Insurance Terms and Related Concepts
Pearson VUE weights this area at 40%. Each question turns on the exact meaning of a term: peril and hazard, insurable interest, actual cash value and replacement cost, subrogation and salvage, waiver and estoppel, appraisal and arbitration, cancellation and nonrenewal, negligence and proximate cause. The PrepPass Texas All Lines Adjuster Study Guide teaches each term with Texas examples and practice questions.
Valuing a loss
Actual cash value is replacement cost minus depreciation; replacement cost pays without deducting depreciation, up to the limit. Agreed value is fixed in advance and waives coinsurance. Salvage is deducted if the insured keeps damaged property, and abandonment to the insurer is not allowed. Pro rata clauses split a loss by limits; primary pays before excess; subrogation transfers the insured's recovery rights to the insurer that paid.
The contract
Texas courts read policies under contract rules, by plain meaning; ambiguity exists only if two readings are reasonable. Waiver is intentional relinquishment of a known right; estoppel protects reliance; neither creates coverage the policy never gave. A reservation of rights letter preserves defenses and, sent in reasonable time, satisfies Texas's affirm-or-deny rule. Misstatements in an application matter only if material to the risk or contributing to the loss.
Liability
Negligence requires duty, breach, proximate cause and damages; proximate cause is cause in fact plus foreseeability. Texas bars a claimant who is more than 50% responsible and reduces the rest. Strict liability needs no proof of carelessness; vicarious liability imputes an employee's negligence to the employer. Occurrence policies respond to injury during the policy term; claims-made policies to claims made during it.
Keep going: the full Texas All Lines Adjuster License Exam guide covers every section of the exam. Texas All Lines Adjuster Study Guide — 2026 Edition — PDF + EPUB, $24.99 · 14-day refund →
Practice stays free. The full Texas All Lines Adjuster License Exam study guide is the material itself, taught start to finish — a downloadable PDF + EPUB you keep.