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ADJUSTER PRO - INSURANCE ADJUSTER TEST QUESTIONS AND ANSWERS 2025 What is insurance? - .... ANSWER .... f% W protection against financial loss what is a premium - ....ANSWER ....Y% W a scheduled amount to be paid for an insurance policy. What are premiums used for - ....ANSWER .... 7 A 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? - ....ANSWER ....f% AW the insurer collects premiums from all policy holders and uses them to pay out the claims of a few. what is Indemnity - ....ANSWER ....W% WZ payment for damages, that is not more or less than the amount caused by the damage. 2) principle of idemnity - ....ANSWER ....W% W insurance will pay no more or less than the actual financial loss suffered indemnification may also include - ....ANSWER .... 7 A repairs to property reimbursement for additional living expenses rental cars and hotels costs directly associated with a loss A Parts of Legal Contract - ...ANSWER .... 4 YW 1. Agreement 2. Consideration 3. Competent Parties 4. Legal Purpose legal contract - agreement - .... ANSWER .... 4 AW mutual intent by offeror and offeree six special characteristics of insurance contracts - we ANSWER .... 7 AW 1. Personal 2. adhesion 3. utmost good faith 4| Conditional Contract - ....ANSWER .... 7 A A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable. Acronym for the four sections of an Insurance policy - .- ANSWER .... WY AW DICE D - declarations page | - Insuring Agreement C- Conditions E - Exclusions Decelerations section - ....ANSWER ....W%W 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 5| Definitions section - ...ANSWER ....W WA Defines terms used to write policy including "collusion" "decay" "like kind and quality" Includes important language for adjusters to know Insuring agreement section - ....ANSWER ....W% WZ 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 - ....ANSWER ....W% WM Insurer specifies any limits or qualifications the policy holder must meet Exclusions section - ....ANSWER ....—W W losses for which the insured is not covered for Endorsements - .... ANSWER ....WZ W Provision that modifies the coverage of the original contract Add or subtract coverage Synonyms - rider, addendum, attachment 7\ Stockholder provide capital and participate in profit or losses "Non participation" insurers - no dividends go to policy holders Mutual Insurance Company - ... ANSWER .... WW No shareholders Policy holders elect board of directors "Participating" insurers - policy holders participate in dividends Re-insurer - ....ANSWER ....~¢Z W Provides insurance for insurers to reduce exposure to loss Pays percentage of insurers loss or any loss over a certain amount Reciprocal Insurers - ....ANSWER .... 7% A Unincorporated Non profit Operated by attorney in fact Members pay into individual accounts Cost of claims shared by whole groups Fraternal Benefit Societies - ...ANSWER .... 7 W 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 - ...ANSWER we PY GA 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 - ...ANSWER ....W%W 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 - ....ANSWER ....wW WZ Authorized by the federal liability risk retention act of 1986 10 | Speculative risk - ...ANSWER ....wW WZ No certainty of gain or loss Made knowingly, by conscious choice Cannot be insured Pure risk - ....ANSWER .... WW Risk with no chance of gain Can only result in either loss or no loss Can be insured Exposure - ...ANSWER ....—W WZ Extent to which an item, person, or organization is open to damage or loss Evaluating exposure - ....ANSWER .... WW Expressed in dollars or units Determining factor in issuing a policy and setting a premium Hazard - ... ANSWER ....~wW W A condition increasing the likelihood or severity of a loss Peril - ... ANSWER .... WW The actual cause of loss or damage | Insurable risk - ...ANSWER ....W% WZ Adequate premiums Definable risk Unexpected losses Substantial loss Exclusions Law of large numbers Adequate Premiums - ...ANSWER ....W% WA 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 - ....ANSWER ....~W W 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 - ....ANSWER .... WW Unforeseeable Unexpected 13 | Transference Retention Risk avoidance - ...ANSWER ....Y% W Eliminates risk by not taking action that involves risk Risk reduction - ...ANSWER ....W WA Taking measures to reduce risk that is involved Also called risk mitigation Risk Transference - ....ANSWER ....wW WZ Management of sever risk by transferring risk to someone else Most common example is Insurance Risk retention - ...ANSWER ....WZ WZ Acknowledging the risks and preparing to handle the unexpected losses as they occur Policy Period - ... ANSWER ....WW The time frame, beginning with the inception date to the expiration date, during which insurance coverage applies. 14] Binder - .... ANSWER .... WW Providing temporary coverage until the policy is issued Blanket coverage vs specific coverage - ...ANSWER ... f SA Blankets cover more than one property, type of property, or coverage under a single limit Specific limits - limits that apply to on specific type of property Representation - ...ANSWER .... WW Statement of fact Missrepresentation - ....ANSWER .... 7 W A false, distorted or deceptive statements Warranty - ....ANSWER ....W W Promise or garuntee certain conditions are met Warranties are found on the conditions page If policy holder breaks up warranty the insurer can deny coverage Concealment - ....ANSWER .... Y% WZ Concealment is hiding the truth 16 | Is a type of behavioral hazard Morale hazard - ....ANSWER .... WZ WZ Occur when someone exhibits risky behavior because of having insurance. Physical hazard - ...ANSWER .... WW Physical conditions that increase the chance of loss. Types of physical hazards - ...ANSWER .... 7 A Environmental - pot holes in road Material - asbestos in a old house Operational - poorly managed engine Occupant - working in a coal mine Legal hazard - ...ANSWER ....wW W Increased chance of loss because of legal action fraud - ...ANSWER ....~W W Deceiving an insurer to profit from an insurance policy Hard and soft fraud - ... ANSWER .... W% WZ Hard fraud - planning or faking a loss 17 | Soft fraud - exaggerating a claim to inflate the indemnity proximate cause - ...ANSWER ....~W WZ Unbroken chain of events between an occurrence and a loss - then that occurrence is the proximate cause of the loss occurrence - ...ANSWER .... WW An event, incident, or condition that causes damage Occurrence as proximate cause - ... ANSWER .... 7 A The original occurrence causes damage that leads to more damage Direct loss - ....ANSWER .... WZ W Physical harm to tangible property Indirect loss - ...ANSWER .... f@% WZ Economic loss that results from the direct or physical loss Insurance claims - ....ANSWER .... 4 w& Demand for payment in accordance with terms of the policy 19 | Applying all financial provisions of the policy Adjustment - ....ANSWER .... 7% W 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 - ....ANSWER ....wW WZ 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 - ...ANSWER ....W WA A lenders financial stake in an insured item Lender Interest Provisions - ...ANSWER ... 7 AW 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 20 | Permit lender to pay premiums to maintain coverage Limits on lender provisions - ...ANSWER .... 7 A Lender may only collect up to its financial interest in a property Lender may never change or cancel an insurance policy Actual Cash Value - ....ANSWER .... WW Same as fair market value and depreciation value ACV offers lower premiums for less coverage Formula: replacement cost minus depreciation Depreciation formula - ...ANSWER .... WW allocation of original costs over the estimated useful life of a tangible asset 3 Types of Deductibles - ....ANSWER .... YW W Fixed Percentage Franchise 
