CAADE - Certified Automotive Appraisal and Damage Estimator Insurance and Legal Procedures Questions and Answers

Question 1

A claimant disputes an insurer's repair estimate, believing the valuation is too low. If the insurance policy contains an "Appraisal Clause," what is its primary function in this scenario?

Accepted Answer

It allows both the claimant and the insurer to hire their own independent appraisers, whose findings (often with an umpire's input) can lead to a binding settlement on the amount of loss.

Answer

It requires the designated repair shop to perform the work for the insurer's estimated amount.

Answer

It automatically refers the claim to the state's Department of Insurance for mediation.

Answer

It forces the claimant to accept the insurer's initial offer or file a lawsuit.

Question 2

Which of the following best defines the insurance principle of "indemnity"?

Accepted Answer

The principle that the insured should be restored to the approximate financial position they were in before a loss occurred, without profiting from it.

Answer

The right of the insurer to pursue the at-fault party to recover claim payments.

Answer

A guarantee that only Original Equipment Manufacturer (OEM) parts will be used for repairs.

Answer

The portion of the claim that the insured is required to pay out-of-pocket.

Question 3

An insurance company pays its policyholder's claim for damages after he was rear-ended by another driver. The company then seeks reimbursement from the at-fault driver's insurance carrier. This process is known as:

Accepted Answer

Subrogation

Answer

Indemnification

Answer

Arbitration

Answer

Contribution

Question 4

As part of a collision repair on a four-year-old vehicle, a tire with 50% of its tread worn away is replaced with a brand-new tire. The insurer reduces the payment for the new tire by a certain amount to account for the depreciation of the old one. This deduction is referred to as:

Accepted Answer

Betterment

Answer

A deductible

Answer

Subrogation

Answer

An exclusion

Question 5

A vehicle owner is at fault for a collision and has a policy with a $500 collision deductible. The total approved cost to repair the vehicle is $4,200. How much is the vehicle owner responsible for paying directly to the repair shop?

Accepted Answer

$500

Answer

$4,200

Answer

$3,700

Answer

$0

Question 6

An insured's vehicle is damaged by a hit-and-run driver in a parking lot. Which coverage under their personal auto policy will typically respond to pay for the repairs?

Accepted Answer

Collision Coverage

Answer

Bodily Injury Liability

Answer

Comprehensive Coverage

Answer

Property Damage Liability