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Adjuster Pro - Insurance adjuster test
questions with correct answers
What is insurance? - CORRECT ANSWERS ✔✔protection against financial loss what is a premium - CORRECT ANSWERS ✔✔a scheduled amount to be paid for an insurance policy. What are premiums used for - CORRECT ANSWERS ✔✔premiums are collected into a "pool" or "reserve to pay out claimants when needed. how can insurance companies afford to pay for an individuals catastrophic loss? - CORRECT ANSWERS ✔✔the insurer collects premiums from all policy holders and uses them to pay out the claims of a few. what is Indemnity - CORRECT ANSWERS ✔✔payment for damages, that is not more or less than the amount caused by the damage. principle of idemnity - CORRECT ANSWERS ✔✔insurance will pay no more or less than the actual financial loss suffered
indemnification may also include - CORRECT ANSWERS ✔✔repairs to property reimbursement for additional living expenses rental cars and hotels costs directly associated with a loss 4 Parts of Legal Contract - CORRECT ANSWERS ✔✔1. Agreement
- Consideration
- Competent Parties
- Legal Purpose legal contract - agreement - CORRECT ANSWERS ✔✔mutual intent by offeror and offeree six special characteristics of insurance contracts - CORRECT ANSWERS ✔✔1. Personal
- adhesion
- utmost good faith
- aleatory
- unilateral
- conditional what kind of contract is an insurance policy? - CORRECT ANSWERS ✔✔Personal contract
E - Exclusions Decelerations section - CORRECT ANSWERS ✔✔Always the first section - establishes the following Names of both parties Policy number Location and description of insured item Dates of the policy Amount and limit of coverage Deductible Premium Definitions section - CORRECT ANSWERS ✔✔Defines terms used to write policy including "collusion" "decay" "like kind and quality" Includes important language for adjusters to know Insuring agreement section - CORRECT ANSWERS ✔✔What is covered and how Which causes of loss are covered Any services provided Any exclusions to coverage The maximum limit of policy coverage in dollars
Conditions section - CORRECT ANSWERS ✔✔Insurer specifies any limits or qualifications the policy holder must meet Exclusions section - CORRECT ANSWERS ✔✔losses for which the insured is not covered for Endorsements - CORRECT ANSWERS ✔✔Provision that modifies the coverage of the original contract Add or subtract coverage Synonyms - rider, addendum, attachment Certificate of Insurance - CORRECT ANSWERS ✔✔A legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided. Characteristics of social insurance - CORRECT ANSWERS ✔✔Non profit Mandatory participation Benefits prescribed by law Designed to meet needs of public Government has monopoly Private Insurers - CORRECT ANSWERS ✔✔Sell insurance based on needs and preferences Wide variety of products
Fraternal Benefit Societies - CORRECT ANSWERS ✔✔Also called fraternal associations Non profit mutual aid organizations Engage in charitable activities Provide some type of insurance to members Typically consist of people with similar religion, ethnicity or occupation Fraternal Benefit Societies insurance - CORRECT ANSWERS ✔✔Used to fund altruistic activities Must be assessable by law Members are both providers and recipients If claims payment ability is impaired, members help pay the difference captive insurers - CORRECT ANSWERS ✔✔Created by businesses in order to retain risk Exist to provide insurance for their "parent" All profit belongs to parent company Permitted in some states Risk retention groups - CORRECT ANSWERS ✔✔Authorized by the federal liability risk retention act of 1986 Owned by their members Provide commercial liability
RRG Requirements - CORRECT ANSWERS ✔✔Members must be involved in similar business endeavors Don't need to be licensed in multiple states Classification based on location - CORRECT ANSWERS ✔✔Domestic Insurer - adhere to law of a state, located in that state Foreign insurer - adhere to laws in the US but can be located elsewhere Alien insurer - obey laws of another country all together Risk - CORRECT ANSWERS ✔✔Potential for financial loss An insured item Two types of risk - CORRECT ANSWERS ✔✔Pure and Speculative Speculative risk - CORRECT ANSWERS ✔✔No certainty of gain or loss Made knowingly, by conscious choice Cannot be insured
Adequate Premiums - CORRECT ANSWERS ✔✔Potential loss can't be too much for insurer to pay Insurer must b able to cover claims and expenses If premiums must be set too high, the risk is not insurable Difneable risk - CORRECT ANSWERS ✔✔Insurer can define exact conditions under which the item is covered by the policy Item it's self is defineable Item has precise value Unexpected loss - CORRECT ANSWERS ✔✔Unforeseeable Unexpected Reasonably unpreventable Random in nature Substantial loss - CORRECT ANSWERS ✔✔Must cause substantial economic hardship Exclusions - CORRECT ANSWERS ✔✔Insurer must be able to exclude large scale disasters and catastrophic events Law of large numbers - CORRECT ANSWERS ✔✔Insurer must be able to cover large numbers of similar risks Spreads risk across more policies Helps insurers predict losses more accurately
Similar risks can mean, cars houses, persons lives, similar business etc Adverse Selection - CORRECT ANSWERS ✔✔when someone buys health insurance because they know they will probably file a claim 4 risk management techniques - CORRECT ANSWERS ✔✔Avoidance Reduction Transference Retention Risk avoidance - CORRECT ANSWERS ✔✔Eliminates risk by not taking action that involves risk Risk reduction - CORRECT ANSWERS ✔✔Taking measures to reduce risk that is involved Also called risk mitigation Risk Transference - CORRECT ANSWERS ✔✔Management of sever risk by transferring risk to someone else Most common example is Insurance
If policy holder breaks up warranty the insurer can deny coverage Concealment - CORRECT ANSWERS ✔✔Concealment is hiding the truth Deliberately withholding information Waiver - CORRECT ANSWERS ✔✔Voluntarily surrender of a right, claim, or privilege Expressed waiver - CORRECT ANSWERS ✔✔In writing or signed Implied waiver - CORRECT ANSWERS ✔✔assumed based on actions Estoppel - CORRECT ANSWERS ✔✔Legal principle that prevents an insurer from denying coverage if the insured has reasonably come to believe that he has such coverage based on insurers practices Types of hazards - CORRECT ANSWERS ✔✔Physical, Moral, Morale, legal Moral hazard - CORRECT ANSWERS ✔✔Results from the policy holders deliberate decision
Involves reckless behavior because of the financial security offered by insurance Is a type of behavioral hazard Morale hazard - CORRECT ANSWERS ✔✔Occur when someone exhibits risky behavior because of having insurance. Physical hazard - CORRECT ANSWERS ✔✔Physical conditions that increase the chance of loss. Types of physical hazards - CORRECT ANSWERS ✔✔Environmental - pot holes in road Material - asbestos in a old house Operational - poorly managed engine Occupant - working in a coal mine Legal hazard - CORRECT ANSWERS ✔✔Increased chance of loss because of legal action fraud - CORRECT ANSWERS ✔✔Deceiving an insurer to profit from an insurance policy Hard and soft fraud - CORRECT ANSWERS ✔✔Hard fraud - planning or faking a loss Soft fraud - exaggerating a claim to inflate the indemnity
acknowledgement - CORRECT ANSWERS ✔✔Insurer require by law to respond Begin investigating all pertinent facts and issues Investigation - CORRECT ANSWERS ✔✔Finding the proximate cause of the loss Examining all damages Noting circumstances Taking witness statements Determining liability Deciding wether claim is valid Evaluation - CORRECT ANSWERS ✔✔Consider policy limit and deductibles Calculating lender interest Determining the value of the loss Applying all financial provisions of the policy Adjustment - CORRECT ANSWERS ✔✔If a claim is accepted, the insurer must pay promptly after notifying that the claim will be paid If claim is denied the insurer must explicitly state reasons for denial Insurable Interest - CORRECT ANSWERS ✔✔Only parties with insurable interest can insure a property or person
You can only insure something that has some financial interest to you Lender interest - CORRECT ANSWERS ✔✔A lenders financial stake in an insured item Lender Interest Provisions - CORRECT ANSWERS ✔✔Allow the lender to be listed as a payee on the policy Endure the lender is notified if the policy is canceled, reduced, or expires Provide compensation for the lender in the event of an act or an omission by insurer party Permit lender to pay premiums to maintain coverage Limits on lender provisions - CORRECT ANSWERS ✔✔Lender may only collect up to its financial interest in a property Lender may never change or cancel an insurance policy Actual Cash Value - CORRECT ANSWERS ✔✔Same as fair market value and depreciation value ACV offers lower premiums for less coverage Formula: replacement cost minus depreciation
Valuation - CORRECT ANSWERS ✔✔Process of estimating an items worth Replacement cost policy - CORRECT ANSWERS ✔✔No depreciation. Based on replacement cost at the time of loss Higher premiums Used on home insurance mostly Replacement cost - CORRECT ANSWERS ✔✔Cost to replace at today's market value Actual Cash Value (ACV) - CORRECT ANSWERS ✔✔Replacement cost minus accumulated depreciation Annual Depreciation - CORRECT ANSWERS ✔✔Replacement cost divided by items useful life span Accumulated Depreciation - CORRECT ANSWERS ✔✔An items annual depreciation Multiplied by its age Valued Policy - CORRECT ANSWERS ✔✔Assigns a set value to each insured item
Co-insurance penalty - CORRECT ANSWERS ✔✔If property is underinsured, the insurer will only cover a percentage of partial losses If multiple partial losses occur, the low premiums are not enough for the insurer to cover all the damages Calculating co insurance penalty - CORRECT ANSWERS ✔✔Had / should X the loss Negligence - CORRECT ANSWERS ✔✔Failure to use a reasonable degree of care in a particular situation- includes both wrongful acts and acts of omission 4 elements of negligence - CORRECT ANSWERS ✔✔1. Defendant had a legal duty to act or not act in a prescribed manner
- The defendant failed to act accordingly
- The plaintiff suffered actual loss or injury due to the defendants action or inaction
- The loss or injury to the plaintiff was a direct result of the breach of duty of the defendant
