy if that date is less than 30 days after the determination Before the insured replaces the policy or on request cancels the policy if the insured does so within 30 days after the determination All insurers of property and casualty insurance must maintain membership with the Association as a condition of their authority to transact insurance business in Nevada. Member insurers are assessed the amounts necessary to fulfill the Associations obligations. The amount of the assessment is based on the proportion that the member insurer's direct written premiums for the previous year bears to the gross direct written premiums of all member insurers. Each member insurer must be notified of an assessment at least 30 days before it is due. The maximum amount the Association will pay for a covered claim, other than Workers' Compensation claims, is $300,000. For Workers' Compensation claims, the Association will pay the entire claim. If the claim is for the return of unearned premiums, the Association will pay no more than $10,000 for each policy. The Association holds the right to seek and obtain any recoverable salvage and to subrogate a covered claim if the Association has paid its obligation under the claim.

Binders

An oral or written contract for temporary insurance that is used when a policy is not immediately issued and serves as evidence that the coverage attaches at a specified time and continues until the policy is issued or the risk is declined.

A binder may not be effective for more than 90 days.

Part A: Liability

Pays to others that you injure in an accident.

Limits are usually either split limits, or combined single limit.

Part B: Medical Payments

Pays to you and your passengers in your car for injuries that you have from an accident.

This is usually a small limit, $3,000 to $10,000 per person.

Part C: Uninsured/Underinsured Motorist

Pays to you, when you are injured by somebody else, who either does not have any or enough insurance.

Part D: Damage to Your Auto

Pays to you, to get your car fixed or replaced.

Part E: Duties After A Loss

Specifies the rules that you need to follow after an accident.

Part F: Policy Provisions

Explains the rules that the insurance company follows.

Out of State Coverage

If you drive into a state with higher minimum liability limits, your policy will automatically match those limits.

Family member

A family member refers to any person related to the named insured or their resident spouse by blood, marriage, or adoption, and who also resides in the named insured's household. This definition includes a ward or foster child.

Bodily injury

Refers to bodily harm, sickness, or disease, including any resulting death.

Property damage

Any physical injury to, destruction of, or loss of use of tangible property.

Business

Includes a trade, profession, or occupation, typically one that is continuous in nature and offers the opportunity for profit.

Occupying

Someone who is in or getting into, upon or getting upon, getting out, or getting off of a vehicle is considered to be occupying the vehicle.

Your Covered Auto

1. Any vehicle shown in the Declarations.

2. Any trailer owned by the named insured or resident spouse.

3. A newly acquired auto

4. Any non-owned auto or trailer being used as a temporary substitute for a covered auto while the covered auto is unavailable for use due to breakdown, repair, servicing, loss, or destruction.

Trailer

A trailer is a vehicle designed to be pulled by a private passenger auto, pickup, or van. It also means a farm wagon or farm implement while it is being towed by a private passenger auto, pickup, or van.

DP1 (Basic Form)

1. The perils that are covered by the Basic Form are fire, lightning, and internal explosion. The perils of wind, hail, aircraft, riot, vehicles, volcanic eruption (other than loss caused by earthquake, land shockwave or tremor), explosion, and smoke are covered by adding the Extended Coverage Endorsement (ECE) for an additional premium. The perils of vandalism and malicious mischief may be covered by adding the optional Vandalism and Malicious Mischief Endorsement (VMM) for an additional premium.

2. Even if the optional Vandalism and Malicious Mischief Endorsement (VMM) is added, it excludes loss for vandalism occurring after 60 days of vacancy.

3. Losses to the dwelling, other structures, and contents are paid on an actual cash value basis to the insured.

DP2 (Broad Form)

1. The perils that are covered by the Broad Form are those included under the DP-1 with the ECE and optional VMM endorsement attached, plus: damage by burglars; falling objects; weight of snow, ice, and sleet; accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, or an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water; freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or of a household appliance; and sudden and accidental damage from artificially generated electrical current.

2. The burglary damage peril includes damage to the covered property caused by the burglars, but not theft of property. The vehicle peril does not include loss to a fence, driveway, or walk caused by a vehicle owned or operated by the insured. The smoke peril does not include loss caused by smoke from agricultural smudging or industrial operations.

3. Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to contents are paid on an actual cash value basis to the insured.

DP3 (Special Form)

1. The dwelling and other structures are covered for all direct physical damage (open peril), except for perils specifically excluded.

2. Theft of property that is part of the dwelling or other structures is covered as long as the dwelling or other structures are not under construction or have not been vacant for more than 30 days immediately preceding the loss. Example: Built-in appliances.

3. Personal property or contents are covered for the Broad Form (DP-2) perils.

4. Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to contents are paid on an actual cash value basis to the insured.

Coverage B is an addition to Coverage A on all policies except:

DP1.

Tree Coverage:

HO8 = $250

DP1 = no coverage

Everything else = $500

Tree removal up to $1000 for 2 trees.

Dwelling Coverages:

Coverage A: Dwelling

Coverage B: Other Structures

Coverage C: Personal Property

Coverage D: Fair Rental Value

Coverage E: Additional Living Expenses

Coverage A: Dwelling

Covers the dwelling (house) on the residence premises.

Structures attached to the dwelling.

Materials intended for construction.

No coverage for land.

Coverage B: Other Structures

insures buildings on the premises that are separated from the dwelling by a clear space or connected only by a fence, utility line, or similar connection

Structures eligible under this coverage include buildings, such as tool sheds or detached garages, or non-building structures, such as swimming pools or gazebos.

Coverage C: Personal Property

Applies to household and personal property usual to the occupancy of a dwelling. Personal property includes anything the insured owns or uses, and anything owned or used by the insured's family members who live with the insured, unless the personal property is excluded by the policy.

Coverage C: Personal Property Exclusions

- Accounts, bank notes, bullion, coins, currency, evidences of debt, passports, and securities

- Animals, birds, and fish.

- Aircraft, hovercraft, and watercraft However, rowboats and canoes are covered

-Motor vehicles, other than those used to service the described location or to assist people with disabilities.

- Electrical equipment that is permanently installed in the vehicle is also excluded.

- Data, including data stored in books of account, drawings, paper records, or computers and related equipment

- Credit cards, funds transfer cards, and other access devices

- Water or steam

- Grave markers

- Personal property of a tenant or boarder.

Coverage D: Fair Rental Value

Coverage D applies when a portion of the described location is rented to others, and it provides insurance for indirect losses that occur as a result of covered direct losses to property insured under Coverages A, B, or C. The policy pays the lost rent of that part of the described location that is rented or held for rental to others at the time of a loss if the rental unit is unfit for its normal use because of the direct loss.

Payment will be made for the shortest time necessary to repair the damaged portion of the dwelling that is normally held for rental, even if that time extends beyond policy expiration. Expenses resulting from cancelling a lease are not covered. Deductions are made for expenses that do not continue while the unit is unfit for occupancy.

If a civil authority prevents the insured from using the dwelling because a neighboring location was directly damaged by peril that is insured by the insured's policy, the fair rental value will be paid for no more than 2 weeks.available if a covered property loss to the dwelling or other structure makes the building uninhabitable and the insured cannot collect the rent he would have been able to receive if the loss had not occurred.

Coverage E: Additional Living Expenses

pays for the additional living expenses the insured incurs after a covered loss, including reasonable motel, dining, laundry and transportation expenses.

Coverage E is automatically included in the DP-2 and DP-3, but it is not included in the DP-1.

Extended Coverage (EC) for DP1 (Basic Form):

Cover losses resulting from the following perils: Windstorm and hail. This will cover losses to the inside of the building as long as wind or hail damaged the outside first and created an opening. For example, if the carpet is damaged because a window was left open during a hailstorm, that loss will not be covered.

Losses to awnings, outdoor radio and television antennas, and canoes and rowboats outside of the building are also not covered

Aircraft.

Riot or civil commotion.

Vehicles.

Volcanic eruption, not including loss caused by earthquake  Explosion, which would replace and expand internal explosion coverage originally provided in order to cover internal and external explosions □ However, explosion does not include electric arcing, breakage of water pipes or pressure relief devices, or explosion of steam boilers  Smoke, not including smoke losses from agricultural smudging or industrial operations

Debris Removal

Pays for the expense of removing debris resulting from a loss that is covered by the policy.

Worldwide Coverage

The insured may use up to 10% of the Coverage C limit of liability for a covered loss to property insured under Coverage C while it's located anywhere in the world. This coverage does NOT apply to rowboats, canoes, or property owned by guests or servants. It is included in the Coverage C limit of liability.

Improvements, Alterations, and Additions

If the insured is a tenant, he or she may use up to 10% of the Coverage C limit of insurance for a covered loss to improvements, alterations, and additions made or acquired at the insured's expense to that part of the described location only occupied by the named insured.

In the DP-1 form, coverage is included in the limit of insurance; in the DP-2 and DP-3 forms, it's additional insurance.

Reasonable Repairs

Pays cost for repairs necessary to protect from additional loss.

Property Removed

If property is being removed from the described location to protect it because it is endangered by a covered peril, coverage is provided for direct loss by any peril while removed. Under the DP-1 form, coverage is provided for 5 days while removed; under the DP-2 and DP-3 forms, coverage is provided for 30 days while removed.

This coverage does not increase the limit of insurance that applies to the property being removed.

Fire Department Service Charge

Under each of the dwelling forms, the policy will pay up to $500 for the named insured's liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from an insured peril.

This is additional insurance and the policy deductible does not apply.

Trees, Shrubs, and Other Plants

Under the DP-2 and DP-3 forms, coverage is provided for trees, shrubs, plants or lawns on the described location for loss caused by the following perils: fire or lightning; explosion; riot or civil commotion; aircraft; vehicles not owned by the named insured or by a resident of the described location; vandalism or malicious mischief; and damage caused during a burglary or an attempted burglary.

This coverage is not included in the DP-1 form.

Damage to trees, shrubs, plants, or lawns caused by the following perils are not covered: wind; hail; weight of snow, ice or sleet; and loss by theft. The limit of insurance for this coverage is up to 5% of the Coverage A limit, with a maximum of $500 applying to any one tree, shrub, or plant.

This is additional coverage.

Collapse

The abrupt falling down or caving in of a building, or any portion of a building, but only if it cannot be occupied for its intended purpose.

Glass or Safety Glazing Material

Under the DP-2 and DP-3 forms, coverage is provided for the breakage of glass or safety glazing material if it is part of a covered building, storm door, or storm window. Coverage is provided for direct loss caused by earth movement and the pieces, fragments, or splinters of broken glass from the glass or safety glazing material.

No coverage applies if the dwelling was vacant for 60 consecutive days immediately before the loss. The vacancy provision doesn't apply to losses caused by earthquake. Loss for damage to glass will be settled on the basis of replacement with safety glazing materials when required by ordinance or law.

Coverage doesn't increase the limit of liability and is NOT provided by the DP-1 form.

Ordinance or Law

Increased costs due to the enforcement of any ordinance or law regulating the use, construction, demolition, remodeling, renovation, or repair of property.

Unnoccupancy

Personal property, but has no occupants.

Fair Credit Reporting Act

Act that protects privacy of background information and ensures that information supplied is accurate.

Liberalization Clause

Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement.

Adverse Selection

A high-risk person benefits more from insurance, so is more likely to purchase it.

Policy Structure

1. Declarations

2. Definitions

3. Insuring agreement

4. Additional coverage

5. Conditions

6. Endorsements

7. Exclusions

Bailor

The person who retains the ownership of the property that has been taken into a bailee's care, custody, or control.

Indirect Loss

Loss that is a result or consequence of a direct loss.

Direct Loss

Direct physical loss to property.

Moral Hazard

Lying on purpose.

Domestic Insurer

Organized under the laws of the resident state.

Assignment

Insured cannot transfer rights of policy.

Actuarial Department

Gather and interpret statistical information used in rate making. An actuary determines the probability of loss and sets premium rates.

Rate

Dollar amount charged for a particular unit of insurance.

Defamation

The publication of false statements that harm a person's reputation.

Premium

Amount you pay monthly, quarterly, semiannually or annually to purchase different types of insurance

Insurability

The ability of an applicant to meet an insurer's underwriting requirements.

Implied Authority

Insurance company assuming you're allowed to transact insurance.

Apparent Authority

Customer assumes you're allowed to transact insurance.

Express Authority

Written in your contract that you're allowed to transact insurance.

Legal Purpose

The purpose of the contract must be legal and not against public policy.

Adhesion

Insurer writes policy, customer either takes it or leaves it.

Aleatory Contract

Unequal exchange of value. One party may obtain a far greater value than the other under the contract.

Gramm-Leach-Bliley Act (GLBA)

Ensures that financial businesses are protecting your private data

Conditional Contract

Both parties have rules/duties they must follow/do.

Unilateral Contract

One-sided, only insurer is legally bound to do anything.

Law of Large Numbers

A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.

Voluntary Market

The standard market.

Market Value

What a willing buyer would pay a willing seller.

Rebate

Special favor as an inducement to purchase insurance.

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from third party.

Specific Insurance

A property insurance policy that covers a specific thing.

Loss Valuation

A factor in determining the premium charged and the amount of insurance required.