Texas Property and Casualty License Practice Exam

What does the term "Other Insurance" refer to in policy provisions?

1. This provision applies when the insured has more than one policy covering the same loss

2. It refers to insurance written outside of the primary policy coverage

3. It indicates insurance that covers losses not included in the main policy

4. It suggests the need for a separate policy for higher coverage limits

The correct answer is: This provision applies when the insured has more than one policy covering the same loss

The term "Other Insurance" in policy provisions specifically refers to situations where the insured has more than one policy that could potentially cover the same loss. This concept is crucial as it addresses how the insurance payouts will be coordinated when multiple policies come into play. In essence, if an insured event occurs and there are multiple applicable policies, the "Other Insurance" provision helps determine the priority of the coverages, how much each policy pays, and ensures that the insured does not receive more than the actual loss. This provision protects both the insurer and the insured from unjust enrichment while also maintaining the principle of indemnity, which states that a policyholder should not profit from a loss. The other options do not accurately capture the essence of the "Other Insurance" provision. For example, written insurance outside of the primary policy coverage pertains more to excess or surplus lines rather than how multiple policies for the same risk interact. Similarly, covering losses not included in the main policy relates more to exclusions or ancillary coverages, which is not the same as addressing the overlap between multiple policies. Lastly, the suggestion for a separate policy for higher coverage limits pertains to different coverage needs rather than the coordination of benefits between existing policies.