Question 1

What best describes Notice of loss?

Accepted Answer

Notice of loss is best described as the insured's report to the insurer that a loss has occurred. This definition matches how the concept is tested on standard P&C licensing exams.

Question 2

What best describes Investigation?

Accepted Answer

Investigation is best described as the process of gathering facts, documents, and statements to evaluate a claim. This definition matches how the concept is tested on standard P&C licensing exams.

Question 3

What best describes Proof of loss?

Accepted Answer

Proof of loss is best described as a formal statement by the insured about the amount and details of the loss when required by the policy. This definition matches how the concept is tested on standard P&C licensing exams.

Question 4

What best describes Subrogation?

Accepted Answer

Subrogation is best described as the insurer's right to recover from a responsible third party after paying a covered claim. This definition matches how the concept is tested on standard P&C licensing exams.

Question 5

What best describes Salvage?

Accepted Answer

Salvage is best described as property remaining after a loss that still has residual value. This definition matches how the concept is tested on standard P&C licensing exams.

Question 6

What best describes A claim reserve?

Accepted Answer

A claim reserve is best described as an amount the insurer sets aside as an estimate for expected claim costs. This definition matches how the concept is tested on standard P&C licensing exams.

Question 7

What best describes Actual cash value settlement?

Accepted Answer

Actual cash value settlement is best described as payment based on replacement cost minus depreciation. This definition matches how the concept is tested on standard P&C licensing exams.

Question 8

What best describes Replacement cost settlement?

Accepted Answer

Replacement cost settlement is best described as payment based on the cost to repair or replace with like kind and quality without deducting for depreciation, subject to policy terms. This definition matches how the concept is tested on standard P&C licensing exams.

Question 9

What best describes An independent adjuster?

Accepted Answer

An independent adjuster is best described as a claims professional who handles claims for insurers on a contract basis. This definition matches how the concept is tested on standard P&C licensing exams.

Question 10

What best describes A staff adjuster?

Accepted Answer

A staff adjuster is best described as a claims adjuster employed directly by the insurer. This definition matches how the concept is tested on standard P&C licensing exams.

Question 11

What best describes A public adjuster?

Accepted Answer

A public adjuster is best described as a claims professional who represents the insured rather than the insurer. This definition matches how the concept is tested on standard P&C licensing exams.

Question 12

What best describes A deductible?

Accepted Answer

A deductible is best described as the portion of a covered claim that the insured must absorb before insurance pays the balance, subject to policy terms. This definition matches how the concept is tested on standard P&C licensing exams.

Question 13

An insured calls the insurer the morning after a fire to report the damage. Which claim process step is this?

Accepted Answer

The insured's first report that a loss occurred is notice of loss. It begins the claim process and allows the insurer to start handling the matter.

Question 14

An adjuster interviews witnesses, reviews photos, and inspects damaged property to determine what happened. Which claim step is this?

Accepted Answer

Investigation is the process of gathering facts needed to evaluate coverage, liability, and the amount of loss. It is one of the central steps in claim handling.

Question 15

The insurer asks the insured to sign a sworn statement describing the damaged property and the amount claimed. Which document is this?

Accepted Answer

A proof of loss is a formal statement by the insured about the claim. Policies may require it as part of the claim process.

Question 16

After paying a covered water loss caused by a negligent plumber, the insurer seeks reimbursement from the plumber. Which claims principle is this?

Accepted Answer

Subrogation allows the insurer to pursue the responsible third party after paying the insured's claim. It helps prevent double recovery and shifts ultimate responsibility to the wrongdoer.

Question 17

A total-loss vehicle still has value as scrap metal after the insurer pays the claim. What is that remaining value associated with?

Accepted Answer

Salvage refers to the residual value remaining in damaged property after a loss. The insurer may take possession of salvage after paying the claim, depending on the circumstances.

Question 18

An insurer sets aside money internally to estimate what a reported loss may ultimately cost. What is this amount called?

Accepted Answer

A reserve is an internal estimate of expected claim costs. It helps the insurer track claim obligations and financial results while the claim is pending.

Question 19

A property loss is settled based on replacement cost minus depreciation. Which settlement basis is being used?

Accepted Answer

Actual cash value is generally replacement cost minus depreciation. It reflects the used value of the property at the time of loss rather than the cost of a new item.

Question 20

A property loss is settled based on the cost to repair or replace with like kind and quality without deducting depreciation, assuming policy requirements are met. Which settlement basis is this?

Accepted Answer

Replacement cost settlement pays the cost to repair or replace damaged property with like kind and quality without a depreciation deduction, subject to policy terms. It generally provides broader recovery than ACV.

Question 21

The insurer hires a claims professional who is not an employee but handles claims under contract for the insurer. Which type of adjuster is this?

Accepted Answer

An independent adjuster handles claims for insurers on a contract basis. That differs from a staff adjuster, who is employed directly by the insurer.

Question 22

An insurer uses one of its own employees to inspect damage and negotiate a settlement. Which type of adjuster is this?

Accepted Answer

A staff adjuster is directly employed by the insurer. Public adjusters represent insureds, while independent adjusters work on a contract basis for insurers.

Question 23

An insured hires a claims professional to represent the insured's interests during a property claim. Which type of adjuster is this?

Accepted Answer

A public adjuster represents the insured in negotiating the claim. Unlike staff or independent adjusters, the public adjuster does not work for the insurer.

Question 24

A claim is covered for $6,000, and the policy includes a $1,000 deductible. Which concept explains why the insurer will not pay the full $6,000?

Accepted Answer

A deductible is the portion of a covered loss retained by the insured. The insurer pays the covered balance after subtracting the deductible, subject to the policy's limits.

Question 25

An adjuster asks the insured for repair invoices, photos, and receipts to support the amount being claimed. Which claim process step does this best reflect?

Accepted Answer

Claim handling involves gathering documentation and investigating the facts of loss. These materials help the insurer evaluate the amount payable and whether coverage applies.

Question 26

A claim has been reported, facts have been gathered, and the insurer now decides how much is owed under the policy. Which claim step is this?

Accepted Answer

Evaluation is the stage where the insurer applies the policy to the facts and determines the amount, if any, that should be paid. It follows notice and investigation.

Question 27

After evaluating a claim, the insurer issues payment and closes the file. Which claim step is this?

Accepted Answer

Settlement is the conclusion of the claim process where payment or other resolution is made. It follows evaluation of coverage and damages.

Question 28

A third party causes a covered auto loss, and the insurer pays the insured first rather than waiting for a lawsuit against the third party to finish. Which principle makes that practical?

Accepted Answer

The insurer can indemnify the insured and then pursue the responsible third party through subrogation. This keeps the claim process moving for the insured without waiving the insurer's recovery rights.

Question 29

A property item would cost $12,000 to replace new and has $3,000 of depreciation. If the policy settles on an ACV basis, what is the amount payable before any deductible?

Accepted Answer

Actual cash value generally equals replacement cost minus depreciation. Subtracting $3,000 from $12,000 results in an ACV of $9,000.

Question 30

A covered property loss totals $18,000 and the deductible is $2,000. Assuming the loss is within policy limits, how much will the insurer pay?

Accepted Answer

The insurer pays the covered loss minus the deductible. $18,000 less $2,000 equals $16,000.

Question 31

A replacement cost loss to covered property is $25,000. Depreciation is $6,000, and the policy requires actual cash value to be paid first with the remaining amount available after repair or replacement. What is the initial ACV payment before any deductible?

Accepted Answer

The initial ACV payment is replacement cost minus depreciation. $25,000 minus $6,000 equals $19,000 before considering any deductible or later recoverable depreciation.

Question 32

An insurer pays a covered $10,000 loss and later recovers $4,000 from the negligent third party through subrogation. Which statement is most accurate?

Accepted Answer

Subrogation allows the insurer to seek recovery from a responsible third party after paying the insured's covered loss. The later recovery does not mean the original claim lacked coverage.

Question 33

A vehicle is a total loss with an ACV of $14,000 and a deductible of $500. If the damaged vehicle has salvage value after the insurer pays the claim, which statement is most accurate?

Accepted Answer

The settlement amount is determined under the policy's valuation and deductible provisions. Salvage refers to the residual value remaining in the damaged property after the loss.

Question 34

A covered property loss has a replacement cost of $30,000, depreciation of $8,000, and a $1,000 deductible. If the policy settles on ACV, how much is payable?

Accepted Answer

First determine ACV by subtracting depreciation from replacement cost: $30,000 minus $8,000 equals $22,000. Then subtract the $1,000 deductible, leaving $21,000 payable.

Question 35

An insured reports a major loss, the insurer investigates, requests a proof of loss, evaluates coverage, and issues payment. Which answer lists the claim process in the best general order?

Accepted Answer

The general claim flow begins with notice of loss, followed by investigation and documentation, then evaluation and settlement. This order reflects the standard claims handling framework tested on licensing exams.

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