-+What is a reserve, in insurance terms? - ANSWERSA pool of collected premiums that the insurer sets aside to pay claims
Which of these scenarios is NOT an example of indemnification? - ANSWERSWhen trying to renew her dog's license, Ellen has to pay a penalty to the city for letting its rabies v...
AdjusterPRO Final Exam Questions &
Answers
-+What is a reserve, in insurance terms? - ANSWERSA pool of collected premiums that
the insurer sets aside to pay claims
Which of these scenarios is NOT an example of indemnification? - ANSWERSWhen
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? - ANSWERSThe principle of indemnity
Which of the following statements is true about an insurance policy? - ANSWERSIt
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? -
ANSWERSThe 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." - ANSWERSConditions
A captive insurance company: - ANSWERSexists 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: - ANSWERSSine 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: - ANSWERSrisk.
Which of the following is a hazard? - ANSWERSA driver's tendency to text while driving
Which of the following situations does NOT involve an insurable risk? - ANSWERSDale
just bought 30 shares of a hot new startup company online.
Which of the following situations does NOT involve an instance of "pure risk?" -
ANSWERSLoss of money invested in the stock market
Which of the following is an insurable risk? - ANSWERSfootball stadium
Risk avoidance is a risk management technique that: - ANSWERSeliminates 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: - ANSWERSrisk 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: - ANSWERSrisk
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? -
ANSWERSAn 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
Jason files a claim, the insurer may not claim that his policy is void due to late
payments.
In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a
security guard on the premises 24/7. This is called a: - ANSWERSA warranty is a
guarantee that certain conditions will be met. If the policyholder violates a warranty, the
insurer can void the policy.
Which of the following is an example of a moral hazard? - ANSWERSKen lights a
candle, sets it right next to the window draperies and leaves the house to go to work.
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