STATE FARM EXAM 2025 WITH CORRECT ANSWERS

STATE FARM EXAM 2025 WITH
CORRECT ANSWERS




Abandonment -correct answer The abdication of insured property into the hands of another,
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or into the possession of no one in particular.
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Absolute Liability -correct answer A type of liability that occurs due to extremely dangerous
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operations, such as the use of explosives or working at extreme heights.
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Accident -correct answer An unplanned, unforeseen event which occurs suddenly and at a
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specific place. s




Actual Cash Value (ACV) -correct answer The required amount to pay damages or for
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property loss, which is calculated based on the property's current replacement value minus
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depreciation.

Additional Coverage -correct answer A provision in an insurance policy that allows for more
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coverage for specific loss expense without increase in premium.
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Additional Insureds -correct answer Individuals or business that are not named as insured on
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the declaration page, but are protected by the policy, usually in regard to a specific interest.
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Adhesion -correct answer A contract offered on a "take-it-or-leave-it" basis by an insurer, in
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which the insured's only option is to accept or reject the contract. Any ambiguities in the
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contract will be settled in favor of the insured.
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Admitted Insurer -correct answer An insurance company authorized and licensed to transact
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business in a particular state. s s s s

, Adverse Selection -correct answer The tendency of risks with higher probability of loss to
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purchase and maintain insurance more often than the risks who present lower probability.
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Agent -correct answer An individual who is licensed to sell, negotiate, or effect insurance
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contracts on behalf of an insurer. s s s s s




Aggregate Limit -correct answer The maximum limit of coverage available under a liability
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policy during a policy year regardless of the number of claims that may be made or the number
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of accidents that may occur.
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Agreed Value -correct answer A property policy with a provision agreed upon by the insurer
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and insured as to the amount of insurance that represents a fair valuation for the property at
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the time the insurance is written.
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Aleatory -correct answer A contract in which the participating parties agree to exchange
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unequal amounts. Insurance contracts are aleatory in that the amount the insured will pay in
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premiums is unequal to the amount the insurer will pay in the event of a loss.
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Alien Insurer -correct answer An insurance company that is incorporated outside the United
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States.

Apparent Authority -correct answer The appearance or the assumption of authority based on
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the actions, words, or deeds of the principal or because of circumstances the principal
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created.

Appraisal -correct answer An assessment of property to determine either the correct amount
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of insurance to be written or the amount of loss to be paid.
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Arbitration -correct answer Method of claim settlement used when the insured and insurer
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cannot agree upon the amount of the loss. s s s s s s s




Assignment -correct answer The transfer of a legal right or interest in an insurance policy. In s s s s s s s s s s s s s s s s




property and casualty insurance, assignments of policies are usually valid only with the prior
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written consent of the insurer. s s s s




Authorized Insurer -correct answer An insurance company that has qualified and received a s s s s s s s s s s s s s




Certificate of Authority from the Department of Insurance to transact insurance in the state.
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Auto -correct answer A land motor vehicle, trailer, or semi-trailer designed for use on public
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roads, including attached machinery or equipment; auto does not include mobile equipment.
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Avoidance -correct answer A method of dealing with risk by deliberately keeping away from it
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(e.g. if a person wanted to avoid the risk of being killed in an airplane crash, he/she might
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choose never to fly in a plane). s s s s s s