NC CLAIMS ADJUSTER UPDATED EXAMS SCRIPT
QUESTIONS AND SOLUTIONS RATED A+
✔✔Loss - ✔✔-reduction in value of an insured item
-financial loss due to an occurrence or accident
-for insurers: the amount paid out in a claims settlement
examples:
1) reduction in Dan's car after an accident
2) medical bills for Dan's injured wrist
3) what the insurer has to pay Dan for his property damage and injury
✔✔Insurable Risk - ✔✔-risk: an item, person, or organization that has been insured
-not everything is insurable
example: a family photo album lost in a car accident
✔✔6 Conditions of Insurable Risk
Adequate Premiums - ✔✔Insurer must be able to cover claims with premium
-potential losses cannot be too much for the insurer to pay
-insurer mus be able to cover claims and expenses
-if the premiums must be set too high, the risk is not insurable.
Example: South Texas homeowners policies exclude hurricane coverage because the
disasters have been too large in scale
✔✔6 Conditions of Insurable Risk
Definable Risk - ✔✔The risk must be definable:
1.) The insurer can define the exact conditions under which the item is covered by the
policy
example: jewelry is covered up to a specified limit if stolen
2.) The item itself is definable (it can be precisely described)
example: a house, car, or diamond necklace can be defined. An entire riverbend
cannot.
3.) The item has a precise value
example: a house or car does. A family photo does not
✔✔6 Conditions of Insurable Risk
Unexpected Loss - ✔✔The loss must be :
, -unforeseeable
-unexpected
-reasonably unpreventable
-completely random in nature
example: Flood insurance is not available in many areas
because flooding has become expected
✔✔6 Conditions of Insurable Risk
Substantial Loss - ✔✔-the loss must cause substantial economic hardship
example: if you burn your favorite t-shirt , you can easily buy a new one. This is not a
substantial loss.
if a guest accidentally backs his car into your porch, you can't easily replace it. This is a
substantial loss.
✔✔6 Conditions of Insurable Risk
Exclusions - ✔✔The insurer must be able to exclude coverage for large scale disasters
why?
-insurers have to charge adequate premiums
-some losses would require such large premiums that it is impossible to insure them
example:
-wars
-terrorism
-nuclear and missile attacks
-earthquakes
-floods
✔✔6 Conditions of Insurable Risk
Law of Large Numbers - ✔✔a large number of similar risks or insured units reduces the
possibility of variation from the expected number of claims.
(the more units that are insured; the more predictable the losses will be)
-spreads the risk across more policies
-helps the insurer to predict losses more accurately
-"similar risks," can mean: cars, houses , person's lives, similar businesses, etc.
QUESTIONS AND SOLUTIONS RATED A+
✔✔Loss - ✔✔-reduction in value of an insured item
-financial loss due to an occurrence or accident
-for insurers: the amount paid out in a claims settlement
examples:
1) reduction in Dan's car after an accident
2) medical bills for Dan's injured wrist
3) what the insurer has to pay Dan for his property damage and injury
✔✔Insurable Risk - ✔✔-risk: an item, person, or organization that has been insured
-not everything is insurable
example: a family photo album lost in a car accident
✔✔6 Conditions of Insurable Risk
Adequate Premiums - ✔✔Insurer must be able to cover claims with premium
-potential losses cannot be too much for the insurer to pay
-insurer mus be able to cover claims and expenses
-if the premiums must be set too high, the risk is not insurable.
Example: South Texas homeowners policies exclude hurricane coverage because the
disasters have been too large in scale
✔✔6 Conditions of Insurable Risk
Definable Risk - ✔✔The risk must be definable:
1.) The insurer can define the exact conditions under which the item is covered by the
policy
example: jewelry is covered up to a specified limit if stolen
2.) The item itself is definable (it can be precisely described)
example: a house, car, or diamond necklace can be defined. An entire riverbend
cannot.
3.) The item has a precise value
example: a house or car does. A family photo does not
✔✔6 Conditions of Insurable Risk
Unexpected Loss - ✔✔The loss must be :
, -unforeseeable
-unexpected
-reasonably unpreventable
-completely random in nature
example: Flood insurance is not available in many areas
because flooding has become expected
✔✔6 Conditions of Insurable Risk
Substantial Loss - ✔✔-the loss must cause substantial economic hardship
example: if you burn your favorite t-shirt , you can easily buy a new one. This is not a
substantial loss.
if a guest accidentally backs his car into your porch, you can't easily replace it. This is a
substantial loss.
✔✔6 Conditions of Insurable Risk
Exclusions - ✔✔The insurer must be able to exclude coverage for large scale disasters
why?
-insurers have to charge adequate premiums
-some losses would require such large premiums that it is impossible to insure them
example:
-wars
-terrorism
-nuclear and missile attacks
-earthquakes
-floods
✔✔6 Conditions of Insurable Risk
Law of Large Numbers - ✔✔a large number of similar risks or insured units reduces the
possibility of variation from the expected number of claims.
(the more units that are insured; the more predictable the losses will be)
-spreads the risk across more policies
-helps the insurer to predict losses more accurately
-"similar risks," can mean: cars, houses , person's lives, similar businesses, etc.
