Texas Property and Casualty License Practice Exam

Which of the following is NOT a reason an insurer can cancel a policy after 60 days?

1. Traffic violation

2. DL suspended/revoked

3. Failure to pay premiums

4. Accidental damage to vehicle

The correct answer is: Accidental damage to vehicle

An insurer is generally limited in the reasons for policy cancellation after a certain period, often 60 days, depending on state regulations. One of the key reasons an insurer cannot cancel a policy after this time frame is incidental or accidental damage to the insured vehicle. Insurers recognize that accidents happen as part of the normal risks associated with vehicle usage and ownership. Canceling a policy due to accidental damage would not only be considered unjust but also contrary to the intentions of providing coverage for unexpected incidents. In contrast, reasons such as traffic violations or a suspended/revoked driver’s license are often linked to the policyholder’s behavior and risk profile. If a driver engages in behaviors that increase their risk for accidents, insurers may justifiably reconsider the terms of the policy or even pursue cancellation. Failure to pay premiums is also a clear reason for cancellation since maintaining coverage relies on timely payments. Thus, accidental damage does not fall under the category of valid reasons for cancellation after the 60-day period, making it the correct choice in this context.