CALA Insurance Policy and Regulations 5

Question 1

Under financial responsibility laws, what is an SR-22 filing?

Accepted Answer

A certificate filed by an insurer with the state certifying that a high-risk driver carries the required minimum liability coverage

Answer

An SR-22 is a certificate of financial responsibility that an insurer files on behalf of a driver who is required by the state to prove minimum liability coverage.

Question 2

Which of the following best describes the 'principle of indemnity' as it applies to auto insurance?

Accepted Answer

The insurer will restore the insured to the same financial position they were in before the loss, without allowing profit

Answer

The principle of indemnity ensures the insured is compensated for the actual loss suffered but cannot gain financially from an insurance claim.

Question 3

A claimant under a liability policy demands payment in excess of the policy limits. What duty does the insurer have regarding settlement negotiations within limits?

Accepted Answer

The insurer must make good-faith efforts to settle within policy limits to protect the insured from excess judgment exposure

Answer

Insurers have a duty to act in good faith and attempt to settle claims within policy limits; failure to do so can expose the insurer to liability for any excess judgment.

Question 4

Which of the following changes in circumstance most commonly requires an insured to notify the insurer to maintain proper auto coverage?

Accepted Answer

Adding a teenage driver to the household

Answer

Adding a resident driver — especially a teenager — materially changes the risk profile and must be reported to the insurer to ensure accurate rating and continued coverage.

Question 5

What is the purpose of the 'insuring agreement' in an auto insurance policy?

Accepted Answer

To broadly define what the insurer promises to do in exchange for the premium

Answer

The insuring agreement is the core promise section of the policy where the insurer agrees to pay covered losses or defend the insured in exchange for the premium.

(CALA) Certified Automotive Loss Adjuster Practice Test

(CALA) Certified Automotive Loss Adjuster Practice Test

CALA Insurance Policy and Regulations 5