ARIZONA ADJUSTER STUDY GUIDE 2026 EXAM
QUESTIONS AND SOLUTIONS RATED A+
✔✔Law of large numbers - ✔✔Insurer must be able to cover large numbers of similar
risks
Spreads risk across more policies
Helps insurers predict losses more accurately
Similar risks can mean, cars houses, persons lives, similar business etc
✔✔Adverse Selection - ✔✔when someone buys health insurance because they know
they will probably file a claim
✔✔4 risk management techniques - ✔✔Avoidance
Reduction
Transference
Retention
✔✔Risk avoidance - ✔✔Eliminates risk by not taking action that involves risk
✔✔Risk reduction - ✔✔Taking measures to reduce risk that is involved
Also called risk mitigation
✔✔Risk Transference - ✔✔Management of sever risk by transferring risk to someone
else
Most common example is Insurance
✔✔Risk retention - ✔✔Acknowledging the risks and preparing to handle the unexpected
losses as they occur
✔✔Policy Period - ✔✔The time frame, beginning with the inception date to the
expiration date, during which insurance coverage applies.
✔✔Binder - ✔✔Providing temporary coverage until the policy is issued
✔✔Blanket coverage vs specific coverage - ✔✔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 - ✔✔Statement of fact
✔✔Missrepresentation - ✔✔A false, distorted or deceptive statements
✔✔Warranty - ✔✔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 - ✔✔Concealment is hiding the truth
Deliberately withholding information
✔✔Waiver - ✔✔Voluntarily surrender of a right, claim, or privilege
✔✔Expressed waiver - ✔✔In writing or signed
✔✔Implied waiver - ✔✔assumed based on actions
✔✔Estoppel - ✔✔Legal principle that prevents an insurer from denying coverage if the
insured has reasonably come to believe that he has such coverage based on insurers
practices
✔✔Types of hazards - ✔✔Physical, Moral, Morale, legal
✔✔Moral hazard - ✔✔Results from the policy holders deliberate decision
Involves reckless behavior because of the financial security offered by insurance
Is a type of behavioral hazard
✔✔Morale hazard - ✔✔Occur when someone exhibits risky behavior because of having
insurance.
✔✔Physical hazard - ✔✔Physical conditions that increase the chance of loss.
✔✔Types of physical hazards - ✔✔Environmental - pot holes in road
Material - asbestos in a old house
Operational - poorly managed engine
Occupant - working in a coal mine
✔✔Legal hazard - ✔✔Increased chance of loss because of legal action
✔✔fraud - ✔✔Deceiving an insurer to profit from an insurance policy
✔✔Hard and soft fraud - ✔✔Hard fraud - planning or faking a loss
Soft fraud - exaggerating a claim to inflate the indemnity
✔✔proximate cause - ✔✔Unbroken chain of events between an occurrence and a loss -
then that occurrence is the proximate cause of the loss
✔✔occurrence - ✔✔An event, incident, or condition that causes damage
QUESTIONS AND SOLUTIONS RATED A+
✔✔Law of large numbers - ✔✔Insurer must be able to cover large numbers of similar
risks
Spreads risk across more policies
Helps insurers predict losses more accurately
Similar risks can mean, cars houses, persons lives, similar business etc
✔✔Adverse Selection - ✔✔when someone buys health insurance because they know
they will probably file a claim
✔✔4 risk management techniques - ✔✔Avoidance
Reduction
Transference
Retention
✔✔Risk avoidance - ✔✔Eliminates risk by not taking action that involves risk
✔✔Risk reduction - ✔✔Taking measures to reduce risk that is involved
Also called risk mitigation
✔✔Risk Transference - ✔✔Management of sever risk by transferring risk to someone
else
Most common example is Insurance
✔✔Risk retention - ✔✔Acknowledging the risks and preparing to handle the unexpected
losses as they occur
✔✔Policy Period - ✔✔The time frame, beginning with the inception date to the
expiration date, during which insurance coverage applies.
✔✔Binder - ✔✔Providing temporary coverage until the policy is issued
✔✔Blanket coverage vs specific coverage - ✔✔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 - ✔✔Statement of fact
✔✔Missrepresentation - ✔✔A false, distorted or deceptive statements
✔✔Warranty - ✔✔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 - ✔✔Concealment is hiding the truth
Deliberately withholding information
✔✔Waiver - ✔✔Voluntarily surrender of a right, claim, or privilege
✔✔Expressed waiver - ✔✔In writing or signed
✔✔Implied waiver - ✔✔assumed based on actions
✔✔Estoppel - ✔✔Legal principle that prevents an insurer from denying coverage if the
insured has reasonably come to believe that he has such coverage based on insurers
practices
✔✔Types of hazards - ✔✔Physical, Moral, Morale, legal
✔✔Moral hazard - ✔✔Results from the policy holders deliberate decision
Involves reckless behavior because of the financial security offered by insurance
Is a type of behavioral hazard
✔✔Morale hazard - ✔✔Occur when someone exhibits risky behavior because of having
insurance.
✔✔Physical hazard - ✔✔Physical conditions that increase the chance of loss.
✔✔Types of physical hazards - ✔✔Environmental - pot holes in road
Material - asbestos in a old house
Operational - poorly managed engine
Occupant - working in a coal mine
✔✔Legal hazard - ✔✔Increased chance of loss because of legal action
✔✔fraud - ✔✔Deceiving an insurer to profit from an insurance policy
✔✔Hard and soft fraud - ✔✔Hard fraud - planning or faking a loss
Soft fraud - exaggerating a claim to inflate the indemnity
✔✔proximate cause - ✔✔Unbroken chain of events between an occurrence and a loss -
then that occurrence is the proximate cause of the loss
✔✔occurrence - ✔✔An event, incident, or condition that causes damage
