Insurance Adjusting- LA Exam Questions and Answers Fully Solved
Adhesion - Answers Insurance policies are contracts of adhesion, which means that one party (the
insurer) dictates the terms, and the other party (the inured) simply accepts or rejects them. One
implication of this arrangement is that any ambiguities in the contract will be interpreted in the favor of
the insured; in this case, in favor of Stephen.
During a storm, lightning strikes a tree in Norman's back yard, causing it to fall on his house and damage
his roof. In this case, Norman's fallen tree is considered: - Answers In this case, Norman's fallen tree
would be considered a direct loss.
A(n) ________ is a bilateral statement that must be signed by the policyholder. It says that the insurer
may continue to investigate a claim or defend the policyholder in court, but that it still keeps its right to
deny coverage. - Answers reservation of rights
Which of the following is TRUE for tort law? - Answers
A pre-defined monetary portion of an insurance claim paid by a policyholder is a: - Answers a deductible.
Roxanne bought her 50" TV four years ago for $2,400. During a storm, her house was struck by lightning
and the current fried her TV. The TV depreciates at $400 per year and a similar TV costs $1,200 today.
Assuming Roxanne's homeowners policy has a replacement cost endorsement for personal property,
how much can she expect to receive in indemnification for her damaged TV? - Answers she will receive
$1,200 for indemnification: the amount it would take to replace the damaged television.
appraisal - Answers opposing parties each choose an appraiser, and then the two appraisers decide on a
third party, called an umpire. When at least two of these three representatives agree on a settlement,
their decision is binding.
Sara's home was partially destroyed by a fire and she insists it will cost $97,000 to repair the damage.
However, after completing his investigation, the adjuster determined the repairs could be done for
$65,000. All attempts at negotiation have failed. Even though it's risky to go to court, why might the
insurer decide to pursue that course of action? - Answers Despite the drawbacks of litigation, the insurer
may decide to go to court to avoid developing a reputation of being a pushover, which could make
future claims more difficult.
What is the main difference between a Full Release Settlement and a No Release Settlement? - Answers
In a Full Release Settlement, the claimant signs a release form giving up the right to additional
indemnification; in a No Release Settlement, the claimant does not sign a release form.
Which of the following is NOT true of arbitration? - Answers Arbitrators often have more expertise than
juries.
, n insurer can use a Reservation of Rights letter to let the claimant know that the adjuster will begin the
claim process, but might deny coverage if it becomes clear that the policy does not apply to the losses,
or if the claim was reported too late. - Answers
Which of the following statements applies to actual cash value? - Answers Actual cash value generally
reflects the fair market value of an item.
franchise deductible - Answers With a franchise deductible, the policyholder only pays for damages that
are less than his deductible. If the cost of damages equals or exceeds his deductible, the insurer pays the
full amount and the policyholder pays nothing.
Jack's home is valued at $950,000. How much insurance does he need to carry on his home in order to
be fully insured under a typical insurance policy? - Answers Jack must carry at least $760,000 (80% of the
value of his home) in insurance in order to be fully insured.
Joe is looking for information in his Standard Fire Policy, relating to policy cancellation, assignment, and
subrogation. In which section would he find this information? - Answers Conditions
Nichole's car was damaged while it was being serviced at Don's Auto Shop. Nichole's auto insurance
policy covers physical damage to her vehicle, but it will not cover the damage that occurred while the
vehicle was under the control of Don's Auto Shop. Which provision in her policy states this? - Answers
Since Nichole's car was in the care and control of Don's Auto Shop, Don's Auto Shop is responsible for
the damages, according to the No Benefit to Bailee condition of Nichole's policy.
Roxanne bought her 50" TV four years ago for $2,400. During a storm, her house is struck by lightning
and the current fries her TV. The TV depreciates $400 per year, and a similar TV costs $1,800 today.
Assuming Roxanne's homeowners policy pays ACV for personal property, how much can she expect to
receive in indemnification for the damaged TV? - Answers You can calculate ACV by subtracting the total
depreciation from the Replacement cost. In this case, the TV is four years old and has depreciated $400
per year. This means the total depreciation = $1,600. The replacement cost is $1,800. So, subtract
$1,600 from $1,800 and you get $200.
Joanne sells her house to her sister, Dianne. To save Dianne the trouble of finding her own homeowners
policy, Joanne calls up her insurance company and tells them that Dianne bought her house and any
future claim settlements should be paid to Dianne. Joanne's insurer tells her that they can't do that
because of which condition? - Answers The assignment condition states that the policyholder cannot
transfer the policy to someone else unless the insurer agrees to the change in writing.
Bill's home was destroyed by a tornado, and Nick is adjusting the claim. Bill's home will cost $235,000 to
rebuild. His homeowners policy has a $225,000 limit and a $1,700 deductible. How much would Nick
typically calculate the final settlement amount to be? - Answers Because the cost of repairs is more than
the policy limit, the final settlement amount is the full policy limit ($225,000) and the deductible is
absorbed into the amount of the loss that exceeds the limit.
Adhesion - Answers Insurance policies are contracts of adhesion, which means that one party (the
insurer) dictates the terms, and the other party (the inured) simply accepts or rejects them. One
implication of this arrangement is that any ambiguities in the contract will be interpreted in the favor of
the insured; in this case, in favor of Stephen.
During a storm, lightning strikes a tree in Norman's back yard, causing it to fall on his house and damage
his roof. In this case, Norman's fallen tree is considered: - Answers In this case, Norman's fallen tree
would be considered a direct loss.
A(n) ________ is a bilateral statement that must be signed by the policyholder. It says that the insurer
may continue to investigate a claim or defend the policyholder in court, but that it still keeps its right to
deny coverage. - Answers reservation of rights
Which of the following is TRUE for tort law? - Answers
A pre-defined monetary portion of an insurance claim paid by a policyholder is a: - Answers a deductible.
Roxanne bought her 50" TV four years ago for $2,400. During a storm, her house was struck by lightning
and the current fried her TV. The TV depreciates at $400 per year and a similar TV costs $1,200 today.
Assuming Roxanne's homeowners policy has a replacement cost endorsement for personal property,
how much can she expect to receive in indemnification for her damaged TV? - Answers she will receive
$1,200 for indemnification: the amount it would take to replace the damaged television.
appraisal - Answers opposing parties each choose an appraiser, and then the two appraisers decide on a
third party, called an umpire. When at least two of these three representatives agree on a settlement,
their decision is binding.
Sara's home was partially destroyed by a fire and she insists it will cost $97,000 to repair the damage.
However, after completing his investigation, the adjuster determined the repairs could be done for
$65,000. All attempts at negotiation have failed. Even though it's risky to go to court, why might the
insurer decide to pursue that course of action? - Answers Despite the drawbacks of litigation, the insurer
may decide to go to court to avoid developing a reputation of being a pushover, which could make
future claims more difficult.
What is the main difference between a Full Release Settlement and a No Release Settlement? - Answers
In a Full Release Settlement, the claimant signs a release form giving up the right to additional
indemnification; in a No Release Settlement, the claimant does not sign a release form.
Which of the following is NOT true of arbitration? - Answers Arbitrators often have more expertise than
juries.
, n insurer can use a Reservation of Rights letter to let the claimant know that the adjuster will begin the
claim process, but might deny coverage if it becomes clear that the policy does not apply to the losses,
or if the claim was reported too late. - Answers
Which of the following statements applies to actual cash value? - Answers Actual cash value generally
reflects the fair market value of an item.
franchise deductible - Answers With a franchise deductible, the policyholder only pays for damages that
are less than his deductible. If the cost of damages equals or exceeds his deductible, the insurer pays the
full amount and the policyholder pays nothing.
Jack's home is valued at $950,000. How much insurance does he need to carry on his home in order to
be fully insured under a typical insurance policy? - Answers Jack must carry at least $760,000 (80% of the
value of his home) in insurance in order to be fully insured.
Joe is looking for information in his Standard Fire Policy, relating to policy cancellation, assignment, and
subrogation. In which section would he find this information? - Answers Conditions
Nichole's car was damaged while it was being serviced at Don's Auto Shop. Nichole's auto insurance
policy covers physical damage to her vehicle, but it will not cover the damage that occurred while the
vehicle was under the control of Don's Auto Shop. Which provision in her policy states this? - Answers
Since Nichole's car was in the care and control of Don's Auto Shop, Don's Auto Shop is responsible for
the damages, according to the No Benefit to Bailee condition of Nichole's policy.
Roxanne bought her 50" TV four years ago for $2,400. During a storm, her house is struck by lightning
and the current fries her TV. The TV depreciates $400 per year, and a similar TV costs $1,800 today.
Assuming Roxanne's homeowners policy pays ACV for personal property, how much can she expect to
receive in indemnification for the damaged TV? - Answers You can calculate ACV by subtracting the total
depreciation from the Replacement cost. In this case, the TV is four years old and has depreciated $400
per year. This means the total depreciation = $1,600. The replacement cost is $1,800. So, subtract
$1,600 from $1,800 and you get $200.
Joanne sells her house to her sister, Dianne. To save Dianne the trouble of finding her own homeowners
policy, Joanne calls up her insurance company and tells them that Dianne bought her house and any
future claim settlements should be paid to Dianne. Joanne's insurer tells her that they can't do that
because of which condition? - Answers The assignment condition states that the policyholder cannot
transfer the policy to someone else unless the insurer agrees to the change in writing.
Bill's home was destroyed by a tornado, and Nick is adjusting the claim. Bill's home will cost $235,000 to
rebuild. His homeowners policy has a $225,000 limit and a $1,700 deductible. How much would Nick
typically calculate the final settlement amount to be? - Answers Because the cost of repairs is more than
the policy limit, the final settlement amount is the full policy limit ($225,000) and the deductible is
absorbed into the amount of the loss that exceeds the limit.
