Alabama Adjuster Pro All Lines Study Guide
!@#$%%%%%
The purpose of the principle of indemnity is: - (ANSWERS)to prevent an insured from making a
profit on a loss. %%%%%%
Bobby just purchased an insurance policy for his home from XYZ Insurance. Which of the
following would be a reason this policy may not be legally binding? - (ANSWERS)Bobby has
been diagnosed as mentally incompetent.
Greg plays trombone in his school band during football games. During a rally song in the stands
one day, Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls
it down the bleachers, completely destroying it. Greg's insurance pays him $400 to replace the
trombone, but then the opposing team's coach also offers to replace the instrument, at
whatever the cost. So Greg orders a new $3,200 trombone and has the opposing team's athletic
department absorb the cost. Which principle has Greg violated? - (ANSWERS)The principle of
indemnity
Which of the following is NOT a characteristic of insurance contracts? - (ANSWERS)Universal
In which section of an insurance policy might you find the following statement? "'We, us, and
our' refers to ABC Insurance company." - (ANSWERS)Definitions
If an adjuster needs to find clarification about what actually constitutes a collision, in which
section of an insurance policy would she find that information? - (ANSWERS)Definitions
Suretrust Insurance was founded and operates in Texas. In Texas, suretrust is considered: -
(ANSWERS)a domestic insurer.
A captive insurance company: - (ANSWERS)exists solely to provide insurance for its parent
company.
Which of the following is a hazard? - (ANSWERS)A driver's tendency to text while driving
Each of the following would classify as an insurable risk, except: - (ANSWERS)a marriage.
A "hazard" is defined as: - (ANSWERS)something that increases the chance of a loss.
Which of the following is an example of a hazard? - (ANSWERS)Sandra's home is in an area of
Los Angeles that is often hit by earthquakes.
When an insurer issues an insurance policy, the actual item, person, or organization that is
being insured is called the: - (ANSWERS)risk.
Risk avoidance is a risk management technique that: - (ANSWERS)eliminates risk.
,Alabama Adjuster Pro All Lines Study Guide
Six Stars Development Company has just purchased several large properties !@#$%%%%%
in Las Vegas. As
%%%%%%
a result of this large purchase, they are a little short on money and decide to save money by not
purchasing insurance on their new properties. Six Stars is practicing: - (ANSWERS)risk
retention.
Which of the following is NOT a risk management technique? - (ANSWERS)Risk equality
Which of the following statements about the principle of estoppel is TRUE? -
(ANSWERS)Estoppel protects the insured party from an insurer who initially approves coverage,
but then later denies coverage after the insured pays for repairs.
Clark is filling out an application for an insurance policy. The application asks for his birth date,
and Clark writes 1-24-67. His actual birthday is 1-24-63, but he likes to appear younger so he
uses a different date. This would be called: - (ANSWERS)misrepresentation.
An insurance contract is an agreement between two parties where each side promises to be
truthful, factual, and honest about their respective positions. Therefore, an insurance contract
is said to be a contract of: - (ANSWERS)utmost good faith.
In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a security
guard on the premises 24/7. This is called a: - (ANSWERS)warranty.
John owes a lot more on his car than it is worth. He figures he would be better off if he burned
the car and collected an insurance settlement. He has someone set fire to his garage to destroy
the car. John's behavior would be considered a: - (ANSWERS)moral hazard.
Which of the following statements about a moral hazard is FALSE? - (ANSWERS)It is the result
of an unconscious behavior.
Lewis owns a computer store, and he spends many hours a day on the sales floor
demonstrating his products to customers. He often gets very animated when showing the
electronics and, although he does not intend for anything bad to happen, he doesn't worry too
much about handling them carefully, since he knows that his insurance policy will cover any
damages. This behavior would be called a: - (ANSWERS)morale hazard.
During a storm, lightning strikes a tree in Harry's yard and starts a fire that spreads to his shed
where he keeps all his equipment for his landscaping business. In addition to the shed, Harry
has to purchase all new equipment to stay in business. The loss of the landscaping equipment
would be considered: - (ANSWERS)a direct loss.
Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home,
causing extensive damage to the East wall and roof. As a result, Sandra and her family must
,Alabama Adjuster Pro All Lines Study Guide
move into a hotel until the repairs are completed. The cost of staying !@#$%%%%%
in a hotel is: -
(ANSWERS)an indirect loss. %%%%%%
When Zach purposefully burned down Matt's restaurant, Matt's insurer paid the claim and then
went after Zach for the damages. Matt is furious about what Zach did and wants to sue him as
well. Why is it NOT possible for Matt to sue Zach? - (ANSWERS)Matt has already received
indemnification from his insurer.
Sally throws a cigarette butt into Neal's dumpster, starting a fire on Neal's property that costs
him $10,000. Neal files a claim with his insurer. The insurer pays Neal and then demands
$10,000 from Sally to pay for the loss she caused. What gives the insurer the right to collect
payment from Sally? - (ANSWERS)Subrogation
Which of the following does NOT have an insurable interest in Big Ed's Steak House, a local
restaurant? - (ANSWERS)Jim, who regularly eats at Big Ed's Steak House because it's his
favorite restaurant.
Kevin has a homeowners policy with replacement cost valuation and a coverage limit of
$90,000 for his personal property. Three years ago, Kevin purchased a sofa and loveseat for
$1,000 and $500 respectively. Both pieces of furniture depreciate at $100 per year. A house fire
damaged many of Kevin's belongings, including the sofa and loveseat, which now cost $1,200
and $700 to purchase today. Ignoring any deductibles, how much will Kevin's insurer give him
for the damaged sofa and loveseat? - (ANSWERS)$1,900
Clara plays the harp in an orchestra. Her harp cost $12,000, and she had it for 5 years before it
was stolen from her locker at a symphony hall. She recently found out a new harp will cost
$15,000. Assuming her harp depreciated at $1,000 a year, how much will an actual cash value
policy indemnify Clara? - (ANSWERS)$10,000 - ACV pays at current market value minus
depreciation
Roxanne runs a red light and totals Ben's car in a t-bone collision. Roxanne's auto policy
includes liability coverage with limits of 50/100/25 and Collision coverage with a deductible of
$500. Ben's car is worth $1,800 at the time of the accident, and he files a claim against
Roxanne's liability insurance. Bearing in mind that liability coverage doesn't have a deductible,
how much will Roxanne have to pay out-of-pocket for the damages she caused? -
(ANSWERS)$0
Which of the following statements applies to replacement cost valuation? - (ANSWERS)Under
replacement cost valuation, insurers may safeguard the principle of indemnity by requiring
policyholders to replace insured items before making full reparations.
Jim is out turkey hunting on a private ranch when he hears some movement in the brush.
Assuming it's a turkey, Jim raises his shotgun and fires. Unfortunately for Jim, he has not taken
, Alabama Adjuster Pro All Lines Study Guide
a turkey, but has severely injured one of the landowner's calves instead. Jim is!@#$%%%%%
responsible for
the cost of the calf because he acted with: - (ANSWERS)negligence %%%%%%
Sarah is playing with a basketball on the stairs at Bob's house. In doing so, she trips, falls, and
breaks her leg. She files a claim against Bob's insurance policy for her injuries. The adjuster
determines that Sarah was 50% responsible for her own injuries, and therefore should only
receive indemnification for 50% of her medical bills. What defense is the adjuster using? -
(ANSWERS)Comparative negligence
James owns a masonry business and has a commercial liability policy with the following liability
limits: $150,000 per occurrence / $500,000 per policy term. While at a job site, his cement
truck's chute cannot reach the pour site, so the operator adds two extra chutes, extending its
length. The chute collapses under the weight of the concrete, causing $35,000 in injury to one
of the workers. The loss is covered by the policy, and James' insurer pays the claim. What will
the new limits be for the remainder of the policy term? - (ANSWERS)$150,000/$465,000
Mental anguish would be an example of: - (ANSWERS)A. General damages.
B. Special damages.
C. Punitive damages.
D. Tangible damages.
Answer: A
On July 14, 2014, Mark suffered injuries when a kitchen appliance he was using broke apart
during operation. In Alabama, what is the last date Mark can file a lawsuit for his injuries? -
(ANSWERS)July 14, 2016
William is wearing an ABC Insurance jacket and has an ABC Insurance sign over his rented
office. The walk-in customer could reasonably believe that he has the authority to write an
insurance contract because of his: - (ANSWERS)implied authority.
A staff adjuster is a: - (ANSWERS)salaried employee working for only one insurer.
A claimant is: - (ANSWERS)an individual or business that makes a claim for payment after a loss
occurs.
What is the last step in the claim settlement process? - (ANSWERS)Preparing the final
adjustment reports
Who sends a Reservation of Rights letter? - (ANSWERS)the insurance company.
An adjuster has a duty to provide which of the following to the claimant? - (ANSWERS)An open
line of communication
!@#$%%%%%
The purpose of the principle of indemnity is: - (ANSWERS)to prevent an insured from making a
profit on a loss. %%%%%%
Bobby just purchased an insurance policy for his home from XYZ Insurance. Which of the
following would be a reason this policy may not be legally binding? - (ANSWERS)Bobby has
been diagnosed as mentally incompetent.
Greg plays trombone in his school band during football games. During a rally song in the stands
one day, Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls
it down the bleachers, completely destroying it. Greg's insurance pays him $400 to replace the
trombone, but then the opposing team's coach also offers to replace the instrument, at
whatever the cost. So Greg orders a new $3,200 trombone and has the opposing team's athletic
department absorb the cost. Which principle has Greg violated? - (ANSWERS)The principle of
indemnity
Which of the following is NOT a characteristic of insurance contracts? - (ANSWERS)Universal
In which section of an insurance policy might you find the following statement? "'We, us, and
our' refers to ABC Insurance company." - (ANSWERS)Definitions
If an adjuster needs to find clarification about what actually constitutes a collision, in which
section of an insurance policy would she find that information? - (ANSWERS)Definitions
Suretrust Insurance was founded and operates in Texas. In Texas, suretrust is considered: -
(ANSWERS)a domestic insurer.
A captive insurance company: - (ANSWERS)exists solely to provide insurance for its parent
company.
Which of the following is a hazard? - (ANSWERS)A driver's tendency to text while driving
Each of the following would classify as an insurable risk, except: - (ANSWERS)a marriage.
A "hazard" is defined as: - (ANSWERS)something that increases the chance of a loss.
Which of the following is an example of a hazard? - (ANSWERS)Sandra's home is in an area of
Los Angeles that is often hit by earthquakes.
When an insurer issues an insurance policy, the actual item, person, or organization that is
being insured is called the: - (ANSWERS)risk.
Risk avoidance is a risk management technique that: - (ANSWERS)eliminates risk.
,Alabama Adjuster Pro All Lines Study Guide
Six Stars Development Company has just purchased several large properties !@#$%%%%%
in Las Vegas. As
%%%%%%
a result of this large purchase, they are a little short on money and decide to save money by not
purchasing insurance on their new properties. Six Stars is practicing: - (ANSWERS)risk
retention.
Which of the following is NOT a risk management technique? - (ANSWERS)Risk equality
Which of the following statements about the principle of estoppel is TRUE? -
(ANSWERS)Estoppel protects the insured party from an insurer who initially approves coverage,
but then later denies coverage after the insured pays for repairs.
Clark is filling out an application for an insurance policy. The application asks for his birth date,
and Clark writes 1-24-67. His actual birthday is 1-24-63, but he likes to appear younger so he
uses a different date. This would be called: - (ANSWERS)misrepresentation.
An insurance contract is an agreement between two parties where each side promises to be
truthful, factual, and honest about their respective positions. Therefore, an insurance contract
is said to be a contract of: - (ANSWERS)utmost good faith.
In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a security
guard on the premises 24/7. This is called a: - (ANSWERS)warranty.
John owes a lot more on his car than it is worth. He figures he would be better off if he burned
the car and collected an insurance settlement. He has someone set fire to his garage to destroy
the car. John's behavior would be considered a: - (ANSWERS)moral hazard.
Which of the following statements about a moral hazard is FALSE? - (ANSWERS)It is the result
of an unconscious behavior.
Lewis owns a computer store, and he spends many hours a day on the sales floor
demonstrating his products to customers. He often gets very animated when showing the
electronics and, although he does not intend for anything bad to happen, he doesn't worry too
much about handling them carefully, since he knows that his insurance policy will cover any
damages. This behavior would be called a: - (ANSWERS)morale hazard.
During a storm, lightning strikes a tree in Harry's yard and starts a fire that spreads to his shed
where he keeps all his equipment for his landscaping business. In addition to the shed, Harry
has to purchase all new equipment to stay in business. The loss of the landscaping equipment
would be considered: - (ANSWERS)a direct loss.
Driving home after a 14-hour shift, Sam falls asleep at the wheel and plows into Sandra's home,
causing extensive damage to the East wall and roof. As a result, Sandra and her family must
,Alabama Adjuster Pro All Lines Study Guide
move into a hotel until the repairs are completed. The cost of staying !@#$%%%%%
in a hotel is: -
(ANSWERS)an indirect loss. %%%%%%
When Zach purposefully burned down Matt's restaurant, Matt's insurer paid the claim and then
went after Zach for the damages. Matt is furious about what Zach did and wants to sue him as
well. Why is it NOT possible for Matt to sue Zach? - (ANSWERS)Matt has already received
indemnification from his insurer.
Sally throws a cigarette butt into Neal's dumpster, starting a fire on Neal's property that costs
him $10,000. Neal files a claim with his insurer. The insurer pays Neal and then demands
$10,000 from Sally to pay for the loss she caused. What gives the insurer the right to collect
payment from Sally? - (ANSWERS)Subrogation
Which of the following does NOT have an insurable interest in Big Ed's Steak House, a local
restaurant? - (ANSWERS)Jim, who regularly eats at Big Ed's Steak House because it's his
favorite restaurant.
Kevin has a homeowners policy with replacement cost valuation and a coverage limit of
$90,000 for his personal property. Three years ago, Kevin purchased a sofa and loveseat for
$1,000 and $500 respectively. Both pieces of furniture depreciate at $100 per year. A house fire
damaged many of Kevin's belongings, including the sofa and loveseat, which now cost $1,200
and $700 to purchase today. Ignoring any deductibles, how much will Kevin's insurer give him
for the damaged sofa and loveseat? - (ANSWERS)$1,900
Clara plays the harp in an orchestra. Her harp cost $12,000, and she had it for 5 years before it
was stolen from her locker at a symphony hall. She recently found out a new harp will cost
$15,000. Assuming her harp depreciated at $1,000 a year, how much will an actual cash value
policy indemnify Clara? - (ANSWERS)$10,000 - ACV pays at current market value minus
depreciation
Roxanne runs a red light and totals Ben's car in a t-bone collision. Roxanne's auto policy
includes liability coverage with limits of 50/100/25 and Collision coverage with a deductible of
$500. Ben's car is worth $1,800 at the time of the accident, and he files a claim against
Roxanne's liability insurance. Bearing in mind that liability coverage doesn't have a deductible,
how much will Roxanne have to pay out-of-pocket for the damages she caused? -
(ANSWERS)$0
Which of the following statements applies to replacement cost valuation? - (ANSWERS)Under
replacement cost valuation, insurers may safeguard the principle of indemnity by requiring
policyholders to replace insured items before making full reparations.
Jim is out turkey hunting on a private ranch when he hears some movement in the brush.
Assuming it's a turkey, Jim raises his shotgun and fires. Unfortunately for Jim, he has not taken
, Alabama Adjuster Pro All Lines Study Guide
a turkey, but has severely injured one of the landowner's calves instead. Jim is!@#$%%%%%
responsible for
the cost of the calf because he acted with: - (ANSWERS)negligence %%%%%%
Sarah is playing with a basketball on the stairs at Bob's house. In doing so, she trips, falls, and
breaks her leg. She files a claim against Bob's insurance policy for her injuries. The adjuster
determines that Sarah was 50% responsible for her own injuries, and therefore should only
receive indemnification for 50% of her medical bills. What defense is the adjuster using? -
(ANSWERS)Comparative negligence
James owns a masonry business and has a commercial liability policy with the following liability
limits: $150,000 per occurrence / $500,000 per policy term. While at a job site, his cement
truck's chute cannot reach the pour site, so the operator adds two extra chutes, extending its
length. The chute collapses under the weight of the concrete, causing $35,000 in injury to one
of the workers. The loss is covered by the policy, and James' insurer pays the claim. What will
the new limits be for the remainder of the policy term? - (ANSWERS)$150,000/$465,000
Mental anguish would be an example of: - (ANSWERS)A. General damages.
B. Special damages.
C. Punitive damages.
D. Tangible damages.
Answer: A
On July 14, 2014, Mark suffered injuries when a kitchen appliance he was using broke apart
during operation. In Alabama, what is the last date Mark can file a lawsuit for his injuries? -
(ANSWERS)July 14, 2016
William is wearing an ABC Insurance jacket and has an ABC Insurance sign over his rented
office. The walk-in customer could reasonably believe that he has the authority to write an
insurance contract because of his: - (ANSWERS)implied authority.
A staff adjuster is a: - (ANSWERS)salaried employee working for only one insurer.
A claimant is: - (ANSWERS)an individual or business that makes a claim for payment after a loss
occurs.
What is the last step in the claim settlement process? - (ANSWERS)Preparing the final
adjustment reports
Who sends a Reservation of Rights letter? - (ANSWERS)the insurance company.
An adjuster has a duty to provide which of the following to the claimant? - (ANSWERS)An open
line of communication
