Adjuster License Exam Questions with
correct Answers 2025-2026 100% Verified.
Insurance Defined; The Laws of large numbers; The Principle of Indemnity; Insurable Interest;
The Principle of Risk; Peril vs Hazard; Risk Management; Underwriting; Reinsurance - ANS-
1: Which of the following best demonstrates a moral Hazard? - ANS-A recent purchaser of auto
insurance drives less carefully, knowing that the insurer will cover any losses that occur
2: Risk is best defined as: - ANS-An uncertainty of a loss
3: Which of the following is most likely to be uninsurable? - ANS-The purchaser of a new home
wants to protect herself from a possible drop in housing prices
4: Which of the following most accurately describes reinsurance - ANS-When an insurance
company buys insurance for some of the risks for which it has issued coverage
5: The attempt to restore an insured to his or her financial condition before a loss occurred is
best described as - ANS-Indemnification
6: A risk where both profit and loss are possible is known as - ANS-Speculative
7: Which of the following is a true statement regarding the Law of Large Numbers - ANS-The L
of L #'s states that as the number of insured unit's increases, the ability to predict losses
increase
8: Which of the following is true regarding pure and speculative risks - ANS-With pure risk there
is only the possibility of loss
9: An insurance contract must comply with the "Principle of Indemnity" Jarron's friend Nick
accidentally destroys Jarron"s laptop computer. Nick pays Jarron for the damages, but Jarron
also submits a claim to his insurance company for the laptop. The claim will be: - ANS-Denied
because Jarron has already been paid for the damage
10: Which of the following would be an example of a moral hazard? - ANS-Embezzlement
11: Adverse selection occurs when - ANS-Applicants are accepted by the insurer with little or
no attention given to underwriting
,12: A church has had the woodwork in the building refinished and new stain and varnish has
been applied. The workers placed the rags and brushes that were used to apply the varnish in a
small closet and closed the door, creating the possibility of spontaneous combustion. Which of
the following terms best describes this condition? - ANS-Hazard
13: Meg has been in very good health in the past 3 years. She has been exercising, her blood
pressure is at a perfect level and her cholesterol is the envy of all her friends. Because Meg is
feeling so healthy, she decides to cancel her health insurance policy. This is an example of
which of the following risk management methods - ANS-Risk retention
14: Which of the following statements is not true concerning the Law of Large numbers? -
ANS-The size of the sample group is not relevant to the accuracy of the results
15: Which of the following is not a hazard - ANS-A fire started in a wastebasket
16: Max lives in a large apartment complex where there is no guard station or gate. Several
hundred people live in the complex so it's very easy to determine the work schedules of the
neighbors living around him. One morning Max leaves for work at 6:30am as he usually does,
but he forgets to lock the front door. Later that morning someone comes into the apartment and
steals Max's computer. What was the peril in this situation? - ANS-The theft of the computer
17: Horatio is a business owner who is part of a business owners group that is buying old
commercial buildings in their small city and refurbishing them. Horatio has bought a beautiful
historical building made mostly of wood. He knows that he should install a sprinkler system right
away to prevent a fire. What risk management strategy is Horatio using? - ANS-Risk reduction
18: All of the following are characteristics of an insurable risk, EXCEPT? - ANS-The loss must
be catastrophic in nature
19: When a person purchases several insurance policies to provide more coverage on a risk
than the value of the possible loss, it is known as? - ANS-Over insurance
20: A slippery floor is an example of? - ANS-A physical hazard
21: The principle of indemnity is illustrated by which of the following? - ANS-Restores an
insured to the same condition enjoyed before a loss
An insured has fabricated a claim so that it would appear to be legitimate. This would be? -
ANS-Moral hazard
23: Which of the following is not a common risk management technique? - ANS-Multiply the risk
by engaging in hazardous activities
,24: Which of the following is the primary source of information used by insurance companies
during the underwriting process - ANS-The application for insurance
A 100 year flood is an example of what type of Risk - ANS-Static Risk
Elements of a Valid Contract; Parties to a Contract; Characteristics of a Contract; Legal
Interpretations Affecting a Contract - ANS-
1: Which of the following terms is used to describe a contract where the insurance company is
the only party that is legally bound to perform its part of the agreement? - ANS-Unilateral
2: A warranty in insurance is best described as which of the following? - ANS-A guarantee that
the statements made by the applicant are completely true and untrue statements can void the
coverage
3: Milton agrees to steal and wreck Albert's car for $4000.00, so that Albert can collect $8000.00
under his auto insurance policy. Which of the elements of a valid contract are missing in this
agreement? - ANS-Legal purpose
4: Vanessa states on an application for personal automobile insurance, that she has had no car
accidents within the past 3 years. She later remembers an accident and corrects this statement
to include an accident that occurred 2 years ago. Vanessa's original statement can be describes
as? - ANS-A representation
5: Which of the following best demonstrates the meaning of "contract of adhesion"? -
ANS-Since the insurance company formulates the policy language, the courts usually will
resolve any ambiguities in the insured's favor
6: Which of the following would not have the capacity to enter into an insurance contract -
ANS-A person who is under the influence of drugs at the time the agreement was made
7: Which of the following is a statement that is guaranteed to be the truth throughout the
duration of the policy - ANS-A warranty
8: Which of the following statements best describes a "Representation" made in an insurance
application - ANS-A representation is a statement made by the applicant that he believes to be
true when made, but which might prove to be false
An applicant fails to disclose known facts when completing an application for insurance. This is
known as? - ANS-Concealment
10: Any intentional misinformation provide by an applicant for an insurance policy that would
have kept the insurance company from issuing the policy had that information been known is? -
ANS-A material misrepresentational
, 11: Which of the following parts of the insurance contract contains the "contractual agreement"
between the insurance company and the insured? - ANS-The insuring agreement
12: In order for a contract to be binding in a court of law, it must be designed for: - ANS-Legal
purposes
13: An intentional act designed to deceive and induce another party to part with something of
value is known as? - ANS-Legal purposes
14: Which of the following best describes the purpose of the "insuring agreement" contained in
an insurance policy? - ANS-The insuring agreement
14: Which of the following best describes the purpose of the "insuring agreement" contained in
an insurance policy? - ANS-To the insurer's promise to pay in case of a loss
15: An element of a valid contract must involve an offer and an acceptance. Sebastian
completes an application for auto insurance and submits it to Indemnify Insurance Company.
Who made the offer? - ANS-Sebastian
16: The conditions section of an insurance policy sets forth the? - ANS-Duties of the insured
and the insurance company
17: Estoppel is best exemplified by which of the following? - ANS-An insurer is prohibited from
denying a claim because its appointed producer advised the insured the claim covered
18: In which part of an insurance contract would you expect to find a description of the duties
and obligations of the insured? - ANS-The Conditions
19: Which of the following people is committing "hard fraud" - ANS-Ally wants her insurer to buy
her a new truck, so she pushes her current truck off a cliff and files an auto accident claim
20: An insurance contract is considered to be an aleatory contract. All of the following are
characteristics of an aleatory contract except? - ANS-
The contract allows the insured to receive a return in claims payments that is nearly equal to the
amount paid in premium - ANS-The contract allows the insured to receive a return in claims
payments that is nearly equal to the amount paid in premium
21: The law recognizes 2 types of waivers. They are? - ANS-Express/ Implied
22: The doctrine that states an insured's policy should provide the coverage that a sensible and
prudent person would expect is? - ANS-The Reasonable expectations doctrine
correct Answers 2025-2026 100% Verified.
Insurance Defined; The Laws of large numbers; The Principle of Indemnity; Insurable Interest;
The Principle of Risk; Peril vs Hazard; Risk Management; Underwriting; Reinsurance - ANS-
1: Which of the following best demonstrates a moral Hazard? - ANS-A recent purchaser of auto
insurance drives less carefully, knowing that the insurer will cover any losses that occur
2: Risk is best defined as: - ANS-An uncertainty of a loss
3: Which of the following is most likely to be uninsurable? - ANS-The purchaser of a new home
wants to protect herself from a possible drop in housing prices
4: Which of the following most accurately describes reinsurance - ANS-When an insurance
company buys insurance for some of the risks for which it has issued coverage
5: The attempt to restore an insured to his or her financial condition before a loss occurred is
best described as - ANS-Indemnification
6: A risk where both profit and loss are possible is known as - ANS-Speculative
7: Which of the following is a true statement regarding the Law of Large Numbers - ANS-The L
of L #'s states that as the number of insured unit's increases, the ability to predict losses
increase
8: Which of the following is true regarding pure and speculative risks - ANS-With pure risk there
is only the possibility of loss
9: An insurance contract must comply with the "Principle of Indemnity" Jarron's friend Nick
accidentally destroys Jarron"s laptop computer. Nick pays Jarron for the damages, but Jarron
also submits a claim to his insurance company for the laptop. The claim will be: - ANS-Denied
because Jarron has already been paid for the damage
10: Which of the following would be an example of a moral hazard? - ANS-Embezzlement
11: Adverse selection occurs when - ANS-Applicants are accepted by the insurer with little or
no attention given to underwriting
,12: A church has had the woodwork in the building refinished and new stain and varnish has
been applied. The workers placed the rags and brushes that were used to apply the varnish in a
small closet and closed the door, creating the possibility of spontaneous combustion. Which of
the following terms best describes this condition? - ANS-Hazard
13: Meg has been in very good health in the past 3 years. She has been exercising, her blood
pressure is at a perfect level and her cholesterol is the envy of all her friends. Because Meg is
feeling so healthy, she decides to cancel her health insurance policy. This is an example of
which of the following risk management methods - ANS-Risk retention
14: Which of the following statements is not true concerning the Law of Large numbers? -
ANS-The size of the sample group is not relevant to the accuracy of the results
15: Which of the following is not a hazard - ANS-A fire started in a wastebasket
16: Max lives in a large apartment complex where there is no guard station or gate. Several
hundred people live in the complex so it's very easy to determine the work schedules of the
neighbors living around him. One morning Max leaves for work at 6:30am as he usually does,
but he forgets to lock the front door. Later that morning someone comes into the apartment and
steals Max's computer. What was the peril in this situation? - ANS-The theft of the computer
17: Horatio is a business owner who is part of a business owners group that is buying old
commercial buildings in their small city and refurbishing them. Horatio has bought a beautiful
historical building made mostly of wood. He knows that he should install a sprinkler system right
away to prevent a fire. What risk management strategy is Horatio using? - ANS-Risk reduction
18: All of the following are characteristics of an insurable risk, EXCEPT? - ANS-The loss must
be catastrophic in nature
19: When a person purchases several insurance policies to provide more coverage on a risk
than the value of the possible loss, it is known as? - ANS-Over insurance
20: A slippery floor is an example of? - ANS-A physical hazard
21: The principle of indemnity is illustrated by which of the following? - ANS-Restores an
insured to the same condition enjoyed before a loss
An insured has fabricated a claim so that it would appear to be legitimate. This would be? -
ANS-Moral hazard
23: Which of the following is not a common risk management technique? - ANS-Multiply the risk
by engaging in hazardous activities
,24: Which of the following is the primary source of information used by insurance companies
during the underwriting process - ANS-The application for insurance
A 100 year flood is an example of what type of Risk - ANS-Static Risk
Elements of a Valid Contract; Parties to a Contract; Characteristics of a Contract; Legal
Interpretations Affecting a Contract - ANS-
1: Which of the following terms is used to describe a contract where the insurance company is
the only party that is legally bound to perform its part of the agreement? - ANS-Unilateral
2: A warranty in insurance is best described as which of the following? - ANS-A guarantee that
the statements made by the applicant are completely true and untrue statements can void the
coverage
3: Milton agrees to steal and wreck Albert's car for $4000.00, so that Albert can collect $8000.00
under his auto insurance policy. Which of the elements of a valid contract are missing in this
agreement? - ANS-Legal purpose
4: Vanessa states on an application for personal automobile insurance, that she has had no car
accidents within the past 3 years. She later remembers an accident and corrects this statement
to include an accident that occurred 2 years ago. Vanessa's original statement can be describes
as? - ANS-A representation
5: Which of the following best demonstrates the meaning of "contract of adhesion"? -
ANS-Since the insurance company formulates the policy language, the courts usually will
resolve any ambiguities in the insured's favor
6: Which of the following would not have the capacity to enter into an insurance contract -
ANS-A person who is under the influence of drugs at the time the agreement was made
7: Which of the following is a statement that is guaranteed to be the truth throughout the
duration of the policy - ANS-A warranty
8: Which of the following statements best describes a "Representation" made in an insurance
application - ANS-A representation is a statement made by the applicant that he believes to be
true when made, but which might prove to be false
An applicant fails to disclose known facts when completing an application for insurance. This is
known as? - ANS-Concealment
10: Any intentional misinformation provide by an applicant for an insurance policy that would
have kept the insurance company from issuing the policy had that information been known is? -
ANS-A material misrepresentational
, 11: Which of the following parts of the insurance contract contains the "contractual agreement"
between the insurance company and the insured? - ANS-The insuring agreement
12: In order for a contract to be binding in a court of law, it must be designed for: - ANS-Legal
purposes
13: An intentional act designed to deceive and induce another party to part with something of
value is known as? - ANS-Legal purposes
14: Which of the following best describes the purpose of the "insuring agreement" contained in
an insurance policy? - ANS-The insuring agreement
14: Which of the following best describes the purpose of the "insuring agreement" contained in
an insurance policy? - ANS-To the insurer's promise to pay in case of a loss
15: An element of a valid contract must involve an offer and an acceptance. Sebastian
completes an application for auto insurance and submits it to Indemnify Insurance Company.
Who made the offer? - ANS-Sebastian
16: The conditions section of an insurance policy sets forth the? - ANS-Duties of the insured
and the insurance company
17: Estoppel is best exemplified by which of the following? - ANS-An insurer is prohibited from
denying a claim because its appointed producer advised the insured the claim covered
18: In which part of an insurance contract would you expect to find a description of the duties
and obligations of the insured? - ANS-The Conditions
19: Which of the following people is committing "hard fraud" - ANS-Ally wants her insurer to buy
her a new truck, so she pushes her current truck off a cliff and files an auto accident claim
20: An insurance contract is considered to be an aleatory contract. All of the following are
characteristics of an aleatory contract except? - ANS-
The contract allows the insured to receive a return in claims payments that is nearly equal to the
amount paid in premium - ANS-The contract allows the insured to receive a return in claims
payments that is nearly equal to the amount paid in premium
21: The law recognizes 2 types of waivers. They are? - ANS-Express/ Implied
22: The doctrine that states an insured's policy should provide the coverage that a sensible and
prudent person would expect is? - ANS-The Reasonable expectations doctrine
