California Adjuster PSI Exam 2026 | Questions
, Answers, and Explanations | Verified Answers
Section 1: General Insurance Concepts
Which of the following best describes the purpose of insurance?
A) To transfer the financial risk from the insured to the insurer
B) To eliminate financial risk
C) To guarantee financial security
D) To encourage reckless behavior
Answer: A) To transfer the financial risk from the insured to the insurer
Which of the following is an example of a moral hazard?
A) A homeowner who neglects to install a security system
,B) A driver who regularly drives without a seatbelt
C) A person who intentionally damages property to collect insurance
D) A business owner who installs fire alarms but forgets to maintain them
Answer: C) A person who intentionally damages property to collect insurance
Which of the following types of insurance is most commonly used to cover losses
due to theft, fire, or vandalism to physical property?
A) Auto insurance
B) Life insurance
C) Homeowners insurance
D) Workers’ compensation insurance
Answer: C) Homeowners insurance
Section 2: Insurance Contracts
Which of the following is a requirement for an insurance contract to be legally
valid?
,A) The contract must be in writing
B) Both parties must have legal capacity
C) The premium must be paid in full before coverage begins
D) The policyholder must have a history of good health
Answer: B) Both parties must have legal capacity
Which of the following terms refers to a condition in an insurance contract that
places limits on the amount the insurer will pay for a specific type of loss?
A) Exclusion
B) Deductible
C) Coverage limit
D) Premium
Answer: C) Coverage limit
Which of the following is NOT a typical element of an insurance policy?
, A) Declarations page
B) Conditions
C) Insurer’s board of directors
D) Exclusions
Answer: C) Insurer’s board of directors
Section 3: Claim Handling and Adjusting
What is the primary role of an insurance adjuster?
A) To sell insurance policies to customers
B) To provide legal advice to policyholders
C) To investigate, evaluate, and settle insurance claims
D) To write insurance contracts for the insurer
Answer: C) To investigate, evaluate, and settle insurance claims
Which of the following is an example of an "indemnity" in an insurance policy?
, Answers, and Explanations | Verified Answers
Section 1: General Insurance Concepts
Which of the following best describes the purpose of insurance?
A) To transfer the financial risk from the insured to the insurer
B) To eliminate financial risk
C) To guarantee financial security
D) To encourage reckless behavior
Answer: A) To transfer the financial risk from the insured to the insurer
Which of the following is an example of a moral hazard?
A) A homeowner who neglects to install a security system
,B) A driver who regularly drives without a seatbelt
C) A person who intentionally damages property to collect insurance
D) A business owner who installs fire alarms but forgets to maintain them
Answer: C) A person who intentionally damages property to collect insurance
Which of the following types of insurance is most commonly used to cover losses
due to theft, fire, or vandalism to physical property?
A) Auto insurance
B) Life insurance
C) Homeowners insurance
D) Workers’ compensation insurance
Answer: C) Homeowners insurance
Section 2: Insurance Contracts
Which of the following is a requirement for an insurance contract to be legally
valid?
,A) The contract must be in writing
B) Both parties must have legal capacity
C) The premium must be paid in full before coverage begins
D) The policyholder must have a history of good health
Answer: B) Both parties must have legal capacity
Which of the following terms refers to a condition in an insurance contract that
places limits on the amount the insurer will pay for a specific type of loss?
A) Exclusion
B) Deductible
C) Coverage limit
D) Premium
Answer: C) Coverage limit
Which of the following is NOT a typical element of an insurance policy?
, A) Declarations page
B) Conditions
C) Insurer’s board of directors
D) Exclusions
Answer: C) Insurer’s board of directors
Section 3: Claim Handling and Adjusting
What is the primary role of an insurance adjuster?
A) To sell insurance policies to customers
B) To provide legal advice to policyholders
C) To investigate, evaluate, and settle insurance claims
D) To write insurance contracts for the insurer
Answer: C) To investigate, evaluate, and settle insurance claims
Which of the following is an example of an "indemnity" in an insurance policy?
