Texas Adjuster Study Guide Questions
with 100% Correct Answers
PERILS Correct Answer: A CAUSE OF PROPERTY LOSSES UNDER AN INSURANCE
CONTRACT EX: WINDSTORM, HURRICANE, EXPLOSION, COLLAPSE OF BUILDING,
VANDALISM, ACCIDENTAL DISCHARGE, AND THEFT
LAW OF LARGE NUMBERS Correct Answer: A FUNDAMENTAL CONCEPT IN
STATISTICS AND PROBABILITY THAT DESCRIBES HOW THE AVERAGE OF A
RANDOMLY SELECTED LARGE SAMPLE FROM A POPULATION. IT BASICALLY RELIES
ON THE PRINCIPLE THAT THE LARGER THE POOL, THE MORE PREDICTABLE THE
AMOUNT OF LOSSES WILL BE IN A GIVEN PERIOD
PRINCIPLE OF INDEMNITY Correct Answer: IS AN INSURANCE PRINCIPLE STATING
THAT AN INSURED MAY NOT BE COMPENSATED BY INSURANCE COMPANY IN AN
AMOUNT EXCEEDING THE INSURED'S ECONOMIC LOSS.
LIMITS OF LIABILITY Correct Answer: THE MAXIMUM AMOUNT THAT AN INSURANCE
POLICY WILL PAY. IT IS SPECIFIED ON THE POLICY DECLARATION PAGE.
PROPERTY INSURANCE Correct Answer: COVERAGE FOR REAL AND PERSONAL
PROPERTY AGAINST LOSS OR DAMAGE FROM PERILS INSURED AGAINST.
LOSS SETTLEMENT Correct Answer: THE PROCESS USED TO DETERMINE THE
AMOUNT OF THE LOSS
ACTUAL CASH VALUE Correct Answer: THE VALUE OF THE PROPERTY BASED ON
THE CURRENT COST TO REPLACE IT MINUS DEPRECIATION.
AGREED VALUE Correct Answer: THE AMOUNT THAT THE INSURED AND INSURER
AGREE UPON DURING THE TIME OF POLICY INCEPTION.
,REPLACEMENT COST Correct Answer: THE COST ASSOCIATED WITH REPLACING
PROPERTY AT CURRENT MARKET PRICES
MARKET VALUE Correct Answer: THE AMOUNT THAT THE PROPERTY IS WORTH IN A
COMPETITIVE MARKET. THIS AMOUNT IS ACCEPTED BY THE BUYER AND SELLER.
TORT Correct Answer: IS A WRONG THAT INVOLVES A BREACH OF CIVIL DUTY
OWED TO SOMEONE ELSE. THIS BREACH DETERMINES IF THAT PERSON IS
NEGLIGENCE.
ELEMENTS USED TO DETERMINE NEGLIGENCE Correct Answer: A DUTY OWED, A
DUTY BREACHED, PROXIMATE CAUSE, AND DAMAGES
METHODS TO DETERMINE LOSS ARE: Correct Answer: ACV, MARKET VALUE,
REPLACEMENT COST, AGREED VALUE
CASUALTY INSURANCE Correct Answer: PROTECTS A PERSON FROM FINANCIAL
LOSS ARISING FROM BODILY INJURY OR PROPERTY DAMAGE TO OTHERS
HAZARD Correct Answer: IS A SITUATION THAT POSES A LEVEL OF THREAT TO LIFE,
HEALTH, PROPERTY, OR ENVIRONMENT.
INDIRECT LOSS Correct Answer: TYPE OF LOSS THAT DOES NOT RESULT FROM
DIRECT DAMAGE OF A COVERED CAUSE OF LOSS OR PERIL BUT IS INSTEAD A
CONSEQUENCE OF THE DIRECT DAMAGE LOSS.
DIRECT LOSS Correct Answer: DIRECT PHYSICAL LOSS TO PROPERTY
INSURING AGREEMENT Correct Answer: THIS SECTION OF THE INSURANCE POLICY
SPECIFIES WHAT THE INSURANCE WILL PROVIDE COVERAGE FOR IN EXCHANGE
FOR PREMIUM PAYMENTS BY THEIR CUSTOMER.
DEDUCTIBLE Correct Answer: THE AMOUNT THE INSURED MUST PAY IN A LOSS
BEFORE ANY PAYMENT IS DUE FROM THE INSURANCE COMPANY.
,WHERE IS A HOMEOWNER PERCENTAGE DEDUCTIBLE ALWAYS TAKEN FROM?
Correct Answer: COVERAGE A STRUCTURE POLICY LIMITS OF LIABILITY THAT IS
USED ON THE DECLARATION PAGE.
CANCELLATION Correct Answer: IS THE TERMINATION OF AN INSURANCE POLICY
BY EITHER SIDE AND IT MUST BE DONE IN WRITING
LIABILITY Correct Answer: A PERSON IS LEGALLY LIABLE FOR AN ACCIDENT IF THAT
PERSON IS FOUND RESPONSIBLE FOR BODILY INJURY OR PROPERTY DAMAGE TO
ANOTHER PARTY.
NEGLIGENCE Correct Answer: THE FAILURE TO EXERCISE THE CARE THAT A
REASONABLY PRUDENT PERSON CAN BE CHARACTERIZED BY THE AVERAGE
PERSON.
ADDITIONAL LIVING EXPENSES Correct Answer: CHARGES COVERED BY
HOMEOWNERS POLICY OVER AND ABOVE POLICY HOLDERS CUSTOMARY LIVING
DUE TO DAMAGE BY A COVERED PERIL AND MAKES THE HOME TEMPORARY
UNINHABITABLE.
EXPOSURE Correct Answer: THE MEASURE OF THE POSSIBILITY OF THE LOSS
INSURED Correct Answer: THE PARTY TO AN INSURANCE ARRANGEMENT THAT HAS
AN INSURABLE INTEREST IN THE PROPERTY THAT IS BEING INSURED.
INSURER Correct Answer: INSURANCE COMPANY
LOSS HISTORY Correct Answer: IS THE INSURED HISTORY OF LOSSES WITH OTHER
COMPANIES. INSURANCE COMPANY VIEWS THIS AS INDICATION OF INSURED
PROPENSITY FOR A CLAIM IN FUTURE.
, NOTICE OF LOSS Correct Answer: NOTICE REQUIRED BY THE INSURANCE
COMPANY IMMEDIATELY AFTER AN INCIDENT. POLICY HOLDER RESPONSIBILITY
AFTER A LOSS
DEPRECIATION Correct Answer: ACT OF LOWERING AN ITEM DUE TO VALUE
WEAR AND TEAR IT IS BASED ON AGE, CONDITION, AND LIFE EXPECTANCY.
PUNITIVE DAMAGE Correct Answer: THE AMOUNT AWARDED BY THE COURT
WHICH IS INTENDED TO REFORM OR DETER THE DEFENDANT FROM ENGAGING IN
SIMILAR CONDUCT IN THE FUTURE
COMPARATIVE NEGLIGENCE Correct Answer: IS A PARTIAL LEGAL DEFENSE THAT
REDUCES THE AMOUNT OF DAMAGES THAT A PERSON CAN RECOVER BASED
UPON THE AMOUNT THAT THIS PERSON'S OWN NEGLIGENCE CONTRIBUTED TO THE
LOSS
CONTRIBUTORY NEGLIGENCE Correct Answer: IS A LAW DEFENSE WHERE A
PERSON NEGLIGENCE CONTRIBUTED TO THE HARM THAT HE OR SHE SUSTAINED
ASSUMPTION OF RISK Correct Answer: A doctrine under which a plaintiff may not
recover for injuries or damage suffered from risks he or she knows of and has
voluntarily assumed
ADVERSE SELECTION Correct Answer: THE TENDENCY OF INSURED'S WHO PRESENT
A HIGHER PROBABILITY OF LOSS TO PURCHASE OR RENEW INSURANCE MORE
OFTEN THAN THOSE WHO PRESENT A LOWER PROBABILITY
ATTRACTIVE NUISANCE Correct Answer: A dangerous place, condition, or object
that is particularly attractive to children.
ACCIDENT Correct Answer: UNFORESEEN, UNINTENDED EVENT, SOMETHING
UNEXPECTED
with 100% Correct Answers
PERILS Correct Answer: A CAUSE OF PROPERTY LOSSES UNDER AN INSURANCE
CONTRACT EX: WINDSTORM, HURRICANE, EXPLOSION, COLLAPSE OF BUILDING,
VANDALISM, ACCIDENTAL DISCHARGE, AND THEFT
LAW OF LARGE NUMBERS Correct Answer: A FUNDAMENTAL CONCEPT IN
STATISTICS AND PROBABILITY THAT DESCRIBES HOW THE AVERAGE OF A
RANDOMLY SELECTED LARGE SAMPLE FROM A POPULATION. IT BASICALLY RELIES
ON THE PRINCIPLE THAT THE LARGER THE POOL, THE MORE PREDICTABLE THE
AMOUNT OF LOSSES WILL BE IN A GIVEN PERIOD
PRINCIPLE OF INDEMNITY Correct Answer: IS AN INSURANCE PRINCIPLE STATING
THAT AN INSURED MAY NOT BE COMPENSATED BY INSURANCE COMPANY IN AN
AMOUNT EXCEEDING THE INSURED'S ECONOMIC LOSS.
LIMITS OF LIABILITY Correct Answer: THE MAXIMUM AMOUNT THAT AN INSURANCE
POLICY WILL PAY. IT IS SPECIFIED ON THE POLICY DECLARATION PAGE.
PROPERTY INSURANCE Correct Answer: COVERAGE FOR REAL AND PERSONAL
PROPERTY AGAINST LOSS OR DAMAGE FROM PERILS INSURED AGAINST.
LOSS SETTLEMENT Correct Answer: THE PROCESS USED TO DETERMINE THE
AMOUNT OF THE LOSS
ACTUAL CASH VALUE Correct Answer: THE VALUE OF THE PROPERTY BASED ON
THE CURRENT COST TO REPLACE IT MINUS DEPRECIATION.
AGREED VALUE Correct Answer: THE AMOUNT THAT THE INSURED AND INSURER
AGREE UPON DURING THE TIME OF POLICY INCEPTION.
,REPLACEMENT COST Correct Answer: THE COST ASSOCIATED WITH REPLACING
PROPERTY AT CURRENT MARKET PRICES
MARKET VALUE Correct Answer: THE AMOUNT THAT THE PROPERTY IS WORTH IN A
COMPETITIVE MARKET. THIS AMOUNT IS ACCEPTED BY THE BUYER AND SELLER.
TORT Correct Answer: IS A WRONG THAT INVOLVES A BREACH OF CIVIL DUTY
OWED TO SOMEONE ELSE. THIS BREACH DETERMINES IF THAT PERSON IS
NEGLIGENCE.
ELEMENTS USED TO DETERMINE NEGLIGENCE Correct Answer: A DUTY OWED, A
DUTY BREACHED, PROXIMATE CAUSE, AND DAMAGES
METHODS TO DETERMINE LOSS ARE: Correct Answer: ACV, MARKET VALUE,
REPLACEMENT COST, AGREED VALUE
CASUALTY INSURANCE Correct Answer: PROTECTS A PERSON FROM FINANCIAL
LOSS ARISING FROM BODILY INJURY OR PROPERTY DAMAGE TO OTHERS
HAZARD Correct Answer: IS A SITUATION THAT POSES A LEVEL OF THREAT TO LIFE,
HEALTH, PROPERTY, OR ENVIRONMENT.
INDIRECT LOSS Correct Answer: TYPE OF LOSS THAT DOES NOT RESULT FROM
DIRECT DAMAGE OF A COVERED CAUSE OF LOSS OR PERIL BUT IS INSTEAD A
CONSEQUENCE OF THE DIRECT DAMAGE LOSS.
DIRECT LOSS Correct Answer: DIRECT PHYSICAL LOSS TO PROPERTY
INSURING AGREEMENT Correct Answer: THIS SECTION OF THE INSURANCE POLICY
SPECIFIES WHAT THE INSURANCE WILL PROVIDE COVERAGE FOR IN EXCHANGE
FOR PREMIUM PAYMENTS BY THEIR CUSTOMER.
DEDUCTIBLE Correct Answer: THE AMOUNT THE INSURED MUST PAY IN A LOSS
BEFORE ANY PAYMENT IS DUE FROM THE INSURANCE COMPANY.
,WHERE IS A HOMEOWNER PERCENTAGE DEDUCTIBLE ALWAYS TAKEN FROM?
Correct Answer: COVERAGE A STRUCTURE POLICY LIMITS OF LIABILITY THAT IS
USED ON THE DECLARATION PAGE.
CANCELLATION Correct Answer: IS THE TERMINATION OF AN INSURANCE POLICY
BY EITHER SIDE AND IT MUST BE DONE IN WRITING
LIABILITY Correct Answer: A PERSON IS LEGALLY LIABLE FOR AN ACCIDENT IF THAT
PERSON IS FOUND RESPONSIBLE FOR BODILY INJURY OR PROPERTY DAMAGE TO
ANOTHER PARTY.
NEGLIGENCE Correct Answer: THE FAILURE TO EXERCISE THE CARE THAT A
REASONABLY PRUDENT PERSON CAN BE CHARACTERIZED BY THE AVERAGE
PERSON.
ADDITIONAL LIVING EXPENSES Correct Answer: CHARGES COVERED BY
HOMEOWNERS POLICY OVER AND ABOVE POLICY HOLDERS CUSTOMARY LIVING
DUE TO DAMAGE BY A COVERED PERIL AND MAKES THE HOME TEMPORARY
UNINHABITABLE.
EXPOSURE Correct Answer: THE MEASURE OF THE POSSIBILITY OF THE LOSS
INSURED Correct Answer: THE PARTY TO AN INSURANCE ARRANGEMENT THAT HAS
AN INSURABLE INTEREST IN THE PROPERTY THAT IS BEING INSURED.
INSURER Correct Answer: INSURANCE COMPANY
LOSS HISTORY Correct Answer: IS THE INSURED HISTORY OF LOSSES WITH OTHER
COMPANIES. INSURANCE COMPANY VIEWS THIS AS INDICATION OF INSURED
PROPENSITY FOR A CLAIM IN FUTURE.
, NOTICE OF LOSS Correct Answer: NOTICE REQUIRED BY THE INSURANCE
COMPANY IMMEDIATELY AFTER AN INCIDENT. POLICY HOLDER RESPONSIBILITY
AFTER A LOSS
DEPRECIATION Correct Answer: ACT OF LOWERING AN ITEM DUE TO VALUE
WEAR AND TEAR IT IS BASED ON AGE, CONDITION, AND LIFE EXPECTANCY.
PUNITIVE DAMAGE Correct Answer: THE AMOUNT AWARDED BY THE COURT
WHICH IS INTENDED TO REFORM OR DETER THE DEFENDANT FROM ENGAGING IN
SIMILAR CONDUCT IN THE FUTURE
COMPARATIVE NEGLIGENCE Correct Answer: IS A PARTIAL LEGAL DEFENSE THAT
REDUCES THE AMOUNT OF DAMAGES THAT A PERSON CAN RECOVER BASED
UPON THE AMOUNT THAT THIS PERSON'S OWN NEGLIGENCE CONTRIBUTED TO THE
LOSS
CONTRIBUTORY NEGLIGENCE Correct Answer: IS A LAW DEFENSE WHERE A
PERSON NEGLIGENCE CONTRIBUTED TO THE HARM THAT HE OR SHE SUSTAINED
ASSUMPTION OF RISK Correct Answer: A doctrine under which a plaintiff may not
recover for injuries or damage suffered from risks he or she knows of and has
voluntarily assumed
ADVERSE SELECTION Correct Answer: THE TENDENCY OF INSURED'S WHO PRESENT
A HIGHER PROBABILITY OF LOSS TO PURCHASE OR RENEW INSURANCE MORE
OFTEN THAN THOSE WHO PRESENT A LOWER PROBABILITY
ATTRACTIVE NUISANCE Correct Answer: A dangerous place, condition, or object
that is particularly attractive to children.
ACCIDENT Correct Answer: UNFORESEEN, UNINTENDED EVENT, SOMETHING
UNEXPECTED
