+What is a reserve, in insurance terms?
A pool of collected premiums that the insurer sets aside to pay claims
Which of these scenarios is NOT an example of indemnification?
When trying to renew her dog's license, Ellen has to pay a penalty to the city for letting its rabies vaccination la...
AdjusterPRO Final Exam
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ANSWERS 2024
-+What is a reserve, in insurance terms? - answer
A pool of collected premiums that the insurer sets
aside to pay claims
Which of these scenarios is NOT an example of
indemnification? - 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?
- answer The principle of indemnity
Which of the following statements is true about an
insurance policy? - 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? - 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." - answer Conditions
A captive insurance company: - 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: - 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: - answer risk.
Which of the following is a hazard? - answer A
driver's tendency to text while driving
Which of the following situations does NOT involve
an insurable risk? - 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?" - answer Loss of money
invested in the stock market
Which of the following is an insurable risk? -
answer football stadium
, Risk avoidance is a risk management technique
that: - 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: - 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: - 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? - answer
An implied waiver is one that is assumed based on
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