California Adjuster PSI Exam 2025/2026 | Questions
and Answers | Latest Update | Instant Download!!
1. What is the primary role of an insurance adjuster?
A. Sell insurance policies
B. Investigate, evaluate, and settle claims (Correct Answer)
C. Manage client investments
D. Draft insurance legislation
Rationale:
Adjusters are responsible for investigating claims, determining coverage, and recommending
settlement amounts.
2. Which factor is most important in determining liability in a property damage
claim?
A. Cost of repairs
B. Cause of loss and policy coverage (Correct Answer)
C. Age of the insured
D. Market value of the property
Rationale:
Liability is based on whether the policy covers the cause of loss, not simply the cost of repairs.
3. An adjuster discovers misrepresentation on a claim. The correct action is to:
A. Approve the claim anyway
B. Ignore it
C. Document the misrepresentation and report it to the insurer (Correct Answer)
D. Confront the claimant aggressively
Rationale:
Adjusters must protect the insurer from fraud while following ethical procedures.
4. Which is an example of an insurable interest?
,A. A neighbor’s car
B. Owning a home and purchasing homeowners insurance (Correct Answer)
C. Watching a friend’s vacation home
D. Borrowing a friend’s car
Rationale:
Insurable interest requires the policyholder to have a financial stake in the property or person
insured.
5. The purpose of a deductible in an insurance policy is to:
A. Reduce coverage limits
B. Share risk between insurer and insured (Correct Answer)
C. Increase premiums automatically
D. Avoid liability
Rationale:
Deductibles encourage policyholders to avoid small claims and reduce insurer exposure.
6. Which document provides the terms and conditions of an insurance policy?
A. Claim form
B. Insurance policy contract (Correct Answer)
C. Renewal notice
D. Application form
Rationale:
The policy contract outlines coverage, exclusions, limits, and duties of all parties.
7. In a liability claim, an adjuster must consider:
A. Only property value
B. Legal responsibility and damages (Correct Answer)
C. Insured’s reputation
D. Claimant’s location
Rationale:
Liability claims are based on legal responsibility and compensable damages.
,8. Which is NOT a duty of an adjuster?
A. Investigating claims
B. Determining coverage
C. Representing the insured in court (Correct Answer)
D. Negotiating settlements
Rationale:
Adjusters represent the insurer, not the insured in legal proceedings.
9. When handling a total loss auto claim, the adjuster should:
A. Repair the vehicle immediately
B. Determine the actual cash value and settle according to policy terms (Correct Answer)
C. Discard the vehicle
D. Wait for the insured to decide
Rationale:
Total loss claims require assessing actual cash value and policy compliance.
10. Which action violates insurance ethics?
A. Promptly investigating a claim
B. Misrepresenting policy coverage to deny a claim (Correct Answer)
C. Documenting claim activity
D. Communicating with all parties professionally
Rationale:
Adjusters must act honestly and avoid misrepresentation.
11. An adjuster receives conflicting statements from witnesses. The best course is
to:
A. Choose the version that favors the insured
B. Investigate further and document discrepancies (Correct Answer)
C. Ignore the conflict
D. Settle the claim immediately
, Rationale:
Proper investigation requires verifying facts and documenting findings.
12. In property claims, depreciation is:
A. Reduction in value due to age or wear (Correct Answer)
B. Additional coverage
C. Deductible adjustment
D. Premium surcharge
Rationale:
Depreciation accounts for the property’s decrease in value over time.
13. Which type of coverage protects the insured against claims from bodily
injury or property damage to others?
A. Life insurance
B. Liability insurance (Correct Answer)
C. Health insurance
D. Property insurance
Rationale:
Liability insurance compensates third parties for losses caused by the insured.
14. When an adjuster delays claim settlement without justification, it may result
in:
A. Increased premium
B. Bad faith liability (Correct Answer)
C. Reduced deductibles
D. Automatic approval
Rationale:
Unjustified delays can expose insurers to legal penalties for bad faith.
15. Subrogation allows the insurer to:
and Answers | Latest Update | Instant Download!!
1. What is the primary role of an insurance adjuster?
A. Sell insurance policies
B. Investigate, evaluate, and settle claims (Correct Answer)
C. Manage client investments
D. Draft insurance legislation
Rationale:
Adjusters are responsible for investigating claims, determining coverage, and recommending
settlement amounts.
2. Which factor is most important in determining liability in a property damage
claim?
A. Cost of repairs
B. Cause of loss and policy coverage (Correct Answer)
C. Age of the insured
D. Market value of the property
Rationale:
Liability is based on whether the policy covers the cause of loss, not simply the cost of repairs.
3. An adjuster discovers misrepresentation on a claim. The correct action is to:
A. Approve the claim anyway
B. Ignore it
C. Document the misrepresentation and report it to the insurer (Correct Answer)
D. Confront the claimant aggressively
Rationale:
Adjusters must protect the insurer from fraud while following ethical procedures.
4. Which is an example of an insurable interest?
,A. A neighbor’s car
B. Owning a home and purchasing homeowners insurance (Correct Answer)
C. Watching a friend’s vacation home
D. Borrowing a friend’s car
Rationale:
Insurable interest requires the policyholder to have a financial stake in the property or person
insured.
5. The purpose of a deductible in an insurance policy is to:
A. Reduce coverage limits
B. Share risk between insurer and insured (Correct Answer)
C. Increase premiums automatically
D. Avoid liability
Rationale:
Deductibles encourage policyholders to avoid small claims and reduce insurer exposure.
6. Which document provides the terms and conditions of an insurance policy?
A. Claim form
B. Insurance policy contract (Correct Answer)
C. Renewal notice
D. Application form
Rationale:
The policy contract outlines coverage, exclusions, limits, and duties of all parties.
7. In a liability claim, an adjuster must consider:
A. Only property value
B. Legal responsibility and damages (Correct Answer)
C. Insured’s reputation
D. Claimant’s location
Rationale:
Liability claims are based on legal responsibility and compensable damages.
,8. Which is NOT a duty of an adjuster?
A. Investigating claims
B. Determining coverage
C. Representing the insured in court (Correct Answer)
D. Negotiating settlements
Rationale:
Adjusters represent the insurer, not the insured in legal proceedings.
9. When handling a total loss auto claim, the adjuster should:
A. Repair the vehicle immediately
B. Determine the actual cash value and settle according to policy terms (Correct Answer)
C. Discard the vehicle
D. Wait for the insured to decide
Rationale:
Total loss claims require assessing actual cash value and policy compliance.
10. Which action violates insurance ethics?
A. Promptly investigating a claim
B. Misrepresenting policy coverage to deny a claim (Correct Answer)
C. Documenting claim activity
D. Communicating with all parties professionally
Rationale:
Adjusters must act honestly and avoid misrepresentation.
11. An adjuster receives conflicting statements from witnesses. The best course is
to:
A. Choose the version that favors the insured
B. Investigate further and document discrepancies (Correct Answer)
C. Ignore the conflict
D. Settle the claim immediately
, Rationale:
Proper investigation requires verifying facts and documenting findings.
12. In property claims, depreciation is:
A. Reduction in value due to age or wear (Correct Answer)
B. Additional coverage
C. Deductible adjustment
D. Premium surcharge
Rationale:
Depreciation accounts for the property’s decrease in value over time.
13. Which type of coverage protects the insured against claims from bodily
injury or property damage to others?
A. Life insurance
B. Liability insurance (Correct Answer)
C. Health insurance
D. Property insurance
Rationale:
Liability insurance compensates third parties for losses caused by the insured.
14. When an adjuster delays claim settlement without justification, it may result
in:
A. Increased premium
B. Bad faith liability (Correct Answer)
C. Reduced deductibles
D. Automatic approval
Rationale:
Unjustified delays can expose insurers to legal penalties for bad faith.
15. Subrogation allows the insurer to:
