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ADJUSTERPRO FINAL EXAM
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ADJUSTERPRO FINAL EXAM
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ADJUSTERPRO FINAL EXAMWhat is a reserve, in insurance terms? - Answers -A pool of collected premiums that the
insurer sets aside to pay claims
Which of these scenarios is NOT an example of indemnification? - Answers -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? - Answers -The principle of indemnity
Which of the following statements is true about an insurance policy? - Answers -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? -
Answers -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." - Answers -Conditions
A captive insurance company: - Answers -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: - Answers -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: - Answers -risk.
, Which of the following is a hazard? - Answers -A driver's tendency to text while driving
Which of the following situations does NOT involve an insurable risk? - Answers -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?" -
Answers -Loss of money invested in the stock market
Which of the following is an insurable risk? - Answers -football stadium
Risk avoidance is a risk management technique that: - Answers -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: - Answers -risk reduction.
Arlene's house suffered structural damage in an earthquake last year, but her policy
does not cover earthquake damage, so Arlene never got it fixed. When a tornado rips
through her neighborhood, it causes some roof damage totaling $2,000, and Arlene
sees an opportunity in the situation. She files a claim for the roof damage, but also
claims that the tornado caused the structural damage to her house that was actually
caused by the earthquake last year. Which of the following statements is true? -
Answers -Arlene committed soft fraud
A power surge sparks a small electrical fire in an office building. The electrical fire
triggers the automatic sprinkler system. The water from the sprinklers soaks the carpets
and shorts-out all the computers, causing thousands of dollars in damage. What is the
proximate cause of the loss? - Answers -The power surge caused the fire, which
caused the sprinklers to go off, which led to the water damage to the office and
computers. Since there is an unbroken chain of events starting with the power surge,
the power surge is the proximate cause of all the other damages.
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 move into a hotel until the repairs are completed. Sam's car
crashing into the house would be considered: - Answers -An unexpected event that
causes damage is called an occurrence.
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 is the transfer of rights that
occurs when an insurer indemnifies someone for a loss. When Neal accepts $10,000
from his insurer, he transfers to the insurer his right to collect that $10,000 from
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