Texas Property and Casualty License Practice Exam

When can an insurer cancel an auto policy within the first 60 days?

1. For any reason without notice

2. With underwriting reasons or for non-payment

3. Only for severe driving violations

4. For any claim filed

The correct answer is: With underwriting reasons or for non-payment

An insurer can cancel an auto policy within the first 60 days for underwriting reasons or for non-payment. This is because insurers have the right to reassess the risk associated with a policyholder during the initial underwriting phase, which is typically the first 60 days of coverage. If the insurer discovers information that raises the level of risk or if the policyholder fails to make premium payments, they may invoke the cancellation rights afforded to them under state regulations. This approach protects insurers from potential losses related to high-risk drivers or inadequate premium collection at the onset of the policy. It also emphasizes the importance of timely premium payments, as non-payment can lead to a cancellation that the insured may not anticipate in the early period of their insurance coverage. The other options suggest cancellations for reasons that do not align with standard underwriting practices or state insurance regulations within the initial 60-day period. Thus, understanding the guidelines surrounding underwriting and payment compliance is crucial for both insurers and policyholders.