AdjusterPRO Final Exam – Questions With
Definitive Answers
What is a reserve, in insurance terms? Correct Answer - A pool
of collected premiums that the insurer sets aside to pay claims
Which of these scenarios is NOT an example of indemnification?
Correct Answer - When trying to renew her dog's license, Ellen
has to pay a penalty to the city for letting its rabies vaccination
lapse.
Ellen having to pay a fine is not an example of indemnification.
Indemnification means being restored to the financial condition you
were in before a loss. In three of these situations, someone
experienced a loss and was then "made whole": Joe-Bob's neighbor
lost his TV, Alice lost her house, and Hugh lost the use of his car. But
in the case of Ellen's dog, the city did not experience a loss; it simply
imposed a penalty to teach Ellen a lesson about keeping up with her
dog's shots.
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? Correct Answer - The principle of indemnity
Which of the following statements is true about an insurance policy?
Correct Answer - It relies on the utmost good faith of both the
insured and the insurer
,An insurance policy relies on the utmost good faith of both the
insured and the insurer.
Which of the following would you find in the Conditions section of
an insurance policy? Correct Answer - The insured's duty after
a loss
In which section of an insurance policy might you find the following
statement? "Damage to insured property must be reported within
15 days of the damaging occurrence." Correct Answer -
Conditions
A captive insurance company: Correct Answer - exists solely to
provide insurance for its parent company.
Cindy holds an insurance policy from Sine Nomine Insurance. This is
not a publicly traded company, and Cindy can participate in the
election of the board, receiving dividends if the company does well.
Sine Nomine Insurance could be best described as a: Correct
Answer - Sine Nomine Insurance is a mutual insurance company.
When an insurer issues an insurance policy, the actual item, person,
or organization that is being insured is called the: Correct Answer
- risk.
Which of the following is a hazard? Correct Answer - A driver's
tendency to text while driving
Which of the following situations does NOT involve an insurable
risk? Correct Answer - Dale just bought 30 shares of a hot new
startup company online.
, Which of the following situations does NOT involve an instance of
"pure risk?" Correct Answer - Loss of money invested in the
stock market
Which of the following is an insurable risk? Correct Answer -
football stadium
Risk avoidance is a risk management technique that: Correct
Answer - eliminates risk.
Amy needs more floor space in her antique furniture store, so she
buys a storage building 3 miles away. She is worried about keeping
the furniture in the storage building safe, so she puts in an alarm
system and smoke detectors. By purchasing the alarm system and
smoke detectors, Amy is practicing: Correct Answer - risk
reduction.
Six Stars Development Company has just been offered a great deal
on ten large properties in Las Vegas. The economy in Las Vegas has
been declining recently, but the CEO of Six Stars expects it to recover
soon. This could be an exceptional opportunity for Six Stars, but it's
also pretty risky. Ultimately, the Six Stars executive team decides not
to purchase the properties. This is an example of: Correct Answer
- risk avoidance.
Jason's auto policy states that the insurer may cancel coverage if a
premium is more than 30 days late. However, Jason is currently
more than 30 days late, and has been so five times in the last year,
and his insurer has done nothing about it. When Jason gets into an
accident and files a claim, which of the following is most likely to
happen? Correct Answer - An implied waiver is one that is
assumed based on someone's actions. When the insurer decided to
accept Jason's late premium payments, it implied that it was waiving
its right to cancel Jason's policy because of a late payment. So, when
Definitive Answers
What is a reserve, in insurance terms? Correct Answer - A pool
of collected premiums that the insurer sets aside to pay claims
Which of these scenarios is NOT an example of indemnification?
Correct Answer - When trying to renew her dog's license, Ellen
has to pay a penalty to the city for letting its rabies vaccination
lapse.
Ellen having to pay a fine is not an example of indemnification.
Indemnification means being restored to the financial condition you
were in before a loss. In three of these situations, someone
experienced a loss and was then "made whole": Joe-Bob's neighbor
lost his TV, Alice lost her house, and Hugh lost the use of his car. But
in the case of Ellen's dog, the city did not experience a loss; it simply
imposed a penalty to teach Ellen a lesson about keeping up with her
dog's shots.
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? Correct Answer - The principle of indemnity
Which of the following statements is true about an insurance policy?
Correct Answer - It relies on the utmost good faith of both the
insured and the insurer
,An insurance policy relies on the utmost good faith of both the
insured and the insurer.
Which of the following would you find in the Conditions section of
an insurance policy? Correct Answer - The insured's duty after
a loss
In which section of an insurance policy might you find the following
statement? "Damage to insured property must be reported within
15 days of the damaging occurrence." Correct Answer -
Conditions
A captive insurance company: Correct Answer - exists solely to
provide insurance for its parent company.
Cindy holds an insurance policy from Sine Nomine Insurance. This is
not a publicly traded company, and Cindy can participate in the
election of the board, receiving dividends if the company does well.
Sine Nomine Insurance could be best described as a: Correct
Answer - Sine Nomine Insurance is a mutual insurance company.
When an insurer issues an insurance policy, the actual item, person,
or organization that is being insured is called the: Correct Answer
- risk.
Which of the following is a hazard? Correct Answer - A driver's
tendency to text while driving
Which of the following situations does NOT involve an insurable
risk? Correct Answer - Dale just bought 30 shares of a hot new
startup company online.
, Which of the following situations does NOT involve an instance of
"pure risk?" Correct Answer - Loss of money invested in the
stock market
Which of the following is an insurable risk? Correct Answer -
football stadium
Risk avoidance is a risk management technique that: Correct
Answer - eliminates risk.
Amy needs more floor space in her antique furniture store, so she
buys a storage building 3 miles away. She is worried about keeping
the furniture in the storage building safe, so she puts in an alarm
system and smoke detectors. By purchasing the alarm system and
smoke detectors, Amy is practicing: Correct Answer - risk
reduction.
Six Stars Development Company has just been offered a great deal
on ten large properties in Las Vegas. The economy in Las Vegas has
been declining recently, but the CEO of Six Stars expects it to recover
soon. This could be an exceptional opportunity for Six Stars, but it's
also pretty risky. Ultimately, the Six Stars executive team decides not
to purchase the properties. This is an example of: Correct Answer
- risk avoidance.
Jason's auto policy states that the insurer may cancel coverage if a
premium is more than 30 days late. However, Jason is currently
more than 30 days late, and has been so five times in the last year,
and his insurer has done nothing about it. When Jason gets into an
accident and files a claim, which of the following is most likely to
happen? Correct Answer - An implied waiver is one that is
assumed based on someone's actions. When the insurer decided to
accept Jason's late premium payments, it implied that it was waiving
its right to cancel Jason's policy because of a late payment. So, when
