Adjuster Pro - Practice Exam with
Complete Solutions
Stephen's insurer denied his claim because the peril was not covered. But, according to
Stephen's understanding of the policy, his loss should be covered, so he filed a dispute.
During the trial, the jury agreed that the policy language was open to interpretation, so
they decided in favor of Stephen. This is because:
A. insurance policies are contracts of adhesion.
B. insurance policies are conditional contracts.
C. insurance policies are contracts of utmost good faith.
D. insurance policies are personal contracts. - ANSWER-A. insurance policies are
contracts of adhesion.
"We will provide the insurance described in this policy in return for the premium and
compliance with all applicable provisions of this policy." In which section of the
insurance policy would this statement be found?
A. Definitions
B. Declarations
C. Insuring Agreement
D. Endorsements - ANSWER-C. Insuring Agreement
Melinda's home sustained $6,500 in damage when Jared ran into it with his truck.
Melinda received $6,500 from her insurance company, and Jared also paid her $5,000.
Melinda has now profited from this loss and is in violation of:
A. the principle of subrogation.
B. federal law.
C. the principle of indemnity.
D. state law. - ANSWER-C. the principle of indemnity.
Sandra rear-ended Randy's car when he stopped quickly for a yellow light that she was
sure they were both going to make. The damage was minor, but Sandra was worried
her premiums would increase if the accident was reported, so she gave Randy $500 in
an effort to keep it just between the two of them. However, Randy filed the claim with his
insurance company and received a settlement check for $750. What has Randy
violated?
A. The principle of insurable interest
B. The principle of subrogation
,C. The principle of indemnity
D. The principle of loss minimization - ANSWER-C. The principle of indemnity
Darnell is applying for auto insurance with his agent. Currently, he only wants to get a
minimal amount of coverage to keep his premiums as low as possible, so he decides
not to include uninsured motorist coverage on his policy. His agent has him sign a
document giving up his right to this coverage. What is this called?
A. A warranty
B. An express waiver
C. A binder
D. An implied waiver - ANSWER-B. An express waiver
An insurance policy's declarations page contains all of the following, EXCEPT:
A. the deductible.
B. the dates of the policy term.
C. the perils insured against.
D. the coverage limit. - ANSWER-C. the perils insured against.
An economic device used to protect against the risk of realizing unforeseen and
extraordinary financial loss is called:
A. risk avoidance.
B. insurance.
C. indemnification.
D. subrogation. - ANSWER-B. insurance.
Which of the following does NOT constitute a legal termination of a contract offer?
A. Rejection by offeree
B. Request for more information
C. Termination by operation of law
D. Revocation by offeror - ANSWER-B. Request for more information
The Principle of Indemnity is designed to prevent:
A. having multiple payees on a policy.
B. an insured from making a profit.
C. insurers from making a profit.
D. subrogation. - ANSWER-B. an insured from making a profit.
Jason's auto policy states that the insurer may cancel coverage if Jason pays a
premium 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 would be
true?
A. The principle of utmost good faith prevents the insurer from denying coverage in this
case.
B. The principle of utmost good faith allows the insurer to deny coverage in this case.
C. The principle of estoppel prevents the insurer from denying coverage in this case.
D. The principle of estoppel allows the insurer to deny coverage in this case. -
ANSWER-C. The principle of estoppel prevents the insurer from denying coverage in
this case.
Lee, the owner of Antonia's Bakery, wants to expand operations and start catering. He
hires Geoffrey to manage the new catering department and quickly realizes that he
might have made a mistake. Geoffrey makes inappropriate comments to other
employees, seems to be dishonest in his dealings with money, and is a reckless driver.
How would Lee effectively practice risk avoidance in this case?
A. Fire Geoffrey
B. Have a company-wide meeting about appropriate language in the workplace
C. Purchase employee theft coverage
D. Hire another new employee to be Geoffrey's supervisor - ANSWER-A. Fire Geoffrey
Natalie's brakes have been squealing for several months. Every time she drives her car,
she's reminded that she needs to have them replaced, but she forgets all about it as
soon as she gets out of the car. Natalie's actions can be considered a:
A. physical hazard.
B. peril.
C. morale hazard.
D. risk. - ANSWER-C. morale hazard.
The law of large numbers states that:
A. insuring a greater number of units increases the likelihood of loss for the insurer.
B. insuring a greater number of units increases the accuracy of the insurer's loss
predictions.
C. insuring a greater number of units increases the effect of statistical outliers on loss
predictions.
D. insuring a greater number of units makes the insurer's losses less predictable. -
ANSWER-B. insuring a greater number of units increases the accuracy of the insurer's
loss predictions.
A hailstorm moves over Erin's restaurant. Large hailstones break through a skylight and
water pours in, damaging the flooring in the restaurant. Additionally, the electrical
system shorts out and Erin has to close for three days. The hail would be considered:
, A. a direct loss.
B. an indirect loss.
C. the physical hazard.
D. the proximate cause of the loss. - ANSWER-D. the proximate cause of the loss.
Which of the following is NOT typically associated with strict liability?
A. Housing exotic or wild animals
B. Working with electronics
C. Using firearms
D. Handling explosives - ANSWER-B. Working with electronics
A retail store institutes a training program for all cashiers, to help them identify and deter
shoplifters. This is an example of:
A. risk avoidance.
B. risk transference.
C. risk reduction.
D. risk retention. - ANSWER-C. risk reduction.
A lion at a zoo escaped when a zoo employee failed to follow protocol. The lion injured
a zoo patron. In court, the injured patron's lawyer could invoke the doctrine of:
A. Contributory negligence.
B. Res Ipsa Loquitur.
C. Comparative negligence.
D. Assumption of Risk. - ANSWER-B. Res Ipsa Loquitur.
Jim is completely "upside down" financially on his car. He owes the finance company
$8,000. If he sells the car, he knows he'll only get about $4,000 for it. But Jim knows
that if the car was somehow stolen, his insurance company would pay him somewhere
in the neighborhood of $7,000. Jim decides to have a friend steal the car and "make it
disappear." Jim then files a claim with his insurance company to report his car stolen.
Which best represents Jim's actions?
A. Concealment
B. Factual misrepresentation
C. Soft fraud
D. Hard fraud - ANSWER-D. Hard fraud
A few weeks ago, Grace's garage was destroyed by an out-of-control motorist named
Zach. Fortunately, Zach had sufficient liability insurance to cover the damages, but
Zach's insurer is giving Grace the runaround negotiating the claim. Grace finally files a
complaint, forcing Zach to:
A. issue a judgement.
Complete Solutions
Stephen's insurer denied his claim because the peril was not covered. But, according to
Stephen's understanding of the policy, his loss should be covered, so he filed a dispute.
During the trial, the jury agreed that the policy language was open to interpretation, so
they decided in favor of Stephen. This is because:
A. insurance policies are contracts of adhesion.
B. insurance policies are conditional contracts.
C. insurance policies are contracts of utmost good faith.
D. insurance policies are personal contracts. - ANSWER-A. insurance policies are
contracts of adhesion.
"We will provide the insurance described in this policy in return for the premium and
compliance with all applicable provisions of this policy." In which section of the
insurance policy would this statement be found?
A. Definitions
B. Declarations
C. Insuring Agreement
D. Endorsements - ANSWER-C. Insuring Agreement
Melinda's home sustained $6,500 in damage when Jared ran into it with his truck.
Melinda received $6,500 from her insurance company, and Jared also paid her $5,000.
Melinda has now profited from this loss and is in violation of:
A. the principle of subrogation.
B. federal law.
C. the principle of indemnity.
D. state law. - ANSWER-C. the principle of indemnity.
Sandra rear-ended Randy's car when he stopped quickly for a yellow light that she was
sure they were both going to make. The damage was minor, but Sandra was worried
her premiums would increase if the accident was reported, so she gave Randy $500 in
an effort to keep it just between the two of them. However, Randy filed the claim with his
insurance company and received a settlement check for $750. What has Randy
violated?
A. The principle of insurable interest
B. The principle of subrogation
,C. The principle of indemnity
D. The principle of loss minimization - ANSWER-C. The principle of indemnity
Darnell is applying for auto insurance with his agent. Currently, he only wants to get a
minimal amount of coverage to keep his premiums as low as possible, so he decides
not to include uninsured motorist coverage on his policy. His agent has him sign a
document giving up his right to this coverage. What is this called?
A. A warranty
B. An express waiver
C. A binder
D. An implied waiver - ANSWER-B. An express waiver
An insurance policy's declarations page contains all of the following, EXCEPT:
A. the deductible.
B. the dates of the policy term.
C. the perils insured against.
D. the coverage limit. - ANSWER-C. the perils insured against.
An economic device used to protect against the risk of realizing unforeseen and
extraordinary financial loss is called:
A. risk avoidance.
B. insurance.
C. indemnification.
D. subrogation. - ANSWER-B. insurance.
Which of the following does NOT constitute a legal termination of a contract offer?
A. Rejection by offeree
B. Request for more information
C. Termination by operation of law
D. Revocation by offeror - ANSWER-B. Request for more information
The Principle of Indemnity is designed to prevent:
A. having multiple payees on a policy.
B. an insured from making a profit.
C. insurers from making a profit.
D. subrogation. - ANSWER-B. an insured from making a profit.
Jason's auto policy states that the insurer may cancel coverage if Jason pays a
premium 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 would be
true?
A. The principle of utmost good faith prevents the insurer from denying coverage in this
case.
B. The principle of utmost good faith allows the insurer to deny coverage in this case.
C. The principle of estoppel prevents the insurer from denying coverage in this case.
D. The principle of estoppel allows the insurer to deny coverage in this case. -
ANSWER-C. The principle of estoppel prevents the insurer from denying coverage in
this case.
Lee, the owner of Antonia's Bakery, wants to expand operations and start catering. He
hires Geoffrey to manage the new catering department and quickly realizes that he
might have made a mistake. Geoffrey makes inappropriate comments to other
employees, seems to be dishonest in his dealings with money, and is a reckless driver.
How would Lee effectively practice risk avoidance in this case?
A. Fire Geoffrey
B. Have a company-wide meeting about appropriate language in the workplace
C. Purchase employee theft coverage
D. Hire another new employee to be Geoffrey's supervisor - ANSWER-A. Fire Geoffrey
Natalie's brakes have been squealing for several months. Every time she drives her car,
she's reminded that she needs to have them replaced, but she forgets all about it as
soon as she gets out of the car. Natalie's actions can be considered a:
A. physical hazard.
B. peril.
C. morale hazard.
D. risk. - ANSWER-C. morale hazard.
The law of large numbers states that:
A. insuring a greater number of units increases the likelihood of loss for the insurer.
B. insuring a greater number of units increases the accuracy of the insurer's loss
predictions.
C. insuring a greater number of units increases the effect of statistical outliers on loss
predictions.
D. insuring a greater number of units makes the insurer's losses less predictable. -
ANSWER-B. insuring a greater number of units increases the accuracy of the insurer's
loss predictions.
A hailstorm moves over Erin's restaurant. Large hailstones break through a skylight and
water pours in, damaging the flooring in the restaurant. Additionally, the electrical
system shorts out and Erin has to close for three days. The hail would be considered:
, A. a direct loss.
B. an indirect loss.
C. the physical hazard.
D. the proximate cause of the loss. - ANSWER-D. the proximate cause of the loss.
Which of the following is NOT typically associated with strict liability?
A. Housing exotic or wild animals
B. Working with electronics
C. Using firearms
D. Handling explosives - ANSWER-B. Working with electronics
A retail store institutes a training program for all cashiers, to help them identify and deter
shoplifters. This is an example of:
A. risk avoidance.
B. risk transference.
C. risk reduction.
D. risk retention. - ANSWER-C. risk reduction.
A lion at a zoo escaped when a zoo employee failed to follow protocol. The lion injured
a zoo patron. In court, the injured patron's lawyer could invoke the doctrine of:
A. Contributory negligence.
B. Res Ipsa Loquitur.
C. Comparative negligence.
D. Assumption of Risk. - ANSWER-B. Res Ipsa Loquitur.
Jim is completely "upside down" financially on his car. He owes the finance company
$8,000. If he sells the car, he knows he'll only get about $4,000 for it. But Jim knows
that if the car was somehow stolen, his insurance company would pay him somewhere
in the neighborhood of $7,000. Jim decides to have a friend steal the car and "make it
disappear." Jim then files a claim with his insurance company to report his car stolen.
Which best represents Jim's actions?
A. Concealment
B. Factual misrepresentation
C. Soft fraud
D. Hard fraud - ANSWER-D. Hard fraud
A few weeks ago, Grace's garage was destroyed by an out-of-control motorist named
Zach. Fortunately, Zach had sufficient liability insurance to cover the damages, but
Zach's insurer is giving Grace the runaround negotiating the claim. Grace finally files a
complaint, forcing Zach to:
A. issue a judgement.
