Texas Life and Health Insurance Exam Prep

Lesson 1: Introduction to Insurance

What is Insurance?

Insurance is a contract in which an insurer agrees to compensate for specific losses or provide benefits in exchange for premiums, transferring risk from the insured to the insurer.

Example: A homeowner pays premiums to an insurer, who covers repair costs if the home is damaged by a covered event, like a fire.

Purpose of Insurance

• Risk Transfer: Shifts financial risk of loss from the insured to the insurer.
• Indemnity: Restores the insured to their financial position before a loss.
• Protection: Provides financial security for unexpected events, like death or illness.

Types of Insurance

• Life Insurance: Pays a death benefit to beneficiaries upon the insured’s death.
• Health Insurance: Covers medical expenses, such as doctor visits and hospital stays.
• Property Insurance: Covers damage to property, like homes or vehicles.
• Casualty Insurance: Covers liability for injuries or damages to others, like auto liability.

Key Parties in Insurance

• Insurer: The company providing the insurance coverage.
• Insured: The person or entity covered by the policy.
• Agent: A licensed individual representing the insurer to sell policies.
• Broker: An intermediary representing the insured to find coverage.

Texas Department of Insurance (TDI)

The TDI regulates insurance in Texas, ensuring fair practices, consumer protection, and insurer solvency. It approves policies, handles complaints, and enforces the Texas Insurance Code.

Example: If an insurer denies a valid claim, the TDI can investigate and impose penalties.