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Ms insurance Adjuster test Questions
With Answers
Which of the following best describes insurance? A)Restoration to the previous financial condition, no more, no less B)An economic device used to protect against the risk of unforeseen and extraordinary financial loss C)Transfer of right to collect a debt from one entity to another D)A legally enforceable agreement between parties B)An economic device used to protect against the risk of unforeseen and extraordinary financial loss Which of the following best describes insurance? A)Restoration to the previous financial condition, no more, no less B)An economic device used to protect against the risk of unforeseen and extraordinary financial loss
C)Transfer of right to collect a debt from one entity to another D)A legally enforceable agreement between parties B)An economic device used to protect against the risk of unforeseen and extraordinary financial loss Which of the following best defines premium? A) A legal agreement providing temporary evidence of insurance until policy is issued B) A legally enforceable agreement between parties C) Transfer of risk of financial loss from one party to another D) The fee paid by the insured in exchange for an insurance policy D) The fee paid by the insured in exchange for an insurance policy How can insurance companies afford to pay for an individual's catastrophic loss? A) The insurer puts each insured's premium payments into an interest- bearing account, which then used to pay for that insured's claims, if they occur B) The insurer will only pay up to the amount already collected from each insured C) The insurer collects premiums from all policyholders and pools them to pay the claims of the few.
D) principle of profit and loss. B) the princple of indemnity. Which of the following refers to being restored to the financial condition you were in before a loss? A) Estoppel B) Subrogation C) Indemnification D) Restoration C) Indemnification A legally binding contract where the risk of financial loss is transferred in exchange for premiums called: A) an insurance policy. B) the principle of indemnity. C) a reserve.
D) a claim A) an insurance policy. Which of the following best defines "insurer"? A) A legally binding contract in which the insurance company agrees to pay for specified losses in exchange for premiums B) An individual or organization that pays premiums in exchange for protection C)Transfer of the risk of financial loss from party to another. D) A company, group, or government offering financial protection. D) A company, group, or government offering financial protection. An offeree may legally reject a contract offer by any the following means, EXCEPT: A) asking for clarification or additional information. B) accepting the offer on one condition. C) proposing a new offer. D) explicitly rejecting the offer.
An insurance applicant revealing his convictions for drunk driving to an insurer is an example of: utmost good faith. Bill purchased a policy from ABC Insurance. Several months later, he filed a claim which was denied. While reviewing his policy, he found several ambiguities in the policy and decided challenge the insurer's decision. When the dispute went to trial, the court ruled in Bill's favor. This is because insurance policies are aleatory contracts What is the primary distinguishing characteristic of a contract of adhesion? A contract of adhesion implies an unequal balance of power in the creation of the contract. Matt offers to lend Shawn his truck so he can pick up some stones for his landscaping project. Matt tells Shawn, "Don't worty my truck is insured." What is Matt really saying? Matt's financial interest in the truck is protected, should a covered loss occur. Tom decides to purchase an insurance policy to protect his home. According to the definition of a personal contract, which of the following most accurately describes what Tom's insurance actually protects? Tom's financial interest in the home Which of the following statements is NOT true about an insurance policy? A) The insurer holds the balance of power in the creation of an insurance policy.
B) Ambiguities in contracts of adhesion often favor the insured. C) An insurance policy actually protects the policyholder's financial interests in the insured item, not the insured item itself. D) The concept of utmost good faith only applies to the insured. D) The concept of utmost good faith only applies to the insured. Tom decides to purchase an insurance policy to protect his home. According to the definition of a personal contract which of the following most accurately describes what Tom's insurance actually protects? A) Tom 's entire family B) Tom house and the entire property C) The house itself D) Tom's financial interest in the home D) Tom's financial interest in the home According What is the primary distinguishing characteristic of a contract of adhesion? A) A contract of adhesion takes precedence over a contract of utmost good faith.
dates of the policy (beginning and end) amount and limit of coverage deductible premium A Definitions section contains: is not technically essential, but common in policies defines terms used to write policy including: "collision," "decay," "like kind and quality." includes important language for adjusters to know The Insuring Agreement summarizes: what is covered. which causes of loss are covered. any services provided. any exclusions to coverage
the maximum limit of policy coverage in dollars. In the Conditions section: the insurer specifies any limits or qualifications the policyholder must meet. For example Requiring security guard for a jewelry store How to file proof of loss How to protect the property after a loss Exclusions section contains list what the policy does not cover. Common Exclusions (in nearly all property policies): earthquakes flooding war nuclear hazards intentional acts Endorsements are additions to the policy that can: add or reduce insurance coverage.
Definitions Explains exactly what specific words mean in the context of the policy Insuring Agreement Essence of the contract. Summarizes what the insurer will cover and how. There are six unique characteristics of insurance contracts: 1.Personal Contract 2.Contract of Adhesion
- Utmost Good Faith Contract 4.Aleatory Contract
- Unilateral Contract 6.Conditional Contract There four essential (and two very common) sections of an insurance contract:
- Declarations Page
- Definitions 3.Insuring Agreement
- Conditions
- Exclusions
- Endorsements Mark wants to add "towing and labor costs" coverage to his auto insurance policy. Under which part policy would he add this coverage? Endorsements Josephine's gas station suffered severe damage when one of the fuel tanks caught fire and exploded. After completing his inspection, the adjuster determines that Josephine's claim is not covered because she did not have
automatic shut-offs for the fuel tanks. If this safety measure was in fact required in order for coverage to apply, where might Josephine find it in the policy? Conditions Charlotte's son just turned 16 and got his driver's license. She wants him to be covered, so she adds him to her auto insurance policy. Where would this addition be found in Charlotte's policy? Endorsements In which section of the policy might you find the following statement? "Property Address: 246 Rosemead Drive." Declarations In an insurance policy, where might one find the make and model of the covered vehicle? Declarations The word "risk" has two meanings in the insurance industry A risk can be: the potential for financial loss being exposed or open to damage. an insured item. Speculative Risk: is undertaken with no certainty of either gain or loss. is made knowingly, by conscious choice.
to mudslides, landslides, etc. The premium and coverage will be based on this research. Hazard condition increasing the likelihood or severity of a loss Example Storing dangerous materials in a building A record of drunk driving Smoking Hazard vs. Exposure: Exposure is the possibility of loss Hazards are things that increase that possibility More Hazards - Higher Exposure Peril The actual cause of loss or damage Lightning Fire Flood Vandalism
Insurance Policies can be: Named Peril lists each peril that is covered All Peril (Open Peril) covers all perils except those specifically excluded Loss
- Reduction in value of an insured item 2. Financial loss due to an occurrence or accident
- For insurers: the amount paid out in a claim settlement Loss # 1 : reduction in value of Dan 's car after accident Loss # 2 : medical bills for Dan 's injured wrist Loss # 3 : what the insurer has to pay Dan for his property damage and injury Exposure The possibility or likelihood of damage or loss Hazard Anything that increases exposure Peril The cause of damage or loss Loss The cause of damage or loss Loss . Reduction in value . Expense caused by a covered peril . The amount an insurer pays to settle a claim
loss. Insurable Risk Risk: an item, person, or organization that has been insured Not everything is insurable. Six qualifications determine what can be insured. Six Qualifications of Insurable Risk Adequate Premiums Definable Risk Unexpected Losses Substantial Losses Exclusions Law of Large Numbers Adequate Premiums Insurer must be able to cover claims with premium income Adequate Premiums Insurer must be able to cover claims with premium income
. Potential losses cannot be too much for the insurer to pay . Insurer must be able to cover claims and expenses
. If premiums must be set too high, the risk is not insurable Definable risk
- The insurer can define the exact conditions under which the item is covered by the policy. Example - Jewelry is covered up to a specified limit if stolen.
- The item itself is definable (it can be precisely described) Example A house, car, or diamond necklace can be defined. An entire riverbed cannot.
- The item has precise value. Example A house or car does. A family photo does not. Unexpected Losses must be unforeseeable unexpected reasonably unpreventable completely random in nature. Flood insurance is not available in because flooding has become expected. True Substantial Losses must The loss must cause substantial economic hardship If your shirt is ruined while you're barbecuing, you can easily buy a new one. This is not
