Indiana Adjuster Practice Exam
Questions & Answers
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 does NOT apply to the Standard Fire Policy?
A. It is the basis for all homeowners policies.
B. It pays actual cash value.
C. It automatically covers wind and vandalism.
D. It is a named peril policy. - ANSWERSC. It automatically covers wind and vandalism.
The Standard Fire Policy is also known by a nickname: The "___ " Policy. -
ANSWERS165 Line
Stan built a porch for his home three years ago at a cost of $10,000. The value of the
porch has depreciated by $6,000, and it would cost $12,000 to replace it today. After
Stan's porch burnt down during a BBQ today, how much would a Standard Fire Policy
indemnify Stan for his porch? - ANSWERS$6,000 (The Standard Fire Policy pays on an
ACV basis. Recall from earlier in the course, that the formula for calculating ACV is
Replacement Cost minus Depreciation. So, in this case: $12,000 - $6,000 = $6,000.)
In an insurance policy, the summary of what the insurer will do in the event of a covered
loss is called: - ANSWERSthe insuring agreement.
If an adjuster needs to find clarification about what actually constitutes a collision, in
which section of an insurance policy would she find that information? -
ANSWERSDefinitions
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
All of the following pieces of information can be found in the Conditions section of an
insurance policy, EXCEPT:
A. anything the insured must do for coverage to remain in effect.
,B. what the insured must do in the event of a lawsuit.
C. the insured's duties after a loss.
D. causes of loss that are not covered. - ANSWERSD. causes of loss that are not
covered.
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.
In a __________, only one party is legally obligated to perform. - ANSWERSunilateral
contract
A reciprocal insurer is: - ANSWERSan unincorporated organization of subscribers that
operates through an attorney-in-fact to provide insurance benefits for its members.
Xavier owns a small insurance company. Recently the company won a bid to insure a
new housing development in Omaha, NE. His company can handle any claims that
arise, but if a series of tornados were to tear through the area and destroy the entire
development, Xavier's company would suffer financially. Which type of insurer could
help Xavier's company protect itself the most from this potential loss? - ANSWERSA re-
insurer
Which of these is NOT typically excluded from coverage in a property insurance policy?
A. Off-premises power failure
B. Nuclear events
C. Civil confiscation
D. Lightning - ANSWERSD. Lightning
Clark is filling out an application for an insurance policy. The application asks for his
birth date, and Clark writes 1-24-67. His actual birthday is 1-24-63, but he likes to
appear younger so he uses a different date. This would be called: -
ANSWERSmisrepresentation.
Bob has been in the construction business a long time and is ready to retire. He sells
the company to his friend Scott and then lets the insurer know that any claims against
his policy should be paid to Scott from now on. The insurer informs Bob that they cannot
do this due to which condition? - ANSWERSAssignment
According to the Mortgagee Clause, what is NOT one of the rights of the mortgagee?
A. The mortgagee may receive a portion of claim payments.
B. The mortgagee may change the coverage amount.
C. The mortgagee may be indemnified, even in the event of fraud by the insured.
D. The mortgagee will be notified if the insurer intends to cancel the policy. -
ANSWERSB. The mortgagee may change the coverage amount.
, Which of the following situations does NOT involve an instance of "pure risk?"
A. Loss of a house due to a hurricane
B. Loss of money invested in the stock market
C. Loss of a company car in an unfortunate accident
D. Loss of crops due to an infestation of parasites - ANSWERSB. Loss of money
invested in the stock market
A lightning strike causes one of the storage buildings on John's farm to burn to the
ground, aided by the fuel tanks he kept in the building. John knows he wasn't supposed
to store any fuel in the building, so he keeps that piece of information to himself when
he files a claim. John's insurer may deny his claim based on his: -
ANSWERSconcealment.
An insurance company might consider any of the following a risk, EXCEPT:
A. a high crime neighborhood.
B. an automobile.
C. a home.
D. a jewelry collection. - ANSWERSA. a high crime neighborhood. (A high-crime
neighborhood is an example of a hazard, not a risk.)
An oral or written statement providing temporary insurance coverage until an insurance
policy can be issued is called a: - ANSWERSbinder.
The Severability of Interests condition states that: - ANSWERScoverage applies to each
insured separately, as if no other insured existed.
Steve has just purchased a wedding ring for his new bride. If something were to happen
to the ring, he'd be out a lot of money, so he purchases an insurance policy. He is able
to do this because: - ANSWERSthe ring is a pure risk.
Agnes purchased a home ten years ago in an up-and-coming neighborhood for
$75,000. The home's value has since tripled to $225,000! Agnes still has $25,000 left on
her mortgage, but has increased her dwelling coverage to $225,000 to keep up with the
home's appreciation. When it burns to the ground in a fire, her mortgage company
wants to be indemnified $75,000 because the value of the home has tripled. Which
policy condition protects against this claim? - ANSWERSInsurable Interest (Agnes'
mortgage holder can only be indemnified for his amount of insurable interest in the
home—$25,000 at the time of the fire—regardless of the fact that her home has tripled
in value)
A "hazard" is defined as: - ANSWERSsomething that increases the chance of a loss.
