Texas All-Lines Adjuster Pre-Licensing Questions With Verified Answers

insurance - Answer financial took that protects individual and organizations from unforeseen and extraordinary financial losses by transferring risk to another party insured - Answer individual or organization that pays premiums in exchange for protection insurer - Answer company, group, or government agency offering financial protection how does insurance work? - Answer insured pays premium insurer promises to pay for specific losses if they occur insurer's promise gives peace of mind to insured principle of indemnity - Answer when a loss occurs, an individual should be restored to the approximate financial condition he was in before the loss, no more and no less Q1: How can insurance companies afford to pay for an individual's catastrophic loss? - Answer Q1: The purpose of the principle of indemnity: - Answer prevents an insured from profiting from a loss Q1: Which of the following best defines premium? - Answer the fee paid by the insured in exchange for the insurance policy Q1: What best describes insurance? - Answer an economic device used to protect against the risk of unforeseen and extraordinary financial loss Q1: Mark incurred $8000 damage to his car in an accident. He received $8000 from his insurance company and $4000 from the other driver. By receiving profit from his loss, Mark could be in violation of: - Answer the principle of indemnity he should be in the same financial condition. no better, no worse indemnification may include payment for: - Answer repairs to property reimbursement for additional living expenses rental cars, hotels costs directly associated with a loss, as allowed under the policy legal contract/insurance policy is: - Answer contract to provide financial protection for a fee legally binding because it meets the 4 requirements of a legal contract What are the 4 requirements of a legal contract? - Answer agreement (offer and acceptance) consideration competent parties legal purpose agreement - Answer mutual consent between offeror and offeree acceptance criteria - Answer offeree communicates to the offeror his intent to enter into contract must be unconditional - the offeree accepts the terms proposed by the offeror original offeree is the only person who can legally accept the offer An offer may be terminated by: - Answer revocation by offeror rejection by offeree time lapse termination by operation of law -either party dies or becomes disabled -performance of contract becomes illegal after the offer -subject matter is destroyed offer rejection - Answer explicit rejection proposal of new offer counteroffer consideration - Answer all parties bring something of value competent parties - Answer 18 years old, sober, and sane legal purpose - Answer no contracts for money laundering Q2: An offeree may legally reject a contract offer by any of the following means EXCEPT: - Answer asking for clarification or additional information Q2: If covered by an insurance policy, an insured may be indemnified for all of the following except: - Answer home remodels Q2: Which of the following is NOT a requirement for a legally binding contract? - Answer it must be a notarized document Q2: Which of the following refers to being restored to the financial condition you were in before a loss? - Answer indemnification Q2: A legally binding contract is where the risk of financial loss is transferred in exchange for premiums is called: - Answer an insurance policy 1-A: The purpose of the principle of indemnity is: - Answer to prevent and insured from making a profit on a loss 1-A: Which of the following best defines premium? - Answer the fee paid by the insured in exchange for an insurance policy 1-A: What is a reserve, in insurance terms? - Answer a pool of collected premiums that the insurer sets aside to pay claims 1-A: Which of the following refers to being restored to the financial condition you were in before a loss? - Answer indemnification six special characteristics of insurance contracts - Answer personal adhesion utmost good faith aleatory unilateral conditional personal contract - Answer protects policyholder from financial losses does not protect property from becoming damaged coverage follows the person, not the property contract of adhesion - Answer the insurer is responsible for the terms of the contract the insured has no say in the wording courts favor the insured in the event of ambiguity *doctrine of reasonable expectations* the contract should be interpreted as a reasonable person would interpret it contract in good faith - Answer applicant are expected to be completely honest about the risk to the insurer the insurer must rely on applicant not to conceal or misrepresent pertinent facts contracts are aleatory - Answer *depending on an unknown future event* neither party can know future losses insurer only has to pay if and when covered losses occur policyholders could pay more in premiums that they ever get for claims, or insurer could pay more in claims than it receives contracts are unilateral - Answer the insurer has an obligation to pay for covered losses the insured has no obligation (he can stop paying premiums) contracts are conditional - Answer the insurer only has to perform if it certain conditions are met (such as a covered loss) the insured must fulfill all conditions listed in the policy Q1: Bill purchased a policy from ABC insurance. Several months later, he filed a claim which was denied. While reviewing his policy, he found several ambiguities in the policy and decided to challenge the insurer's decision. When the dispute went to trial, the court ruled in Bill's favor. This is because insurance policies are: - Answer contracts of adhesion Q1: Which of the following is true? A) kevins auto insurance policy now covers Bill, who bought Kevin's truck B) when kevin sold his truck to bill, he lost his auto insurance coverage C) kevins insurance policy covers him for losses to his new car, even though he sold his truck, which was previously covered under his policy to Bill D) kevins auto insurance policy protects his car from damage - Answer C Q1: Matt offers to lend Shawn his truck so he can pick up some stones for his landscaping project. Matt tells Shawn "dont worry, my truck is insured." What is Matt really saying? - Answer Matt's financial interest in the truck is protected, should a covered loss occur. Q1: Which of the following statements is NOT true about an insurance policy? - Answer an insurance contract requires the utmost good faith of both the insurer and the insured Q1: What is the primary distinguishing characteristic of a contract of adhesion? - Answer there is an unequal balance of power in the creation of the contract 4 essential parts of an insurance contract: - Answer *D*eclaration & *D*efinitions *I*nsuring Agreement *C*onditions *E*xclusions *E*ndorsements declarations page - Answer first page of the policy, the general overview: names both of the parties (insured and insurer) policy number location and description of insured item value of insured item dates of the policy (beginning and end) amount and limit of coverage deductible premium definition page - Answer not essential, but common defines terms used to write policy including: *collision,* *decay,* *like kind and quality* includes important language for adjusters to know insuring agreement - Answer summarizes: what is covered which causes of loss are covered any services provided any exclusions to coverage that maximum limit of policy coverage in dollars conditions - Answer the insurer specifies any limits or qualifications the policyholder must meet ex: requiring security guards for a jewelry store how to file a proof of loss how to protect the property after a loss exclusions - Answer common exclusions: earthquakes flooding war nuclear hazards intentional acts endordsements - Answer additions to the policy that can: -add or reduce coverage -change policy provisions -change the premium price after the policy period ends synonyms: rider addendum attachment certificate of insurance - Answer includes basic details of the insurance policy constitutes proof of coverage often required for drivers in an insurance policy, where might one find the make and model of the covered vehicle? - Answer declarations 1-B: In which section of the policy might you find the following statement? "property address: 246 Rosemead Drive" - Answer declarations 1-B: Janelle wants to change her coverage for personal property in her Homeowners policy from AV to Replacement Cost. She visits her local insurance agent and asks him to make this change to her policy while keeping all the other details the same. Which section of her policy would the agent use to make this change? - Answer endorsements 1-B: Which of the following best describes a contract in which only one party makes a promise to perform? - Answer unilateral 1-B: Charlottes son just turned 16 and go this driver's license. She wants him to be covered, so she adds him to her auto insurance policy. Where would this addition be found in Charlotte's policy? - Answer endorsememts 1-B:Which of the following statements is NOT true about an insurance policy? - Answer the concept of utmost good faith only applies to the insured 1-B: Josephine's gas station suffered severe sun damage when one of the fuel tanks caught fire and exploded. After completing his inspection, the adjuster determines that Josephine's claim is not covered because she did not have the automatic shut-offs for the fuel tanks. If this safety measure in fact was required in order for coverage to apply, where might Josephine find it in the policy? - Answer conditions types of insurers - Answer insurance companies other private groups government entities government insurers - Answer non-profit mandatory benefits prescribed by law designed to meet needs of general public government has monopoly (Medicare, Medicaid, FEMA, etc) private insurers - Answer sell insurance based on consumer preferences offer a wide variety of insurance products typically exist to generate a profit or benefit a group insured party voluntarily participates stock insurance companies - Answer always for profit publicly-traded stockholders provide capital and participate in profits or losses "non-participating" insurers: no dividends go to policyholders (aflac, allstate, geico, etc) mutual insurance companies - Answer owned by policyholders policyholders elect board of directors