COLORADO INSURANCE CLAIMS ADJUSTING EXAM
QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) Q&A 2026|INSTANT DOWNLAOD PDF
1. Which principle requires that both parties in an insurance
contract provide truthful and complete information?
A. Indemnity
B. Utmost good faith
C. Subrogation
D. Insurable interest
Correct answer: B. Utmost good faith
Rationale: Insurance contracts require honesty from both
insurer and insured. “Utmost good faith” means full disclosure
of all material facts. Indemnity relates to restoring loss,
subrogation is recovery rights, and insurable interest is financial
stake in the insured item.
2. What is the primary purpose of insurance?
A. To eliminate all risks
B. To transfer risk from insured to insurer
C. To guarantee profit for the insured
D. To prevent losses entirely
Correct answer: B. To transfer risk from insured to insurer
,Rationale: Insurance does not eliminate risk; it spreads or
transfers financial risk. Loss prevention is separate, and
insurance does not guarantee profit or remove risk completely.
3. The concept of indemnity means:
A. Paying more than the loss suffered
B. Restoring the insured to the same financial position as
before the loss
C. Punishing negligent parties
D. Ignoring partial losses
Correct answer: B. Restoring the insured to the same financial
position as before the loss
Rationale: Indemnity ensures no profit from insurance.
Overpayment (A) violates indemnity, and C–D are unrelated.
4. What is a deductible in an insurance policy?
A. The total policy limit
B. The amount the insurer refuses to pay
C. The amount the insured pays before coverage applies
D. A penalty fee charged by the insurer
Correct answer: C. The amount the insured pays before
coverage applies
Rationale: Deductibles reduce small claims and share risk. It is
not a penalty or denial of coverage.
,5. Subrogation allows the insurer to:
A. Cancel the policy after a claim
B. Increase premiums after loss
C. Recover claim payments from a responsible third party
D. Deny all future claims
Correct answer: C. Recover claim payments from a responsible
third party
Rationale: Subrogation prevents the insured from double
recovery and allows insurers to pursue liable parties.
6. Which of the following is required for an insurable interest?
A. Emotional attachment only
B. Financial loss if damage occurs
C. Ownership of government property
D. Verbal agreement only
Correct answer: B. Financial loss if damage occurs
Rationale: Insurable interest must involve measurable financial
exposure to loss.
7. What is the purpose of underwriting?
A. Investigating fraud after a claim
B. Selecting and pricing risk before issuing a policy
, C. Paying claims quickly
D. Managing customer complaints
Correct answer: B. Selecting and pricing risk before issuing a
policy
Rationale: Underwriting evaluates risk before policy issuance,
not after claims occur.
8. A peril in insurance refers to:
A. The policy contract
B. The cause of loss
C. The insured property value
D. The premium amount
Correct answer: B. The cause of loss
Rationale: Perils include fire, theft, wind, etc. They are causes
of damage.
9. A hazard in insurance is best defined as:
A. The insurance policy
B. A condition that increases the likelihood of loss
C. The claim settlement amount
D. The insured property
Correct answer: B. A condition that increases the likelihood of
loss
QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) Q&A 2026|INSTANT DOWNLAOD PDF
1. Which principle requires that both parties in an insurance
contract provide truthful and complete information?
A. Indemnity
B. Utmost good faith
C. Subrogation
D. Insurable interest
Correct answer: B. Utmost good faith
Rationale: Insurance contracts require honesty from both
insurer and insured. “Utmost good faith” means full disclosure
of all material facts. Indemnity relates to restoring loss,
subrogation is recovery rights, and insurable interest is financial
stake in the insured item.
2. What is the primary purpose of insurance?
A. To eliminate all risks
B. To transfer risk from insured to insurer
C. To guarantee profit for the insured
D. To prevent losses entirely
Correct answer: B. To transfer risk from insured to insurer
,Rationale: Insurance does not eliminate risk; it spreads or
transfers financial risk. Loss prevention is separate, and
insurance does not guarantee profit or remove risk completely.
3. The concept of indemnity means:
A. Paying more than the loss suffered
B. Restoring the insured to the same financial position as
before the loss
C. Punishing negligent parties
D. Ignoring partial losses
Correct answer: B. Restoring the insured to the same financial
position as before the loss
Rationale: Indemnity ensures no profit from insurance.
Overpayment (A) violates indemnity, and C–D are unrelated.
4. What is a deductible in an insurance policy?
A. The total policy limit
B. The amount the insurer refuses to pay
C. The amount the insured pays before coverage applies
D. A penalty fee charged by the insurer
Correct answer: C. The amount the insured pays before
coverage applies
Rationale: Deductibles reduce small claims and share risk. It is
not a penalty or denial of coverage.
,5. Subrogation allows the insurer to:
A. Cancel the policy after a claim
B. Increase premiums after loss
C. Recover claim payments from a responsible third party
D. Deny all future claims
Correct answer: C. Recover claim payments from a responsible
third party
Rationale: Subrogation prevents the insured from double
recovery and allows insurers to pursue liable parties.
6. Which of the following is required for an insurable interest?
A. Emotional attachment only
B. Financial loss if damage occurs
C. Ownership of government property
D. Verbal agreement only
Correct answer: B. Financial loss if damage occurs
Rationale: Insurable interest must involve measurable financial
exposure to loss.
7. What is the purpose of underwriting?
A. Investigating fraud after a claim
B. Selecting and pricing risk before issuing a policy
, C. Paying claims quickly
D. Managing customer complaints
Correct answer: B. Selecting and pricing risk before issuing a
policy
Rationale: Underwriting evaluates risk before policy issuance,
not after claims occur.
8. A peril in insurance refers to:
A. The policy contract
B. The cause of loss
C. The insured property value
D. The premium amount
Correct answer: B. The cause of loss
Rationale: Perils include fire, theft, wind, etc. They are causes
of damage.
9. A hazard in insurance is best defined as:
A. The insurance policy
B. A condition that increases the likelihood of loss
C. The claim settlement amount
D. The insured property
Correct answer: B. A condition that increases the likelihood of
loss
