FREE Claims Adjuster Handling Procedures Questions and Answers

Question 1

Andrew was the owner of a little mail facility. The building's interior was destroyed by fire, rendering it unusable. Andrew must now set aside some time to move his business. This cost him a month's worth of business revenue. His loss of revenue would be classified as what kind of loss?

Accepted Answer

Indirect Loss

Answer

Andrew's loss of a month's business revenue is classified as an indirect loss. While the fire directly destroyed his mail facility (a direct loss), the loss of income is a consequence that resulted from that direct physical damage, rather than the damage itself. Indirect losses, also known as consequential losses, cover financial impacts like business interruption or loss of use that stem from a covered direct loss.

Question 2

Which of the following situations is NOT a representation of a hazard?

Accepted Answer

Fire that destroys personal property in a building

Answer

A hazard is a condition or situation that increases the likelihood or severity of a loss. Examples include a wet floor (increasing slip risk) or faulty wiring (increasing fire risk). Fire itself is a peril, which is the actual cause of loss, not a condition that increases the chance of a loss.

Question 3

XYZ Insurance Company informed Marlin that he lacked the legal competence to enter into an insurance agreement. Which of the following scenarios could explain why the insurance provider said that?

Accepted Answer

He was not sober at the time of making the agreement

Answer

For a contract to be legally binding, all parties must have the legal capacity or competence to enter into it. Being under the influence of alcohol or drugs (not sober) impairs one's judgment and ability to understand the terms of an agreement, rendering them legally incompetent. Therefore, an insurance agreement made while not sober would be voidable.

Question 4

What is the primary reason for an adjuster using a Reservation of Rights letter rather than a Non-waiver Agreement?

Accepted Answer

The insured isn't required to sign it

Answer

A Reservation of Rights (ROR) letter is a unilateral notice sent by an insurer to an insured, informing them that the insurer is investigating a claim but is not waiving its right to deny coverage later. Unlike a Non-waiver Agreement, an ROR letter does not require the insured's signature to be effective. This allows the insurer to proceed with investigation without inadvertently accepting liability or coverage.

Question 5

Because Anna recently submitted a fraudulent claim, ABC Insurance has decided to cancel Anna's homeowner's policy. There had barely been three months of the policy's existence. What grounds would ABC Insurance use to give Anna her unused premium returned?

Accepted Answer

Pro rata

Answer

When an insurance policy is canceled, the method of returning the unused premium depends on who initiated the cancellation. A 'pro rata' return means the insurer returns the full unearned premium without any penalty, typically used when the insurer cancels the policy. Since ABC Insurance canceled Anna's policy, they would return her premium on a pro rata basis.

Claims Adjuster Test Practice Test

Claims Adjuster Test Practice Test

FREE Claims Adjuster Handling Procedures Questions and Answers