Texas Claims Adjuster Practice Questions and
Correct Answers
Basic Cause of Loss
Normal Peril form that specifies the perils insured against.
Broad Cause of Loss Form
Named peril form and provides coverage for the perils named in the basic form, but adds
additional perils and names them on the form.
Special Cause of Loss Form
The special form is an "open peril" or "all risk" form that provides coverage for all risks of
loss, except for those excluded in the policy
Appraisal Clause
allows either the insured or the insurance company to demand a binding appraisal of the loss.
Principle of Indemnity
An insured who has suffered a loss, should only be restored to the approximate financial
condition that existed prior to the loss, no better and no worse.
Insurable Interest
The "person" must have a lawful, substantial, and economic interest in the health, property or
object being covered under the insurance.
Risk
uncertainty concerning the occurrence of a loss
Pure Risk
,There is only the possibility of a loss or no-loss.
Speculative Risk
There is a possibility of both profit and loss
Peril
cause of loss
Hazard
Increases the chance of loss
Physical hazard
The material, structural, or operational features of the risk itself, apart from the morale or
moral hazards of persons owning or managing it.
Moral Hazard
A condition that increases the likelihood that a person will intentionally cause or exaggerate a
loss.
Morale Hazard
A condition of inattention to, or disregard for, one's own life, health, property or behavior,
that increases the frequency or severity of a loss.
Five Methods of Risk Management
1. Risk Avoidance
2. Transfer of Risk
3. Sharing a Risk
, 4. Assumption of Risk
5. Risk Reduction or Risk Control
Underwriting
Process of selecting certain types of risks and rejecting others so the insurance company will
have a book of business that will produce the company's desired results. (they want a
favorable loss ratio)
Contracts must contain these 4 elements
1. Capacity of Contract/Competent Parties
2. Legal Purposes
3. Offer and Acceptance
4. Consideration
Parts of an Insurance Contract
1. Declarations
2. Insuring agreement
3. Exclusions
4. Conditions
The two broad principles that form the legal foundations of all insurance policies are:
The doctrine of utmost faith
the doctrine of reasonable expectations
A breach of Warranty
The failure of the insured to comply with one or more of the policy conditions
Representation
Correct Answers
Basic Cause of Loss
Normal Peril form that specifies the perils insured against.
Broad Cause of Loss Form
Named peril form and provides coverage for the perils named in the basic form, but adds
additional perils and names them on the form.
Special Cause of Loss Form
The special form is an "open peril" or "all risk" form that provides coverage for all risks of
loss, except for those excluded in the policy
Appraisal Clause
allows either the insured or the insurance company to demand a binding appraisal of the loss.
Principle of Indemnity
An insured who has suffered a loss, should only be restored to the approximate financial
condition that existed prior to the loss, no better and no worse.
Insurable Interest
The "person" must have a lawful, substantial, and economic interest in the health, property or
object being covered under the insurance.
Risk
uncertainty concerning the occurrence of a loss
Pure Risk
,There is only the possibility of a loss or no-loss.
Speculative Risk
There is a possibility of both profit and loss
Peril
cause of loss
Hazard
Increases the chance of loss
Physical hazard
The material, structural, or operational features of the risk itself, apart from the morale or
moral hazards of persons owning or managing it.
Moral Hazard
A condition that increases the likelihood that a person will intentionally cause or exaggerate a
loss.
Morale Hazard
A condition of inattention to, or disregard for, one's own life, health, property or behavior,
that increases the frequency or severity of a loss.
Five Methods of Risk Management
1. Risk Avoidance
2. Transfer of Risk
3. Sharing a Risk
, 4. Assumption of Risk
5. Risk Reduction or Risk Control
Underwriting
Process of selecting certain types of risks and rejecting others so the insurance company will
have a book of business that will produce the company's desired results. (they want a
favorable loss ratio)
Contracts must contain these 4 elements
1. Capacity of Contract/Competent Parties
2. Legal Purposes
3. Offer and Acceptance
4. Consideration
Parts of an Insurance Contract
1. Declarations
2. Insuring agreement
3. Exclusions
4. Conditions
The two broad principles that form the legal foundations of all insurance policies are:
The doctrine of utmost faith
the doctrine of reasonable expectations
A breach of Warranty
The failure of the insured to comply with one or more of the policy conditions
Representation
