N. C. Claims Adjuster Exam: N.C. Claims Adjuster
License Exam: Latest Updated A+ Guide Solution
insurance - ANSWER- Tool to protect against overwhelming financial loss; a transfer
of risk
Principle of Indemnity" - ANSWERto restoration of approximate previous financial
condition, no more and no less (claimant made whole again)
The Insurance Policy - ANSWERa Legal Contract between the insurer and insured
Agreement - ANSWERmutual consent
Consideration - ANSWERall parties bring something of value
Competent parties - ANSWER18 years old, sane and sober
Legal purpose - ANSWERno contracts written for illegal activities
Six Characteristics of Insurance Contracts - ANSWER1.Personal Contract
2.Adhesion
3.Utmost Good Faith
4.Aleatory
5.Unilateral
6.Conditional
.Personal Contract - ANSWERprotects policyholder, not property
Adhesion - ANSWERone party dictates terms of the contract, the other party agrees
to adhere to it, or not buy it
Utmost Good Faith - ANSWERapplicants are expected to be honest regarding the risk
involved
Aleatory - ANSWERdepends on unknown or future event
Unilateral - ANSWERonly one party has to act
Conditional - ANSWER- certain conditions have to be met before pay out
Four parts of an insurance policy - ANSWER1.Declarations Page
2.Insuring Agreement
3.Conditions
4.Exclusions
,Declarations Page - ANSWER· Gives names of both parties, policy number, item,
value, inception/expiration dates of policy, amount and limit of coverage, deductible
and premiums
· Makes it a personal contract
Definition Section - ANSWER: clarifies terms for understanding and later
interpretation
Insuring Agreement - ANSWERwhat the insurer will cover in the event of a loss
· What is covered, which losses, any services, exclusions, policy limit, etc.
Conditions - ANSWERany limits/conditions the policyholder must meet in the event
of a loss
Also how to file a loss, how to protect after a loss, etc
Exclusions - ANSWERlists things not covered
· Common exclusions: earthquakes, floods, war, nuclear hazards, intentional acts
Endorsements - ANSWERmodifies coverage to the contract (adds or subtracts)
Also known as a "rider," "addendum," or "attachment"
Government (social) insurance - ANSWERNon-profit, mandatory participation,
benefits prescribed by law, designed to meet the best needs of the general public,
government has a monopoly
Private insurers - ANSWERSell insurance based on consumer's needs and
preferences, wide variety of products, generate a profit, voluntary participation
Private commercial insurers - ANSWEROperate for profit, collect premiums, portion
of premiums reserved for claims, excess premiums collected are profit
Stock insurance company - ANSWERAlways for profit, usually publicly-traded,
stockholders provide capital, profit and losses, no dividends go to party holders,
"non-participating
Mutual insurance companies - ANSWEROwned by policyholders who earn dividends,
"participating"
Re-insurer - ANSWERProvides insurance for insurers, pays a percentage of insurer's
losses
Reciprocal insurer - ANSWERPeople/organizations who insure each other
Unincorporated, non-profit, cost of claims shared among members
Fraternal benefit societies - ANSWERShare common interests, engage in charitable
activities, provide insurance to members, members are both the providers and
recipients, members pay difference if a member can't cover their own costs
,Risk retention groups (RRG) - ANSWERA form of commercial insurer in which
members use their own capital to issue insurance policies
Both the insurer and insured, assume all risks and share all profits
RRG Syndicate - ANSWERGroup of investors provide a pool for insurance purposes
· Underwriter assesses rick and writes policies
· Members responsible for claims payments, but collect dividends
Risk purchasing group - ANSWERFormed an organization to buy insurance as a group
Private non-commercial insurer - ANSWERNot-for-profit insurance company that
returns profits by expanding coverage or lowering premiums
· Blue Cross or Blue Shield
Classification based on location - ANSWER1.Domestic
2.Foreign
3.Alien
Domestic - ANSWERlocated in a state, abides by state laws
Foreign - ANSWER- abides by state or US laws, but it can be located elsewhere
Alien - ANSWERobeys another country's laws altogether
"Risk": - ANSWER'Probability of loss or damage
' The insured item
"speculative risk - ANSWER· undertaken with no certainty of gain or loss
Made knowingly, cannot be insured (buying a lottery ticket)
"pure risk" - ANSWER· no chance of gain, either loss or no loss
o Can be insured
§ Persons, items, or organizations can be pure risks
Exposure" - ANSWERo the extent to which a person or item is open to damage or
loss
§ Expressed in dollars or units, helpful in setting the premium
"Hazard" - ANSWERincreases the chance of loss
A condition increasing the likelihood or severity of a loss
"Peril" - ANSWERactual cause of loss
"named-peril" - ANSWER- list all of the perils covered in the policy
"all (open)-peril" - ANSWERcovers all perils except for those excluded by the policy
, "Loss" - ANSWERReduction in value of an insured item
Financial loss due to an occurrence
For insurers, amount paid out in a claim settlement
Insurable risk" - ANSWERsix qualifications determine what can be insured
Adequate premiums - ANSWERneed to be able to cover claims or expenses
· If premium is set too high, item in uninsureable
Definable risk - ANSWERexact conditions offered
· Item itself is definable and has a precise value
o Emotions have no insurable value
Unexpected loss - ANSWERloss must be unforeseeable, unexpected, reasonably
unpreventable, and random in nature
· Flood insurance isn't unexpected
Substantial loss - ANSWER- must cause substantial economic hardship
Exclusions - ANSWERmust be able to exclude coverage for large scale disasters and
catastrophic events
· Wars, terrorism, earthquakes, etc.
Law of Large Numbers - ANSWERlarge number of similar risks must be insured
· Helps predict losses and spread risks
Law of Large Numbers - ANSWERstatistics are more accurate the more numbers
involves
Reduces possibility of variation from expected number of claims
RISK MANAGEMENT - ANSWERkeeps insurers in the black
Risk avoidance - ANSWEReliminates risk by refusing to issue policy
· High exposure to loss, applicant record of fraud/poor credit, high number of claims
by applicant
Risk reduction - ANSWER· Charge higher premiums
· Ask policyholders to take action
Provide less coverage
Risk transference - ANSWER· Insurance protection for insurers
o Keep the same obligation to policyholders
Risk retention - ANSWER§ - acceptance
· Insurer accepts risk and accepts policy
License Exam: Latest Updated A+ Guide Solution
insurance - ANSWER- Tool to protect against overwhelming financial loss; a transfer
of risk
Principle of Indemnity" - ANSWERto restoration of approximate previous financial
condition, no more and no less (claimant made whole again)
The Insurance Policy - ANSWERa Legal Contract between the insurer and insured
Agreement - ANSWERmutual consent
Consideration - ANSWERall parties bring something of value
Competent parties - ANSWER18 years old, sane and sober
Legal purpose - ANSWERno contracts written for illegal activities
Six Characteristics of Insurance Contracts - ANSWER1.Personal Contract
2.Adhesion
3.Utmost Good Faith
4.Aleatory
5.Unilateral
6.Conditional
.Personal Contract - ANSWERprotects policyholder, not property
Adhesion - ANSWERone party dictates terms of the contract, the other party agrees
to adhere to it, or not buy it
Utmost Good Faith - ANSWERapplicants are expected to be honest regarding the risk
involved
Aleatory - ANSWERdepends on unknown or future event
Unilateral - ANSWERonly one party has to act
Conditional - ANSWER- certain conditions have to be met before pay out
Four parts of an insurance policy - ANSWER1.Declarations Page
2.Insuring Agreement
3.Conditions
4.Exclusions
,Declarations Page - ANSWER· Gives names of both parties, policy number, item,
value, inception/expiration dates of policy, amount and limit of coverage, deductible
and premiums
· Makes it a personal contract
Definition Section - ANSWER: clarifies terms for understanding and later
interpretation
Insuring Agreement - ANSWERwhat the insurer will cover in the event of a loss
· What is covered, which losses, any services, exclusions, policy limit, etc.
Conditions - ANSWERany limits/conditions the policyholder must meet in the event
of a loss
Also how to file a loss, how to protect after a loss, etc
Exclusions - ANSWERlists things not covered
· Common exclusions: earthquakes, floods, war, nuclear hazards, intentional acts
Endorsements - ANSWERmodifies coverage to the contract (adds or subtracts)
Also known as a "rider," "addendum," or "attachment"
Government (social) insurance - ANSWERNon-profit, mandatory participation,
benefits prescribed by law, designed to meet the best needs of the general public,
government has a monopoly
Private insurers - ANSWERSell insurance based on consumer's needs and
preferences, wide variety of products, generate a profit, voluntary participation
Private commercial insurers - ANSWEROperate for profit, collect premiums, portion
of premiums reserved for claims, excess premiums collected are profit
Stock insurance company - ANSWERAlways for profit, usually publicly-traded,
stockholders provide capital, profit and losses, no dividends go to party holders,
"non-participating
Mutual insurance companies - ANSWEROwned by policyholders who earn dividends,
"participating"
Re-insurer - ANSWERProvides insurance for insurers, pays a percentage of insurer's
losses
Reciprocal insurer - ANSWERPeople/organizations who insure each other
Unincorporated, non-profit, cost of claims shared among members
Fraternal benefit societies - ANSWERShare common interests, engage in charitable
activities, provide insurance to members, members are both the providers and
recipients, members pay difference if a member can't cover their own costs
,Risk retention groups (RRG) - ANSWERA form of commercial insurer in which
members use their own capital to issue insurance policies
Both the insurer and insured, assume all risks and share all profits
RRG Syndicate - ANSWERGroup of investors provide a pool for insurance purposes
· Underwriter assesses rick and writes policies
· Members responsible for claims payments, but collect dividends
Risk purchasing group - ANSWERFormed an organization to buy insurance as a group
Private non-commercial insurer - ANSWERNot-for-profit insurance company that
returns profits by expanding coverage or lowering premiums
· Blue Cross or Blue Shield
Classification based on location - ANSWER1.Domestic
2.Foreign
3.Alien
Domestic - ANSWERlocated in a state, abides by state laws
Foreign - ANSWER- abides by state or US laws, but it can be located elsewhere
Alien - ANSWERobeys another country's laws altogether
"Risk": - ANSWER'Probability of loss or damage
' The insured item
"speculative risk - ANSWER· undertaken with no certainty of gain or loss
Made knowingly, cannot be insured (buying a lottery ticket)
"pure risk" - ANSWER· no chance of gain, either loss or no loss
o Can be insured
§ Persons, items, or organizations can be pure risks
Exposure" - ANSWERo the extent to which a person or item is open to damage or
loss
§ Expressed in dollars or units, helpful in setting the premium
"Hazard" - ANSWERincreases the chance of loss
A condition increasing the likelihood or severity of a loss
"Peril" - ANSWERactual cause of loss
"named-peril" - ANSWER- list all of the perils covered in the policy
"all (open)-peril" - ANSWERcovers all perils except for those excluded by the policy
, "Loss" - ANSWERReduction in value of an insured item
Financial loss due to an occurrence
For insurers, amount paid out in a claim settlement
Insurable risk" - ANSWERsix qualifications determine what can be insured
Adequate premiums - ANSWERneed to be able to cover claims or expenses
· If premium is set too high, item in uninsureable
Definable risk - ANSWERexact conditions offered
· Item itself is definable and has a precise value
o Emotions have no insurable value
Unexpected loss - ANSWERloss must be unforeseeable, unexpected, reasonably
unpreventable, and random in nature
· Flood insurance isn't unexpected
Substantial loss - ANSWER- must cause substantial economic hardship
Exclusions - ANSWERmust be able to exclude coverage for large scale disasters and
catastrophic events
· Wars, terrorism, earthquakes, etc.
Law of Large Numbers - ANSWERlarge number of similar risks must be insured
· Helps predict losses and spread risks
Law of Large Numbers - ANSWERstatistics are more accurate the more numbers
involves
Reduces possibility of variation from expected number of claims
RISK MANAGEMENT - ANSWERkeeps insurers in the black
Risk avoidance - ANSWEReliminates risk by refusing to issue policy
· High exposure to loss, applicant record of fraud/poor credit, high number of claims
by applicant
Risk reduction - ANSWER· Charge higher premiums
· Ask policyholders to take action
Provide less coverage
Risk transference - ANSWER· Insurance protection for insurers
o Keep the same obligation to policyholders
Risk retention - ANSWER§ - acceptance
· Insurer accepts risk and accepts policy
