Insurance Quiz: Types of Insurance and Related Concepts, Exams of Insurance law

Download Insurance Quiz: Types of Insurance and Related Concepts and more Exams Insurance law in PDF only on Docsity! FLORIDA CLAIMS ADJUSTER EXAM 3 VERSIONS Q & A 2024 1. Which of the following statements is true about an insurance policy? A. It is a legal contract between the insurer and the insured. B. It is solely based on verbal agreements. C. It does not require any premium payments. D. It can be canceled by the insured without any consequences. Answer: A. It is a legal contract between the insurer and the insured. Rationale: An insurance policy is a legal contract that outlines the terms and conditions of the insurance coverage, including the responsibilities and obligations of both parties. 2. What is the purpose of the principle of indemnity in insurance? A. To provide unlimited compensation to the insured. B. To prevent the insured from receiving more than the actual amount of loss. C. To exclude certain types of risks from coverage. D. To increase the premium amount for the insured. Answer: B. To prevent the insured from receiving more than the actual amount of loss. Rationale: The principle of indemnity ensures that the insured is compensated for the actual amount of loss suffered, without receiving more than the monetary value of the loss. 3. Which of the following is an example of a peril in insurance? A. Fire B. Policyholder C. Insurance agent D. Insurance premium Answer: A. Fire Rationale: A peril is a specific event or cause of loss that is covered by an insurance policy, such as fire, theft, or natural disasters. 4. What is the purpose of an insurance deductible? A. To increase the premium amount for the insured. 8. What is the purpose of a subrogation clause in an insurance policy? A. To prevent the insured from filing a claim with the insurer. B. To allow the insured to recover damages from a third party responsible for the loss. C. To limit the amount of coverage provided by the policy. D. To exclude certain types of risks from coverage. Answer: B. To allow the insured to recover damages from a third party responsible for the loss. Rationale: A subrogation clause in an insurance policy allows the insurer to "step into the shoes" of the insured and pursue legal action against a third party responsible for the loss to recover the amount paid out on the claim. 9. Which of the following is not a factor used to determine the insurance premium amount? A. Age and gender of the insured. B. Marital status of the insured. C. Occupation and income of the insured. D. Credit score of the insured. Answer: B. Marital status of the insured. Rationale: Factors such as age, gender, occupation, income, and credit score of the insured are commonly used by insurance companies to calculate the insurance premium amount, while marital status is not typically a relevant factor in determining premiums. 10. What is an insurance endorsement? A. A document that cancels an insurance policy. B. A document that extends or modifies the terms of an insurance policy. C. A document that certifies the insured's ownership of the insured property. D. A document that confirms the insurance coverage provided by the policy. Answer: B. A document that extends or modifies the terms of an insurance policy. Rationale: An insurance endorsement is a document that is attached to an insurance policy to add, delete, or modify the coverage provided by the policy. 11. Which of the following is not a type of property insurance policy? A. Homeowners insurance B. Renters insurance C. Auto insurance D. Life insurance Answer: D. Life insurance Rationale: Property insurance policies provide coverage for physical assets, such as homes, vehicles, and personal belongings, while life insurance policies provide financial protection to beneficiaries in the event of the insured's death. 12. What is the purpose of an insurance adjuster in the claims process? A. To deny all claims made by policyholders. B. To investigate and assess the validity of insurance claims. C. To approve claims without any review. D. To increase the insurance premium amount for the insured. Answer: B. To investigate and assess the validity of insurance claims. Rationale: Insurance adjusters play a crucial role in the claims process by investigating the circumstances of a claim, reviewing policy coverage, and determining the amount of compensation to be paid to the insured. 13. Which of the following statements is true about an insurance binder? A. It is a permanent insurance policy. B. It provides temporary insurance coverage until the policy is issued. C. It does not require any premium payments. 17. Which of the following is not a type of casualty insurance policy? A. Auto insurance B. Liability insurance C. Workers' compensation insurance D. Homeowners insurance Answer: D. Homeowners insurance Rationale: Casualty insurance policies provide coverage for liability and personal injury claims, such as auto insurance, liability insurance, and workers' compensation insurance, while homeowners insurance covers property damage and personal liability. 18. What is the purpose of an insurance claim? A. To increase the premium amount for the insured. B. To deny coverage for a loss suffered by the insured. C. To request compensation from the insurance company for a covered loss. D. To cancel the insurance policy without consequences. Answer: C. To request compensation from the insurance company for a covered loss. Rationale: An insurance claim is a formal request made by the insured to the insurance company for compensation or benefits as a result of a covered loss or event. 19. Which of the following is not a standard homeowners insurance policy form? A. HO-1 B. HO-3 C. HO-6 D. HO-9 Answer: D. HO-9 Rationale: HO-1, HO-3, and HO-6 are standard homeowners insurance policy forms that provide varying levels of coverage for different types of properties and risks, while HO-9 does not exist as a standard form. 20. What is the purpose of an insurance settlement? A. To increase the premium amount for the insured. B. To negotiate a lower insurance premium with the insurer. C. To reach an agreement on the amount of compensation to be paid for a covered loss. D. To cancel the insurance policy without consequences. Answer: C. To reach an agreement on the amount of compensation to be paid for a covered loss. Rationale: An insurance settlement is a formal agreement reached between the insurer and the insured on the amount of compensation to be paid for a covered loss, typically after an investigation and evaluation of the claim. 21. Which of the following is a type of supplemental insurance coverage? A. Collision coverage B. Comprehensive coverage C. Personal injury protection D. Umbrella insurance Answer: D. Umbrella insurance Rationale: Umbrella insurance is a type of supplemental insurance coverage that provides additional liability protection beyond the limits of standard insurance policies, such as auto or homeowners insurance. 22. What is the purpose of an insurance grace period? A. To extend the coverage provided by the policy without payment of the premium. B. To allow the insured to pay the premium after the due date without penalty. C. To cancel the insurance policy for non-payment of the premium. D. To provide temporary insurance coverage until the policy is issued. Which of the following best defines the principle of indemnity in insurance? A) The insured is entitled to receive a payment equal to the market value of the insured property. B) The insured should be fully compensated for any loss or damage to the insured property. C) The insured should be restored to the same financial position as before the loss occurred. D) The insured is entitled to receive a sum of money that exceeds the value of the insured property. Answer: C) The insured should be restored to the same financial position as before the loss occurred. Rationale: The principle of indemnity ensures that the insured is compensated for their actual loss, without being overcompensated. This principle aims to mitigate the potential for moral hazard and the overvaluation of assets. Which type of insurance policy provides coverage for a specific period, such as one year, and requires the policyholder to pay premiums on a regular basis? A) Term life insurance B) Whole life insurance C) Universal life insurance D) Variable life insurance Answer: A) Term life insurance Rationale: Term life insurance provides coverage for a specified term and requires regular premium payments. It does not accumulate cash value over time, unlike whole life or universal life insurance policies. When an insurance company spreads the risk of potential losses across multiple policyholders, it is engaging in: A) Risk retention B) Risk avoidance C) Risk transfer D) Risk pooling Answer: D) Risk pooling Rationale: Risk pooling involves spreading the risk of potential losses across a large number of policyholders, thereby reducing the impact of individual losses on the insurer. What type of insurance policy covers damage to a policyholder's own vehicle resulting from a collision with another vehicle or object? A) Comprehensive insurance B) Liability insurance C) Collision insurance D) Uninsured motorist insurance Answer: C) Collision insurance Rationale: Collision insurance provides coverage for damage to the policyholder's own vehicle resulting from a collision with another vehicle or object, regardless of fault. In insurance, the term "subrogation" refers to: A) The process of an insurer seeking reimbursement from a third party responsible for the insured loss. B) The act of an insured transferring their policy to another insurance company. C) The process of evaluating the financial risk associated with an insurance policy. D) The legal requirement for an insured to disclose all material facts to the insurer. Answer: A) The process of an insurer seeking reimbursement from a third party responsible for the insured loss. Rationale: Subrogation allows the insurer to pursue reimbursement from a third party responsible for the insured loss, after the insurer has compensated the insured for the loss. D) When the insured purchases an extended reporting period endorsement. Answer: C) When a claim is made against the insured and reported to the insurer during the policy period. Rationale: Claims-made policies respond to claims made against the insured and reported to the insurer during the policy period, regardless of when the actual loss occurred. Which of the following is a characteristic of a surplus lines insurer? A) It is licensed to write insurance in the state where the insured risk is located. B) It is subject to the same regulatory requirements as admitted insurers. C) It specializes in providing coverage for standard risks. D) It is not required to obtain state approval for its insurance rates and policy forms. Answer: D) It is not required to obtain state approval for its insurance rates and policy forms. Rationale: Surplus lines insurers are not subject to the same regulatory requirements as admitted insurers, and they have more flexibility in setting rates and policy forms. In the context of insurance, what does the term "underwriting" refer to? A) The process of settling insurance claims and making payments to policyholders. B) The evaluation of risk and determination of the terms and conditions of insurance coverage. C) The process of marketing insurance products to potential policyholders. D) The development of investment strategies to maximize the insurer's financial returns. Answer: B) The evaluation of risk and determination of the terms and conditions of insurance coverage. Rationale: Underwriting involves the assessment of risk and the establishment of terms and conditions for insurance coverage, including premium levels and coverage limits. Which type of insurance policy provides coverage for an individual's legal liability for bodily injury or property damage to others? A) Personal injury protection B) Comprehensive insurance C) Liability insurance D) Collision insurance Answer: C) Liability insurance Rationale: Liability insurance provides coverage for an individual's legal liability for bodily injury or property damage to others, including legal defense costs. When an insurance policy is considered "admitted," it means that: A) The policy is guaranteed to be renewed by the insurer at the end of each policy period. B) The policy has been approved and is issued by an insurer licensed in the state where the insured risk is located. C) The policy provides coverage for losses that have already occurred before the policy inception date. D) The policy is written on a non-standard basis, with customized terms and conditions. Answer: B) The policy has been approved and is issued by an insurer licensed in the state where the insured risk is located. Rationale: Admitted insurance policies are issued by insurers licensed in the state where the insured risk is located, providing a level of regulatory oversight and consumer protection. Which of the following is a characteristic of a "binder" in the context of insurance? A) It is a formal written contract that outlines the terms and conditions of insurance coverage. B) It provides temporary insurance coverage until a formal policy is issued or rejected. C) It is an insurance policy that covers multiple properties or items under a single limit of insurance. D) It is a type of insurance policy that covers specified valuable items, such as jewelry or fine art. A) It refers to any loss or damage covered by an insurance policy. B) It involves an event that results in widespread and severe damage or loss, often beyond the capacity of a single insurer to handle. C) It is an event that triggers the insurer's obligation to pay the policyholder's claim. D) It is a type of insurance policy that covers losses resulting from specific perils, such as earthquakes or floods. Answer: B) It involves an event that results in widespread and severe damage or loss, often beyond the capacity of a single insurer to handle. Rationale: A catastrophic event typically results in widespread and severe damage or loss, often requiring coordinated response efforts from multiple insurers and reinsurers. What is the purpose of coinsurance in property insurance policies? A) To allocate a portion of the risk to the insured, encouraging risk management practices. B) To provide coverage for losses resulting from specific perils, such as fire or theft. C) To limit the insurer's liability for losses that exceed a certain threshold. D) To establish the maximum amount that the insurer will pay for a covered loss. Answer: A) To allocate a portion of the risk to the insured, encouraging risk management practices. Rationale: Coinsurance provisions in property insurance policies encourage policyholders to maintain coverage levels that are proportional to the value of their insured property, thereby promoting risk management practices. A provision in an insurance policy that specifies the time period during which the insured must provide notice of a claim to the insurer is known as: A) The statute of limitations B) The time limit on certain defenses C) The conditions precedent clause D) The notice of claim provision Answer: D) The notice of claim provision Rationale: The notice of claim provision specifies the time period within which the insured must provide notice of a claim to the insurer, ensuring prompt notification and investigation of potential losses. What is the primary purpose of an insurance policy's "endorsement"? A) To notify the insured of any changes in the policy terms and conditions. B) To provide coverage for losses that result from specific perils, such as hurricanes or earthquakes. C) To alter or add to the terms and conditions of the original policy. D) To establish the maximum amount that the insurer will pay for a covered loss. Answer: C) To alter or add to the terms and conditions of the original policy. Rationale: Endorsements are used to modify or add to the terms and conditions of the original insurance policy, allowing for customization based on the insured's specific needs. When an insurance policy contains a "waiver of subrogation" clause, it means that: A) The insured has waived their right to pursue legal action against the insurer for any claim-related disputes. B) The insurer has waived its right to seek reimbursement from a third party responsible for the insured loss. C) The insurer has waived its right to cancel the policy for non-payment of premiums. D) The insured has waived their right to file a claim for losses covered by the policy. Answer: B) The insurer has waived its right to seek reimbursement from a third party responsible for the insured loss. Rationale: A waiver of subrogation clause prevents the insurer from seeking reimbursement from a third party responsible for the insured loss, protecting the insured's relationship with that party. In the context of insurance, what does the term "retention" refer to? A) The process of an insurer seeking reimbursement from a third party responsible for the insured loss. FLORIDA CLAIMS ADJUSTER EXAM 3 VERSIONS Q & A 2024 1. Which of the following statements is true about an insurance policy? A. It is a legal contract between the insurer and the insured. B. It is solely based on verbal agreements. C. It does not require any premium payments. D. It can be canceled by the insured without any consequences. Answer: A. It is a legal contract between the insurer and the insured. Rationale: An insurance policy is a legal contract that outlines the terms and conditions of the insurance coverage, including the responsibilities and obligations of both parties. 2. What is the purpose of the principle of indemnity in insurance? A. To provide unlimited compensation to the insured. B. To prevent the insured from receiving more than the actual amount of loss. C. To exclude certain types of risks from coverage. D. To increase the premium amount for the insured. Answer: B. To prevent the insured from receiving more than the actual amount of loss. Rationale: The principle of indemnity ensures that the insured is compensated for the actual amount of loss suffered, without receiving more than the monetary value of the loss. 3. Which of the following is an example of a peril in insurance? A. Fire B. Policyholder C. Insurance agent D. Insurance premium Answer: A. Fire Rationale: A peril is a specific event or cause of loss that is covered by an insurance policy, such as fire, theft, or natural disasters. 4. What is the purpose of an insurance deductible? A. To increase the premium amount for the insured. 8. What is the purpose of a subrogation clause in an insurance policy? A. To prevent the insured from filing a claim with the insurer. B. To allow the insured to recover damages from a third party responsible for the loss. C. To limit the amount of coverage provided by the policy. D. To exclude certain types of risks from coverage. Answer: B. To allow the insured to recover damages from a third party responsible for the loss. Rationale: A subrogation clause in an insurance policy allows the insurer to "step into the shoes" of the insured and pursue legal action against a third party responsible for the loss to recover the amount paid out on the claim. 9. Which of the following is not a factor used to determine the insurance premium amount? A. Age and gender of the insured. B. Marital status of the insured. C. Occupation and income of the insured. D. Credit score of the insured. Answer: B. Marital status of the insured. Rationale: Factors such as age, gender, occupation, income, and credit score of the insured are commonly used by insurance companies to calculate the insurance premium amount, while marital status is not typically a relevant factor in determining premiums. 10. What is an insurance endorsement? A. A document that cancels an insurance policy. B. A document that extends or modifies the terms of an insurance policy. C. A document that certifies the insured's ownership of the insured property. D. A document that confirms the insurance coverage provided by the policy. Answer: B. A document that extends or modifies the terms of an insurance policy. Rationale: An insurance endorsement is a document that is attached to an insurance policy to add, delete, or modify the coverage provided by the policy. 11. Which of the following is not a type of property insurance policy? A. Homeowners insurance B. Renters insurance C. Auto insurance D. Life insurance Answer: D. Life insurance Rationale: Property insurance policies provide coverage for physical assets, such as homes, vehicles, and personal belongings, while life insurance policies provide financial protection to beneficiaries in the event of the insured's death. 12. What is the purpose of an insurance adjuster in the claims process? A. To deny all claims made by policyholders. B. To investigate and assess the validity of insurance claims. C. To approve claims without any review. D. To increase the insurance premium amount for the insured. Answer: B. To investigate and assess the validity of insurance claims. Rationale: Insurance adjusters play a crucial role in the claims process by investigating the circumstances of a claim, reviewing policy coverage, and determining the amount of compensation to be paid to the insured. 13. Which of the following statements is true about an insurance binder? A. It is a permanent insurance policy. B. It provides temporary insurance coverage until the policy is issued. C. It does not require any premium payments. 17. Which of the following is not a type of casualty insurance policy? A. Auto insurance B. Liability insurance C. Workers' compensation insurance D. Homeowners insurance Answer: D. Homeowners insurance Rationale: Casualty insurance policies provide coverage for liability and personal injury claims, such as auto insurance, liability insurance, and workers' compensation insurance, while homeowners insurance covers property damage and personal liability. 18. What is the purpose of an insurance claim? A. To increase the premium amount for the insured. B. To deny coverage for a loss suffered by the insured. C. To request compensation from the insurance company for a covered loss. D. To cancel the insurance policy without consequences. Answer: C. To request compensation from the insurance company for a covered loss. Rationale: An insurance claim is a formal request made by the insured to the insurance company for compensation or benefits as a result of a covered loss or event. 19. Which of the following is not a standard homeowners insurance policy form? A. HO-1 B. HO-3 C. HO-6 D. HO-9 Answer: D. HO-9 Rationale: HO-1, HO-3, and HO-6 are standard homeowners insurance policy forms that provide varying levels of coverage for different types of properties and risks, while HO-9 does not exist as a standard form. 20. What is the purpose of an insurance settlement? A. To increase the premium amount for the insured. B. To negotiate a lower insurance premium with the insurer. C. To reach an agreement on the amount of compensation to be paid for a covered loss. D. To cancel the insurance policy without consequences. Answer: C. To reach an agreement on the amount of compensation to be paid for a covered loss. Rationale: An insurance settlement is a formal agreement reached between the insurer and the insured on the amount of compensation to be paid for a covered loss, typically after an investigation and evaluation of the claim. 21. Which of the following is a type of supplemental insurance coverage? A. Collision coverage B. Comprehensive coverage C. Personal injury protection D. Umbrella insurance Answer: D. Umbrella insurance Rationale: Umbrella insurance is a type of supplemental insurance coverage that provides additional liability protection beyond the limits of standard insurance policies, such as auto or homeowners insurance. 22. What is the purpose of an insurance grace period? A. To extend the coverage provided by the policy without payment of the premium. B. To allow the insured to pay the premium after the due date without penalty. C. To cancel the insurance policy for non-payment of the premium. D. To provide temporary insurance coverage until the policy is issued. Which of the following best defines the principle of indemnity in insurance? A) The insured is entitled to receive a payment equal to the market value of the insured property. B) The insured should be fully compensated for any loss or damage to the insured property. C) The insured should be restored to the same financial position as before the loss occurred. D) The insured is entitled to receive a sum of money that exceeds the value of the insured property. Answer: C) The insured should be restored to the same financial position as before the loss occurred. Rationale: The principle of indemnity ensures that the insured is compensated for their actual loss, without being overcompensated. This principle aims to mitigate the potential for moral hazard and the overvaluation of assets. Which type of insurance policy provides coverage for a specific period, such as one year, and requires the policyholder to pay premiums on a regular basis? A) Term life insurance B) Whole life insurance C) Universal life insurance D) Variable life insurance Answer: A) Term life insurance Rationale: Term life insurance provides coverage for a specified term and requires regular premium payments. It does not accumulate cash value over time, unlike whole life or universal life insurance policies. When an insurance company spreads the risk of potential losses across multiple policyholders, it is engaging in: A) Risk retention B) Risk avoidance C) Risk transfer D) Risk pooling Answer: D) Risk pooling Rationale: Risk pooling involves spreading the risk of potential losses across a large number of policyholders, thereby reducing the impact of individual losses on the insurer. What type of insurance policy covers damage to a policyholder's own vehicle resulting from a collision with another vehicle or object? A) Comprehensive insurance B) Liability insurance C) Collision insurance D) Uninsured motorist insurance Answer: C) Collision insurance Rationale: Collision insurance provides coverage for damage to the policyholder's own vehicle resulting from a collision with another vehicle or object, regardless of fault. In insurance, the term "subrogation" refers to: A) The process of an insurer seeking reimbursement from a third party responsible for the insured loss. B) The act of an insured transferring their policy to another insurance company. C) The process of evaluating the financial risk associated with an insurance policy. D) The legal requirement for an insured to disclose all material facts to the insurer. Answer: A) The process of an insurer seeking reimbursement from a third party responsible for the insured loss. Rationale: Subrogation allows the insurer to pursue reimbursement from a third party responsible for the insured loss, after the insurer has compensated the insured for the loss. D) When the insured purchases an extended reporting period endorsement. Answer: C) When a claim is made against the insured and reported to the insurer during the policy period. Rationale: Claims-made policies respond to claims made against the insured and reported to the insurer during the policy period, regardless of when the actual loss occurred. Which of the following is a characteristic of a surplus lines insurer? A) It is licensed to write insurance in the state where the insured risk is located. B) It is subject to the same regulatory requirements as admitted insurers. C) It specializes in providing coverage for standard risks. D) It is not required to obtain state approval for its insurance rates and policy forms. Answer: D) It is not required to obtain state approval for its insurance rates and policy forms. Rationale: Surplus lines insurers are not subject to the same regulatory requirements as admitted insurers, and they have more flexibility in setting rates and policy forms. In the context of insurance, what does the term "underwriting" refer to? A) The process of settling insurance claims and making payments to policyholders. B) The evaluation of risk and determination of the terms and conditions of insurance coverage. C) The process of marketing insurance products to potential policyholders. D) The development of investment strategies to maximize the insurer's financial returns. Answer: B) The evaluation of risk and determination of the terms and conditions of insurance coverage. Rationale: Underwriting involves the assessment of risk and the establishment of terms and conditions for insurance coverage, including premium levels and coverage limits. Which type of insurance policy provides coverage for an individual's legal liability for bodily injury or property damage to others? A) Personal injury protection B) Comprehensive insurance C) Liability insurance D) Collision insurance Answer: C) Liability insurance Rationale: Liability insurance provides coverage for an individual's legal liability for bodily injury or property damage to others, including legal defense costs. When an insurance policy is considered "admitted," it means that: A) The policy is guaranteed to be renewed by the insurer at the end of each policy period. B) The policy has been approved and is issued by an insurer licensed in the state where the insured risk is located. C) The policy provides coverage for losses that have already occurred before the policy inception date. D) The policy is written on a non-standard basis, with customized terms and conditions. Answer: B) The policy has been approved and is issued by an insurer licensed in the state where the insured risk is located. Rationale: Admitted insurance policies are issued by insurers licensed in the state where the insured risk is located, providing a level of regulatory oversight and consumer protection. Which of the following is a characteristic of a "binder" in the context of insurance? A) It is a formal written contract that outlines the terms and conditions of insurance coverage. B) It provides temporary insurance coverage until a formal policy is issued or rejected. C) It is an insurance policy that covers multiple properties or items under a single limit of insurance. D) It is a type of insurance policy that covers specified valuable items, such as jewelry or fine art. A) It refers to any loss or damage covered by an insurance policy. B) It involves an event that results in widespread and severe damage or loss, often beyond the capacity of a single insurer to handle. C) It is an event that triggers the insurer's obligation to pay the policyholder's claim. D) It is a type of insurance policy that covers losses resulting from specific perils, such as earthquakes or floods. Answer: B) It involves an event that results in widespread and severe damage or loss, often beyond the capacity of a single insurer to handle. Rationale: A catastrophic event typically results in widespread and severe damage or loss, often requiring coordinated response efforts from multiple insurers and reinsurers. What is the purpose of coinsurance in property insurance policies? A) To allocate a portion of the risk to the insured, encouraging risk management practices. B) To provide coverage for losses resulting from specific perils, such as fire or theft. C) To limit the insurer's liability for losses that exceed a certain threshold. D) To establish the maximum amount that the insurer will pay for a covered loss. Answer: A) To allocate a portion of the risk to the insured, encouraging risk management practices. Rationale: Coinsurance provisions in property insurance policies encourage policyholders to maintain coverage levels that are proportional to the value of their insured property, thereby promoting risk management practices. A provision in an insurance policy that specifies the time period during which the insured must provide notice of a claim to the insurer is known as: A) The statute of limitations B) The time limit on certain defenses C) The conditions precedent clause D) The notice of claim provision Answer: D) The notice of claim provision Rationale: The notice of claim provision specifies the time period within which the insured must provide notice of a claim to the insurer, ensuring prompt notification and investigation of potential losses. What is the primary purpose of an insurance policy's "endorsement"? A) To notify the insured of any changes in the policy terms and conditions. B) To provide coverage for losses that result from specific perils, such as hurricanes or earthquakes. C) To alter or add to the terms and conditions of the original policy. D) To establish the maximum amount that the insurer will pay for a covered loss. Answer: C) To alter or add to the terms and conditions of the original policy. Rationale: Endorsements are used to modify or add to the terms and conditions of the original insurance policy, allowing for customization based on the insured's specific needs. When an insurance policy contains a "waiver of subrogation" clause, it means that: A) The insured has waived their right to pursue legal action against the insurer for any claim-related disputes. B) The insurer has waived its right to seek reimbursement from a third party responsible for the insured loss. C) The insurer has waived its right to cancel the policy for non-payment of premiums. D) The insured has waived their right to file a claim for losses covered by the policy. Answer: B) The insurer has waived its right to seek reimbursement from a third party responsible for the insured loss. Rationale: A waiver of subrogation clause prevents the insurer from seeking reimbursement from a third party responsible for the insured loss, protecting the insured's relationship with that party. In the context of insurance, what does the term "retention" refer to? A) The process of an insurer seeking reimbursement from a third party responsible for the insured loss. C. Jointly to ABC and XYZ D. All listed interests: D. All listed interests Remember that the insurer is not responsible to know the degrees of interest. In the event of a loss, one payment is made by the insurer and it is up to the additional interests on working out their share. 2. Insurance applies separately to each insured as if other insureds did not exist. This is defined as: A. Severability B. Conditional C. Warranty D. None of the above: A. Severability 3. Property insurance policies usually contain a(n) clause, stating the insured cannot dump damaged property on the insurer and demand its full value: A. Pro Rata B. Abandonment C. Liberalization D. All of the above: B. Abandonment 4. A(n) is one wherein economic loss would be suffered from an adverse happening to the subject: A. Conditional Contract B. Personal Contract C. Economic Contract D. Insurable Interest: D. Insurable Interest 5. States that if the insurer adopts a revision which would broaden coverage without additional premium within some period of time prior to the policy period or during the policy period, the insured receives the benefit of such broadened coverage. A. Cancellation Clause B. Policy Period C. Pro Rata D. Liberalization: D. Liberalization The time frame is typically 60 days. 1/36 Florida Claims Adjuster Exam Questions with Correct Answers 6. The states that when there is an unbroken connection be- tween an occurrence and damage that grows out of the occurrence, then the resultant damage is all a part of the occurrence. A. Doctrine of Proximate Cause B. Doctrine of Perils & Hazards C. Insurance Policy Handbook D. Doctrine of Property Insurance: A. Doctrine of Proximate Cause For example, if a property insurance policy covers the peril of fire but further damage is caused by smoke, water used to extinguish, and the process of moving property away - fire is considered to be the *proximate cause* of all of the damage. 7. The Loss Settlement Valuation that subtracts an allowance for deprecia-tion is defined as? A. Actual Cash Value B. Replacement Cost C. "Old for New" D. None of the Above: A. Actual Cash Value 8. A policy condition, either based on information in the insured's application or inserted by the insurer, is defined as: A. Warranty B. Misrepresentation C. Concealment D. None of the Above: A. Warranty 9. The following are basic characteristics of a property or liability insurance contract, except: 14. As to required proof for future accidents by purchase of auto liability in- surance, the insurer must make a filing (Form SR-22) certifying that coverage is in effect, and this certification must remain on file for years: A. 1 B. 3 C. 4 D. 2:B.3 15. The Business Automobile Policy includes all of the following coverage forms except: A. The Garage Coverage Form B. The Trailer Interchange Coverage Form C. The Truckers Coverage Form D. The Business Auto Coverage Form: B. The Trailer Interchange Coverage Form 16. Personal Injury Protection, or PIP, has a per person, per accident limit. 3/36 Florida Claims Adjuster Exam Questions with Correct Answers A. 10,000 B. 20,000 C. 1,000 D. Depends on the damaged property: A. 10,000 17. Used to insure businesses engaged in selling, servicing, repairing, park-ing or storing automobiles: A. Servicing Coverage Form B. Garage Coverage Form C. Truckers Coverage Form D. None of the Above: B. Garage Coverage Form 18. The following examples are referred to as liability limits: 25/50/25 or 10/20/10. A. Split B. Single C. Straight D. None of the Above: A. Split 10/20/10 = 10,000 per person injured 20,000 all injuries combined 10,000 property damage Example of straight liability limit = $30,000 19. Jeremy has a not at fault accident. If he has PIP with a $1,000 deductible, how much can he expect his PIP coverage to pay toward his medical bills that total $3,000? A. $1,600 B. $1,000 C. $2,400 D. $3,000: A. $1,600 3000 (bills) - 1000 (deductible) = 2000 x .80 (eighty percent) 20. Frank has a not-at-fault accident, he has basic PIP, no deductible and Med pay of $5,000. How much will his Med Pay contribute to medical bills of $15,000? A. $15,000 B. $5,000 C. $3,000 D. $0, Frank is not-at-fault: B. $5,000 4/36 Florida Claims Adjuster Exam Questions with Correct Answers in the fire B. A fish dies because he has been left alone for a week without food C. The insureds daughters tennis racket is stolen from her locker D. The insureds suitcase and clothing, valued at $1,500, are stolen from his hotel: B. A fish dies because he has been left alone for a week without food Animals are listed as an "exclusion" under a Homeowner's policy. 27. All of the following are eligible for a Homeowner's Policy, except? A. An apartment tenant B. A condominium owner C. Four-family dwelling owner-occupant D. A business condo owned by a local insurance company: D. A business condo owned by a local insurance company Commercial property is not eligible for a Homeowner's policy. 28. Which of the following are characteristics of Homeowner's Insurance? A. Protects against economic loss to residences and household property and legal liabilities B. Owner-occupants of 1-4 family dwellings C. Renters who maintain residential occupancy in any type of building D. All of the Above: D. All of the Above Also included: personal, non-business risk, no more than 2 roomers/boarders, condominium unit owners and cooperative apartment occupants 29. Jeremy owns a home that is recently damaged due to a hurricane. The repair estimate is averaged at $25,000 and Jeremy decides to stay in a hotel because most of the damage is to his bedroom and kitchen. Under a Homeowner's Policy, what coverage will pay for the hotel room bill? A. Fair Rental Value B. Value Obligation C. Loss of Use D. Insurers Duties: C. Loss of Use The insurer will pay any necessary and reasonable expenses associated with a daily living routine. 30. An insured who wishes to purchase flood insurance, but is located in a moderate or low risk flood zone may do so by purchasing a: A. Preferred Risk Flood Policy B. Standard Flood Policy C. Universal Flood Insurance D. None of the Above: A. Preferred Risk Flood Policy Although Flood Insurance is provided by the Federal Government, those who are 6/36 Florida Claims Adjuster Exam Questions with Correct Answers not in a "flood zone" may purchase a preferred risk policy to cover them for a flood claim. 31. Used only for Commercial Condominiums, it covers the unit-owners busi-ness personal property and the personal property of others in the insured's care, custody or control: A. Condominium Dwelling Form B. Personal Condominium Unit Owners Form C. Condominium Unit Owners Form D. None of the Above: C. Condominium Unit Owners Form Does not cover buildings since coverage would typically be provided under the Condo Association coverage form issued. 32. The Commercial Property Contract includes all of the following, except: A. Common Policy Conditions B. Commercial Property Conditions C. Coverage Form D. Commercial Loss Schedule: D. Commercial Loss Schedule Also included: Declarations, Causes of Loss Form, Endorsements 33. Insures a condominium association against direct physical loss or dam-age to buildings, business personal property and personal property of others in the care, custody or control of the association and located at the premises: A. Condominium Association Form B. Condominium Unit Owners Form C. Condominium Insured Owner Form D. None of the Above: A. Condominium Association Form This, along with Condo Unit Owners Form, is located under Condo Coverage. Includes: structure being built (including foundations), fixtures and machinery, equipment to service building, owned materials and supplies used for construction. Temporary structures built or assembled on site are also included if not covered by insurance. 39. First developed as an extension of Ocean Marine coverage, to provide coverage for cargo traveling over land, instead of by sea. A. Commercial Inland Marine Coverage B. Personal Inland Marine Coverage C. Ocean Commercial Coverage D. None of the Above: A. Commercial Inland Marine Coverage Definition: to help identify kinds of risks which are eligible for either Ocean or Inland Marine insurance. 8/36 Florida Claims Adjuster Exam Questions with Correct Answers 40. Protects against loss of business income that results from damage to covered property from a covered cause of loss. A. Business Income Insurance Coverage B. Business Income Replacement Coverage C. Business Income Actual Value Coverage D. None of the Above: A. Business Income Insurance Coverage Period of restoration begins 72 hours after date of direct damage. In effect, coverage has a 72 hour deductible. Coverage ends on either 1. date when damaged property could be repaired, rebuilt, or replaced 2. date business resumes operations at new, permanent location (whichever comes first) 41. What payment covers several areas of costs related to claims, and are payable in addition to the policy limits? A. Supplementary B. Liability C. Personal Injury D. All of the Above: A. Supplementary Generally, all costs of litigation are covered (court costs, prejudgment interest, judgement interest, cost of bonds to release attachments) 42. Three full-time employees from a local furniture company are horsing around and one is pushed into a machine that cut his foot. How will the company's General Liability respond? A. The Med Pay Section must pay Primary B. The General Liability Policy will pay up to $20,000 in medical payments C. The GL policy will not pay D. Only property damage is covered under GL policy: C. The GL policy will not pay Coverage excludes liabilities under Workers Comp or similar law or arising from injuries to employees of the insured. The employees would have to file through Workers Comp. 43. Which of the following can be found in a Commercial General Liability Contract? A. Declarations B. Common Policy Conditions C. Occurrence and Claims-Made Forms D. All of the Above: D. All of the Above Also included: Nuclear Energy Liability Exclusion endorsement (other endorse-ments may be attached) 9/36 Florida Claims Adjuster Exam Questions with Correct Answers D. None of the Above: B. Known Loss Insurer should have been notified and further investigation of the spill and effective clean-up would have been observed. 49. Applies to BI or PD which occurs during the policy period, regardless of any later time at which a claim is made: A. Occurrence Form B. Claims-Made Form C. Premises and Operations Exposure D. None of the Above: A. Occurrence Form vs. Claims-Made: applies only to BI or PD occurring on or after retroactive date for which claim is received/recorded during policy period 50. Applies only to a BI or PD which occurs on or after the retroactive date, and for which the claim is received or recorded by an insured or the company during the policy period: A. Occurrence B. Claims-Made C. Operations Completed D. None of the Above: B. Claims-Made Retroactive date is stated in Declarations and will normally be same date as issuing company's first claims-made effective date for insured. 51. All of the following are components of Workers Compensation, except: A. Up to $750,000 in Death Benefits B. Reimbursement for Medical Expenses incurred C. Reimbursement for lost wages on percentage basis D. Funeral costs up to $7,500: A. Up to $750,000 in Death Benefits Compensation for death is payable if death results within one year of an accident or if it follows disability within five years of accident. 52. The following are classes of disability, except: A. Permanent Total B. Temporary Total C. Permanent Impairment D. Temporary Full: D. Temporary Full Also included: Temporary Partial 53. The measure to determine disability benefits is the of the employee at the time of injury: A. Average Monthly Wage B. Average Weekly Wage C. Average Daily Wage 11/3 6 Florida Claims Adjuster Exam Questions with Correct Answers D. Income Estimate: B. Average Weekly Wage Disability - incapacity due to injury to earn same or any other employment wages that employee was receiving at time of injury. 54. Mandatory for risks exceeding certain annual premiums, recognizes the prior loss experience of the risk and applies either a debit for unfavorable experience or a credit for better-than-expected loss results. This is defined as: A. The Experience Rating Plan B. The Retrospective Rating Plan C. The Risk Plan D. None of the Above: A. The Experience Rating Plan This, along with Retrospective Rating Plan, is a manual rating process until premiums reach a certain level. 55. Under workers compensations, a rate is charged for every of payroll to employees. A. $100 B. $1,000 C. $10 D. $500: A. $100 The National Council on Compensation Insurance enforces this rating. 56. Under Workers Compensation, Part Four Your Duties if Injuries Occur, an employer is required to: A. Provide the names/addresses of injured persons and witnesses B. Promptly provide any legal papers C. Cooperate and assist as insurer requests D. All of the Above: D. All of the Above D. $5,000: D. $5,000 62. Under Crime Insurance, losses must be discovered within 1 year. This is defined as: A. The Discovery Period B. The Loss Sustained Period C. The Open Period D. All of the Above: A. The Discovery Period 63. Crime Insurance is over any other Insurance coverage. A. Primary B. Secondary 13/3 6 Florida Claims Adjuster Exam Questions with Correct Answers C. Excess D. Recess: C. Excess A situation may arise where another form of insurance will pay claim - that insurance would be primary. 64. Cover only losses that both occurred and were discovered during the policy period, or within one year of its expiration. This is defined as: A. Discovery B. Loss Sustained C. Sustained Loss D. None of the Above: B. Loss Sustained One exception to the rule is that Loss Sustained forms will also cover losses that occurred under previous (expired) crime policies and that were discovered during current policy year, as long as crime coverage had continued w/o interruption 65. Any loss discovered during the policy period or within 60 days after its expiration (one year after expiration for losses connected with employee benefit plans) is covered regardless of when it occurred. This is defined as: A. Loss Sustained B. Valuation C. Discovery D. None of the Above: C. Discovery If XYZ restaurant discovers stolen goods taken over a year ago, this is within 2 years of inception date and found within policy period so it's covered. 66. Under Crime Insurance, the insured is covered for loss by: A. Theft B. Burglary C. Robbery D. All of the Above: D. All of the Above Unless the loss is specifically excluded or limited 67. Provides for loss of money and securities outside the premises in the care, custody and control of a messenger or armored car service resulting from theft, disappearance or destruction. This is defined as: A. Inside the Premises B. Outside the Premises C. Care, Custody, & Control D. None of the Above: B. Outside the Premises Also covers robbery of other property under the circumstances. 68. Taking or attempted taking of property from within a locked safe or vault, by unlawful entry, with visible marks of forcible entry, or taking of the safe or 14/3 6 Florida Claims Adjuster Exam Questions with Correct Answers B. Obligee C. Surety D. All of the Above: C. Surety aka Bonding Company; Surety is a "guarantee" 74. This bond guarantees indemnification to the obligee for any losses re- sulting from the principal's failure to complete the contract work in accord with specifications: A. Performance B. Bid C. Court D. Maintenance: A. Performance Considered a contract bond 75. One who undertakes to perform, to fulfill a contract or to meet an obliga- tion is known as: A. Principal B. Obligee C. Surety D. All of the Above: A. Principal Obligee - needs guarantee principal will perform Surety - guarantees performance between principal and obligee 76. This form of bond is required to accompany a bid for a contract which will require that the successful bidder furnish further bond if awarded the job: A. Bid B. Performance C. Court D. Maintenance: A. Bid 77. May act as part of the bonding party and agrees to reimburse the surety for any loss it may suffer from having bonded the principal: A. Indemnitor B. Surety C. Obligee D. None of the Above: A. Indemnitor Known as "fourth party", may put up collateral 78. Which of the following are parties to a Bond? A. Principal B. Obligee C. Surety D. All of the Above: D. All of the Above 16/3 6 Florida Claims Adjuster Exam Questions with Correct Answers Principal - undertakes to perform/fulfill Obligee - guaranteed principal will perform Surety - guarantees performance *Indemnitor - may act as additional party; agrees to reimburse surety for any loss 79. This type of bond covers streets, sidealks, sewers, etc.: A. Sidewalk B. Subdivision C. Supply D. None of the Above: B. Subdivision Falls under Maintenance Bond 80. When a person has lost stock certificates, bonds or similar instruments, a bond is generally required by the issuing company to reissue the document. This is known as a: A. Public Official Bond B. Lost Instrument Bond C. Public Instrument Bond D. None of the Above: B. Lost Instrument Bond Also guarantees to save issuer from any loss growing out of lost instrument 81. A is a selected group of hospitals and medical practitioners in a given area who have joined together in an effort to reduce medical costs. A. HMO B. Major Medical Insurance C. Coinsurance D. PPO: D. PPO B. HMO C. PPO D. None of the Above: A. Major Medical Some forms designed to supplement basic policies; others provide both basic and catastrophic coverage 87. A policy may contain a provision which states a period of time between issuance and acceptance before sickness benefits begin. This is defined as: A. Waiting Period B. Elimination Period C. Both A & B D. None of the Above: C. Both A & B This helps keep premiums reasonable by eliminating chance of persons buying coverage only when they are sick 18/3 6 Florida Claims Adjuster Exam Questions with Correct Answers 88. Characteristics of an HMO plan usually include: A. Small of non-existent Deductibles B. Fewer Exclusions C. Insurance services to members through employed physicians D. All of the Above: D. All of the Above Also included: broad coverage, coinsurance provisions 89. Provides indemnification to the insured for basic hospitalization of room and board in the hospital, nursing care, laboratory fees, operating room, medical supplies, etc. This is defined as? A. Hospitalization Expense B. Hospital Indemnity C. Accident Policy D. All of the Above: A. Hospitalization Expense Associated with a daily limit, not to exceed specified maximum 90. A(n) provides comprehensive health services to its members for a prepaid fixed fee, equivalent to an insurance premium. A. HMO B. PPO C. Major Medical Plan D. All of the Above: A. HMO Referred to as an emerging and increasingly important non-insurance alternative to dealing with risk of health care costs 91. Established in 1973, this association was created for applicants who are unable to obtain insurance in the private market: A. FWCJUA B. FWUA C. Citizens D. FRPCJUA E. FAJUA: E. FAJUA 92. In 2002, the Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA) and the Florida Windstorm Joint Underwriting Asso-ciation (FWUA), were combined to create: A. FWCJUA B. FWUA C. Citizens D. FRPCJUA E. FAJUA: C. Citizens 19/3 6