ARIZONA INSURANCE ADJUSTER LICENSING
EXAM QUESTIONS WITH CORRECT ANSWERS
AND RATIONALES LATEST 2025-2026 UPDATE
SECTION 1: Insurance Fundamentals (1–15)
1. Insurance is best defined as:
A. A guaranteed savings plan
B. A transfer of risk from insured to insurer
C. A government benefit program
D. A tax deduction strategy
Answer: B
Rationale: Insurance transfers financial risk from an individual to an
insurer in exchange for premiums.
2. The principle that requires both parties to act honestly is:
A. Indemnity
B. Utmost good faith
C. Subrogation
D. Contribution
Answer: B
Rationale: Insurance contracts require full honesty from both insurer
and insured.
3. A contract of indemnity means:
A. Profit from loss
B. Restoring insured to pre-loss condition
C. Paying more than loss
D. Guaranteed replacement value
,Answer: B
Rationale: Indemnity restores the insured to their financial position
before the loss.
4. The insurer’s promise to pay is found in:
A. Exclusions
B. Declarations
C. Insuring agreement
D. Conditions
Answer: C
Rationale: The insuring agreement outlines coverage promises.
5. A peril is:
A. The cause of loss
B. The policy limit
C. The premium amount
D. The deductible
Answer: A
6. A hazard is:
A. A policy type
B. A condition that increases risk
C. A type of claim
D. A coverage limit
Answer: B
7. A deductible is:
A. Paid by insurer only
, B. Portion paid by insured before coverage applies
C. Refundable premium
D. State tax
Answer: B
8. Subrogation allows insurer to:
A. Cancel policy
B. Recover paid claim from responsible party
C. Increase premiums
D. Deny all claims
Answer: B
9. Insurable interest must exist:
A. Only at policy purchase
B. Only at claim time
C. At both policy inception and loss
D. Never
Answer: C
10. An insurance policy is considered a:
A. Unilateral contract
B. Bilateral contract
C. Void contract
D. Implied contract
Answer: A
11. Utmost good faith requires:
A. Concealing losses
EXAM QUESTIONS WITH CORRECT ANSWERS
AND RATIONALES LATEST 2025-2026 UPDATE
SECTION 1: Insurance Fundamentals (1–15)
1. Insurance is best defined as:
A. A guaranteed savings plan
B. A transfer of risk from insured to insurer
C. A government benefit program
D. A tax deduction strategy
Answer: B
Rationale: Insurance transfers financial risk from an individual to an
insurer in exchange for premiums.
2. The principle that requires both parties to act honestly is:
A. Indemnity
B. Utmost good faith
C. Subrogation
D. Contribution
Answer: B
Rationale: Insurance contracts require full honesty from both insurer
and insured.
3. A contract of indemnity means:
A. Profit from loss
B. Restoring insured to pre-loss condition
C. Paying more than loss
D. Guaranteed replacement value
,Answer: B
Rationale: Indemnity restores the insured to their financial position
before the loss.
4. The insurer’s promise to pay is found in:
A. Exclusions
B. Declarations
C. Insuring agreement
D. Conditions
Answer: C
Rationale: The insuring agreement outlines coverage promises.
5. A peril is:
A. The cause of loss
B. The policy limit
C. The premium amount
D. The deductible
Answer: A
6. A hazard is:
A. A policy type
B. A condition that increases risk
C. A type of claim
D. A coverage limit
Answer: B
7. A deductible is:
A. Paid by insurer only
, B. Portion paid by insured before coverage applies
C. Refundable premium
D. State tax
Answer: B
8. Subrogation allows insurer to:
A. Cancel policy
B. Recover paid claim from responsible party
C. Increase premiums
D. Deny all claims
Answer: B
9. Insurable interest must exist:
A. Only at policy purchase
B. Only at claim time
C. At both policy inception and loss
D. Never
Answer: C
10. An insurance policy is considered a:
A. Unilateral contract
B. Bilateral contract
C. Void contract
D. Implied contract
Answer: A
11. Utmost good faith requires:
A. Concealing losses
