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Montana All Lines Adjuster Practice Exam (100 Questions)
Section 1: Insurance Fundamentals & Contract Law (Questions 1–25)
1. What is the primary purpose of insurance?
A. To guarantee profit for the insurer
B. To indemnify the insured for covered losses
C. To prevent all future losses
D. To invest premium funds
Answer: B
2. Which legal doctrine requires both the insured and the insurer to act honestly and
disclose all material facts?
A. Warranty
B. Utmost Good Faith
C. Adhesion
D. Estoppel
Answer: B
3. An adjuster must investigate a claim to determine:
A. If the policy should be canceled
B. If the loss is covered under the policy
C. How to sell more policies
D. The insured's credit score
Answer: B
4. A representation is:
A. A guarantee
B. A statement believed to be true
C. A promise
D. A condition precedent
Answer: B
5. An insurance contract requiring the insured to perform certain acts before coverage
applies is called:
A. Unilateral
B. Conditional
C. Aleatory
D. Adhesion
Answer: B
6. The principle of indemnity means the insured:
A. Receives payment greater than the loss
B. Is restored to pre-loss financial position
, 2
C. Gains a profit from a claim
D. Receives guaranteed replacement cost
Answer: B
7. Which of the following is the insuring clause?
A. Lists exclusions
B. Contains declarations
C. Explains coverage obligations
D. Lists conditions
Answer: C
8. Which type of damage does liability insurance cover?
A. Third-party bodily injury and property damage
B. First-party theft
C. Wear and tear
D. Intentional acts
Answer: A
9. A deductible is:
A. Amount the insured must pay before insurer pays
B. A bonus
C. Policy limit
D. Premium refund
Answer: A
10. What is subrogation?
A. Premium refund
B. Insurer's right to recover from a responsible party
C. Underwriting profit
D. Claims discount
Answer: B
11. Actual cash value (ACV) is best described as:
A. Replacement cost
B. Replacement cost minus depreciation
C. Market value plus appraisal
D. Policy limit
Answer: B
12. Which of the following is a proximate cause of loss?
A. A deductible
B. The primary cause of loss without which loss would not occur
C. A warranty
, 3
D. A fraudulent act
Answer: B
13. Indemnity in liability insurance is usually paid to:
A. The insurer
B. A third party injured by the insured
C. The agent
D. State regulator
Answer: B
14. What does "binding authority" allow an adjuster to do?
A. Commit the insurer to cover claims or issue coverage
B. File taxes
C. Set premiums for life insurance
D. Cancel licenses
Answer: A
15. The limit expressed on a policy as "$100,000 per occurrence" is a:
A. Single limit per loss event
B. Aggregate limit
C. Deductible
D. Premium
Answer: A
16. Which of these is considered damage covered by liability policies?
A. Wear and tear
B. Property damage to others
C. Intentional vandalism by insured
D. Depreciation
Answer: B
17. A reservation of rights letter means the insurer:
A. Reserves right to later deny coverage
B. Accepts full responsibility
C. Lowers the deductible
D. Cancels the policy
Answer: A
18. The term "proof of loss" refers to:
A. Premium receipt
B. Document supporting a claim
C. Policy cancellation
D. Underwriting file
Answer: B
Montana All Lines Adjuster Practice Exam (100 Questions)
Section 1: Insurance Fundamentals & Contract Law (Questions 1–25)
1. What is the primary purpose of insurance?
A. To guarantee profit for the insurer
B. To indemnify the insured for covered losses
C. To prevent all future losses
D. To invest premium funds
Answer: B
2. Which legal doctrine requires both the insured and the insurer to act honestly and
disclose all material facts?
A. Warranty
B. Utmost Good Faith
C. Adhesion
D. Estoppel
Answer: B
3. An adjuster must investigate a claim to determine:
A. If the policy should be canceled
B. If the loss is covered under the policy
C. How to sell more policies
D. The insured's credit score
Answer: B
4. A representation is:
A. A guarantee
B. A statement believed to be true
C. A promise
D. A condition precedent
Answer: B
5. An insurance contract requiring the insured to perform certain acts before coverage
applies is called:
A. Unilateral
B. Conditional
C. Aleatory
D. Adhesion
Answer: B
6. The principle of indemnity means the insured:
A. Receives payment greater than the loss
B. Is restored to pre-loss financial position
, 2
C. Gains a profit from a claim
D. Receives guaranteed replacement cost
Answer: B
7. Which of the following is the insuring clause?
A. Lists exclusions
B. Contains declarations
C. Explains coverage obligations
D. Lists conditions
Answer: C
8. Which type of damage does liability insurance cover?
A. Third-party bodily injury and property damage
B. First-party theft
C. Wear and tear
D. Intentional acts
Answer: A
9. A deductible is:
A. Amount the insured must pay before insurer pays
B. A bonus
C. Policy limit
D. Premium refund
Answer: A
10. What is subrogation?
A. Premium refund
B. Insurer's right to recover from a responsible party
C. Underwriting profit
D. Claims discount
Answer: B
11. Actual cash value (ACV) is best described as:
A. Replacement cost
B. Replacement cost minus depreciation
C. Market value plus appraisal
D. Policy limit
Answer: B
12. Which of the following is a proximate cause of loss?
A. A deductible
B. The primary cause of loss without which loss would not occur
C. A warranty
, 3
D. A fraudulent act
Answer: B
13. Indemnity in liability insurance is usually paid to:
A. The insurer
B. A third party injured by the insured
C. The agent
D. State regulator
Answer: B
14. What does "binding authority" allow an adjuster to do?
A. Commit the insurer to cover claims or issue coverage
B. File taxes
C. Set premiums for life insurance
D. Cancel licenses
Answer: A
15. The limit expressed on a policy as "$100,000 per occurrence" is a:
A. Single limit per loss event
B. Aggregate limit
C. Deductible
D. Premium
Answer: A
16. Which of these is considered damage covered by liability policies?
A. Wear and tear
B. Property damage to others
C. Intentional vandalism by insured
D. Depreciation
Answer: B
17. A reservation of rights letter means the insurer:
A. Reserves right to later deny coverage
B. Accepts full responsibility
C. Lowers the deductible
D. Cancels the policy
Answer: A
18. The term "proof of loss" refers to:
A. Premium receipt
B. Document supporting a claim
C. Policy cancellation
D. Underwriting file
Answer: B
