HOSMERIT
ALABAMA INSURANCE ADJUSTER EXAM
QUESTIONS WITH VERIFIED ANSWERS 2024/2025
Which of the following best defines premium? - CORRECT ANSWERS Under an
insurance contract, the insured pays a scheduled and affordable fee, called a premium. In
return, the insurer promises to pay for specified losses if they occur.
What are the four requirements of a legally binding contract? - CORRECT ANSWERS
agreement, consideration, competent parties, and legal purpose.
Melinda's home sustained $6,500 in damage when Jared ran into it with is truck. Melinda
received $6,500 from her insurance company, and Jared also paid her $5,000. Melinda has now
profited from this loss and is in violation of: - CORRECT ANSWERS The principle of
indemnity.
An insurance policy's declarations page contains all of the following, except: - CORRECT
ANSWERS The declarations page is always the first page or section of an insurance
policy. It gives a general overview of the policy and will include at least 8 details: the names
of both parties, the insurer and the insured; the policy number; the location and
description of the insured item; the value and replacement value of the insured item; the
dates that policy coverage starts and ends (known as the inception and expiration dates);
the amount and limit of insurance coverage; the deductibles on the policy; and the
premium that the insured has to pay.
All of the following pieces of information can be found in the Conditions section of an insurance
policy, except: - CORRECT ANSWERS conditions section. This is where the policy
establishes a set of conditions that the insured must meet in order for the policy to be valid.
If the policyholder does not meet the conditions listed here, the insurer has a right to deny
coverage. For example, if a jewelry store owner wants to purchase an insurance policy, the
conditions section may require that a security guard be present whenever the store is open.
Other conditions require a claimant to protect damaged property from further losses, and
that the claimant must submit a proof of loss if the insurer requests it. The insured must
also cooperate with the insurer during any investigations or lawsuits. These and other
conditions are found in the conditions section of the policy.
,Janelle is happy with most of the coverage in her Homeowners policy, but she wants to change
her coverage for personal property from ACV to Replacement Cost. She visits her local
insurance agent and asks him to make this change to her policy while keeping all the other
details the same. Which section of her policy would the agent use to make this change? -
CORRECT ANSWERS Endorsements. often the last section of an insurance contract.
Like the definitions, this section is optional but very common. An endorsement is a
provision that modifies the coverage of the original contract. It can add or subtract
coverage for people, property, or causes of loss.
Mark belongs to a non-profit organization that engages in charitable activities and provides Mark
with death and disability insurance coverage. To what kind of organization does Mark likely
belong? - CORRECT ANSWERS Fraternal Benefit Societies, or Fraternal
Associations, are non-profit, mutual aid organizations that engage primarily in charitable
or benevolent activities. They offer their members insuranceagainst death, disease, and
disability. Members of Fraternal Benefit Societies usually share common interests, such as
religion, occupation, or ethnic background. The Elks, the Masons, The Catholic Aid
Association, and Sons of Norway are all examples of fraternal benefit societies.
A non-profit group of people or organizations that insure each other is called a: - CORRECT
ANSWERS Risk Retention Groups: Groups where the members insure each other,
using their own capital to write insurance policies.
A "binder" is: - CORRECT ANSWERS A binder is a statement providing immediate
insurance coverage for a short period. The binder can be oral or written, and it is meant to
give temporary protection until the final contract is drawn up, or until the insurer decides
against issuing a written policy.
Which of the following situations does NOT contain an insurable risk? - CORRECT
ANSWERS risk is an item, person, or organization that has been insured. But not
everything is insurable.
First determine insurable risk is whether the insurer can collect enough income from premiums
to cover its two major expenses: claims against policies and the operating costs. Second
determining whether a risk is insurable is threefold. The insurer must be able to define the exact
conditions of coverage, must know the precise dollar value of the risk, and must be able to
clearly set out the terms under which a claim would be paid. insurable risk is that a loss must be
unpredictable and caused by circumstances no one could reasonably prevent-a roof blown off in
a tornado, a car accident, a third condition of insurable risk is that a loss must be unpredictable
, and caused by circumstances no one could reasonably prevent-a roof blown off in a tornado, a
car accident, a theft, or a fire caused by lightning. Fourth condition of insurable risk is that the
loss must cause substantial economic hardship., Fifth condition for determining insurable risk is
that an insurer must be able to exclude coverage for some disasters considered significantly
catastrophic., Sixth and final qualification of an insurable risk is that an insurer must be able to
cover a large number of similar risks.,
Dale just bought 30 shares of a hot new startup company online.
An insurance company may consider each of the following a risk, except: - CORRECT
ANSWERS a school bus.
Risk: In the insurance industry, risk can have two meanings: 1) the potential for financial loss;
being exposed or open to damage, 2) an insured item.
All of the following are true about the Law of Large Numbers in the insurance industry, except: -
CORRECT ANSWERS The larger the number of units insured, the more an insurer
will have to pay out. Simply put, the Law of Large Numbers says that statistics are more
accurate and predictable when there is a larger group of units involved.
Monica's home is located in a flood zone. In insurance terms, the location of Monica' home is
considered: - CORRECT ANSWERS a hazard: Anything that increases the chance of
loss.
Which of the following is true about risk management in the insurance industry? - CORRECT
ANSWERS Risk management begins before a policy is purchased.
Darla works for XYZ Insurance and has Eddie in her office, who is applying for an auto
insurance policy. During the application process, Darla discovers that Eddie has been reported
for fraudulent insurance activity. What risk management technique would Darla most likely use
in this situation? - CORRECT ANSWERS Risk Reduction in three main ways: it can
insure a risk but charge highert han usual premiums, or it can require the policyholder to
perform some action to reduce risk, or it can provide less coverage than the applicant
wants.
