NC Adjuster Exam Correct Questions &
Answers
Utmost Good Faith - ANSWER Both parties must act honest and openly in order for the
contract to be valid.
Adhesion - ANSWER One party sets the terms for the contract; the other party may
simply agree or disagree
Unilateral - ANSWER Only the insurer makes a promise to act; the insured can void
contract at any time.
Personal - ANSWER The insured person is protected from loses not the personal
property.
Conditional - ANSWER The insurer must only honor the contract if the insured meets
certain conditions.
Lavatory - ANSWER The execution of the contract depends on an unknown future
event.
Conditions - ANSWER List of requirements the insured must meet for coverage to
apply.
Declarations - ANSWER Information that makes a policy unique to the insured.
Exclusions - ANSWER Causes of loss or items of property that are not covered by the
policy.
Endorsements - ANSWER Add, reduce, or change the coverage of the policy in some
way.
Definitions - ANSWER Explains exactly what specific words mean in the context of the
policy.
Re-insurer - ANSWER insurance for insurers
Fraternal Benefit Society - ANSWER non profit mutual organization that will usually offer
insurance benefits to members and their families.
Risk Retention Group - ANSWER an alternative to traditional insurance, owned by its
members; provides liability coverage for multiple companies in the same business.
, Risk - ANSWER 1. potential for loss
2. the insured item
Speculative Risk - ANSWER any risk in which gain is possible. Not insurable
Pure risk - ANSWER any risk in which no gain is possible. Insurable
Exposure - ANSWER The possibility or likelihood of damage or loss
Hazard - ANSWER anything that increases exposure
Peril - ANSWER The cause of damage or loss
Loss - ANSWER Reduction in value
expense caused by covered peril
the amount an insurer pays to settle a claim
Risk Avoidance - ANSWER eliminates risk
Risk Reduction - ANSWER reduces or mitigates risk
Risk Transference - ANSWER paying someone else to take the risk
Risk Retention - ANSWER Accepts the risk
Insurer - ANSWER Agency providing insurance
Insured - ANSWER Person purchasing the policy
First Named Insured - ANSWER First person or entity listed on the dec page
Binder - ANSWER Temporary coverage until policy is issued.
Representation - ANSWER A statement assumed to be true
Insuring Agreement - ANSWER Essence of the contract. Summarizes what the insurer
will cover and how.
Government vs Private insurance - ANSWER Mandatory, run by the government, suited
to needs of the general public.
Offer insurance products based on customer preferences.
Stock vs Mutual insurance - ANSWER Publicly traded; stock holders participate in
dividends.
Policy holders participate in dividends.
Answers
Utmost Good Faith - ANSWER Both parties must act honest and openly in order for the
contract to be valid.
Adhesion - ANSWER One party sets the terms for the contract; the other party may
simply agree or disagree
Unilateral - ANSWER Only the insurer makes a promise to act; the insured can void
contract at any time.
Personal - ANSWER The insured person is protected from loses not the personal
property.
Conditional - ANSWER The insurer must only honor the contract if the insured meets
certain conditions.
Lavatory - ANSWER The execution of the contract depends on an unknown future
event.
Conditions - ANSWER List of requirements the insured must meet for coverage to
apply.
Declarations - ANSWER Information that makes a policy unique to the insured.
Exclusions - ANSWER Causes of loss or items of property that are not covered by the
policy.
Endorsements - ANSWER Add, reduce, or change the coverage of the policy in some
way.
Definitions - ANSWER Explains exactly what specific words mean in the context of the
policy.
Re-insurer - ANSWER insurance for insurers
Fraternal Benefit Society - ANSWER non profit mutual organization that will usually offer
insurance benefits to members and their families.
Risk Retention Group - ANSWER an alternative to traditional insurance, owned by its
members; provides liability coverage for multiple companies in the same business.
, Risk - ANSWER 1. potential for loss
2. the insured item
Speculative Risk - ANSWER any risk in which gain is possible. Not insurable
Pure risk - ANSWER any risk in which no gain is possible. Insurable
Exposure - ANSWER The possibility or likelihood of damage or loss
Hazard - ANSWER anything that increases exposure
Peril - ANSWER The cause of damage or loss
Loss - ANSWER Reduction in value
expense caused by covered peril
the amount an insurer pays to settle a claim
Risk Avoidance - ANSWER eliminates risk
Risk Reduction - ANSWER reduces or mitigates risk
Risk Transference - ANSWER paying someone else to take the risk
Risk Retention - ANSWER Accepts the risk
Insurer - ANSWER Agency providing insurance
Insured - ANSWER Person purchasing the policy
First Named Insured - ANSWER First person or entity listed on the dec page
Binder - ANSWER Temporary coverage until policy is issued.
Representation - ANSWER A statement assumed to be true
Insuring Agreement - ANSWER Essence of the contract. Summarizes what the insurer
will cover and how.
Government vs Private insurance - ANSWER Mandatory, run by the government, suited
to needs of the general public.
Offer insurance products based on customer preferences.
Stock vs Mutual insurance - ANSWER Publicly traded; stock holders participate in
dividends.
Policy holders participate in dividends.
