Adjuster PRO Final Exam Questions And
Already Passed Answers.
What is a reserve, in insurance terms? - Answer A pool of collected premiums that the insurer sets
aside to pay claims
Which of these scenarios is NOT an example of indemnification? - Answer When trying to renew her
dog's license, Ellen has to pay a penalty to the city for letting its rabies vaccination lapse.
Ellen having to pay a fine is not an example of indemnification. Indemnification means being restored to
the financial condition you were in before a loss. In three of these situations, someone experienced a
loss and was then "made whole": Joe-Bob's neighbor lost his TV, Alice lost her house, and Hugh lost the
use of his car. But in the case of Ellen's dog, the city did not experience a loss; it simply imposed a
penalty to teach Ellen a lesson about keeping up with her dog's shots.
Greg plays trombone in his school band during football games. During a rally song in the stands one day,
Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls it down the
bleachers, completely destroying it. Greg's insurance pays him $400 to replace the trombone, but then
the opposing team's coach also offers to replace the instrument, at whatever the cost. So Greg orders a
new $3,200 trombone and has the opposing team's athletic department absorb the cost. Which principle
has Greg violated? - Answer The principle of indemnity
Which of the following statements is true about an insurance policy? - Answer It relies on the utmost
good faith of both the insured and the insurer
An insurance policy relies on the utmost good faith of both the insured and the insurer.
Which of the following would you find in the Conditions section of an insurance policy? - Answer The
insured's duty after a loss
In which section of an insurance policy might you find the following statement? "Damage to insured
property must be reported within 15 days of the damaging occurrence." - Answer Conditions
A captive insurance company: - Answer exists solely to provide insurance for its parent company.
,Cindy holds an insurance policy from Sine Nomine Insurance. This is not a publicly traded company, and
Cindy can participate in the election of the board, receiving dividends if the company does well. Sine
Nomine Insurance could be best described as a: - Answer Sine Nomine Insurance is a mutual insurance
company.
When an insurer issues an insurance policy, the actual item, person, or organization that is being insured
is called the: - Answer risk.
Which of the following is a hazard? - Answer A driver's tendency to text while driving
Which of the following situations does NOT involve an insurable risk? - Answer Dale just bought 30
shares of a hot new startup company online.
Which of the following situations does NOT involve an instance of "pure risk?" - Answer Loss of money
invested in the stock market
Which of the following is an insurable risk? - Answer football stadium
Risk avoidance is a risk management technique that: - Answer eliminates risk.
Amy needs more floor space in her antique furniture store, so she buys a storage building 3 miles away.
She is worried about keeping the furniture in the storage building safe, so she puts in an alarm system
and smoke detectors. By purchasing the alarm system and smoke detectors, Amy is practicing: - Answer
risk reduction.
Six Stars Development Company has just been offered a great deal on ten large properties in Las Vegas.
The economy in Las Vegas has been declining recently, but the CEO of Six Stars expects it to recover
soon. This could be an exceptional opportunity for Six Stars, but it's also pretty risky. Ultimately, the Six
Stars executive team decides not to purchase the properties. This is an example of: - Answer risk
avoidance.
Jason's auto policy states that the insurer may cancel coverage if a premium is more than 30 days late.
However, Jason is currently more than 30 days late, and has been so five times in the last year, and his
, insurer has done nothing about it. When Jason gets into an accident and files a claim, which of the
following is most likely to happen? - Answer An implied waiver is one that is assumed based on
someone's actions. When the insurer decided to accept Jason's late premium payments, it implied that it
was waiving its right to cancel Jason's policy because of a late payment. So, when Jason files a claim, the
insurer may not claim that his policy is void due to late payments.
In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a security guard on the
premises 24/7. This is called a: - Answer A warranty is a guarantee that certain conditions will be met. If
the policyholder violates a warranty, the insurer can void the policy.
Which of the following is an example of a moral hazard? - Answer Ken lights a candle, sets it right next
to the window draperies and leaves the house to go to work.
Lucy has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it
off and leaves it in her car's cupholder so she can put it back on in the morning on her way to work.
Lucy's behavior would be considered a: - Answer Lucy does not intend to have the necklace stolen. But
leaving it in sight in her car overnight is risky, and she would probably be more careful if she had no
insurance on the necklace. Lucy's behavior is a morale hazard, since she is unconsciously more willing to
take a risk, due to her insurance coverage.
Arlene's house suffered structural damage in an earthquake last year, but her policy does not cover
earthquake damage, so Arlene never got it fixed. When a tornado rips through her neighborhood, it
causes some roof damage totaling $2,000, and Arlene sees an opportunity in the situation. She files a
claim for the roof damage, but also claims that the tornado caused the structural damage to her house
that was actually caused by the earthquake last year. Which of the following statements is true? -
Answer Arlene committed soft fraud
A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic
sprinkler system. The water from the sprinklers soaks the carpets and shorts-out all the computers,
causing thousands of dollars in damage. What is the proximate cause of the loss? - Answer The power
surge caused the fire, which caused the sprinklers to go off, which led to the water damage to the office
and computers. Since there is an unbroken chain of events starting with the power surge, the power
surge is the proximate cause of all the other damages.
Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home, causing
extensive damage to the East wall and roof. As a result, Sandra and her family must move into a hotel
until the repairs are completed. Sam's car crashing into the house would be considered: - Answer An
unexpected event that causes damage is called an occurrence.
