Adjuster Pro Exam Prep

Addison has property insurance for his home through the NCJUA. His building coverage limit is $340,000. Addison's limit for personal property is ______________.

$136,000

A student who is away at school, but under the age of ___ , is still considered a resident of the household under the HO policy.

24

Under the NCJUA, coverage for personal property is ____of the building coverage.

40%

In order to cancel an auto insurance policy for any reason other than non-payment of premiums, the insurer must provide the policyholder with at least...

60 days' notice.

XYZ Trucking Company has a franchise deductible policy with a deductible of $100,000. When a tornado rips through their lot, the company sustains $965,000 in damage. How much of the damage will XYZ Trucking Company be responsible for paying? A. $0 B. $965,000 C. $100,000 D. $865,000

A. $0

Molly borrows her friend Dom's car to run to the grocery store. On the way home, she rear-ends a van, injuring the driver and 3 other passengers. Each of the passengers suffers $45,000 in injuries, while the driver suffers $40,000. Assuming Dom has a liability policy with limits of 50/100/50, while Molly has 25/50/25 coverage, how much will the primary policy cover?

A. $100,000

A _________ is often required when applying for a contract, and ensures that the principal, if selected, is capable of taking on the project.

A. bid bond

Edna's Homestyle Pies had record sales over Thanksgiving, and Edna still has $10,000 worth of invoices to send out for pies she delivered that week. However, when her office burns down during a kitchen fire, all of her records are destroyed. She manages to recreate $2,000 worth of invoices from memory, but the remaining customer information is gone. What Inland Marine Business Floater would indemnify her for this money that she can no longer collect?

Accounts Receivable

A characteristic of an insurance contract. Means "depending on an unknown future event." An insurance contract will only pay IF and WHEN covered damages occur. Neither party knows how much the contract will end up paying when they enter into the contract.

Aleatory

has lifetime coverage for the incidents that occur during a policy period, regardless of when the claim is reported.

An occurrence policy

Heather's house is fully insured with a DP-3 with a limit of $85,000. One day, the house is struck by lightning, and despite the fire department's efforts, it burns to the ground. She still had a balance of $20,000 left on her mortgage at the time of the fire. What is the maximum indemnification that would go to Heather, the fire department, and her mortgage lender respectively? A. $85,000; $1,000; $85,000 B. $65,000; $500; $20,000 C. $84,500; $1,000; $20,000 D. $64,500; $500; $20,000

B. $65,000; $500; $20,000

Which of the following perils is normally excluded from coverage in a personal auto policy? A. Missiles B. Mechanical breakdown C. Riot D. Flood

B. Mechanical breakdown

When a flood inundates Peter's property, it causes $150,000 in damage to his home and $20,000 in damage to his detached garage, which includes an apartment that he rents to his friend Jim. Peter has a Dwelling Form flood policy with a $200,000 limit. If he decides to apply the maximum amount of coverage possible to his garage, how much of the repairs will be covered?

C. $0, Unfortunately for Peter, since he rents the garage out to Jim, who uses it as a residence, it cannot be covered under Coverage A of his NFIP policy.

Under a Personal Auto Policy, an insurer will cover Medical Payments for up to ____ from the date of the accident. A. 1 year B. 6 months C. 3 years D. 2 years

C. 3 years

ABC Manufacturing is covered by an Equipment Breakdown Protection Coverage Form which includes Business Income coverage. Which of the following is a TRUE statement regarding the Business Income coverage? A. In the event of a covered loss, coverage is provided for lost business income for as long as it takes to make needed repairs, regardless of how long it takes. B. ABC Manufacturing must supply the insurer with a yearly report detailing the company's income and expenditures in order to avoid a coinsurance penalty in the event of a loss. C. ABC Manufacturing must supply the insurer with a yearly report detailing the values of all the covered equipment in order to avoid a coinsurance penalty in the event of a loss. D. This coverage pays for extra costs that ABC Manufacturing incurs while making temporary repairs and expediting permanent repairs after a breakdown of covered equipment.

C. ABC Manufacturing must supply the insurer with a yearly report detailing the values of all the covered equipment in order to avoid a coinsurance penalty in the event of a loss.

A liability policy in which the insurer covers claims that are filed during the policy period, no matter when the loss occurred.

Claims-Made Form

A means of protecting a business' property that is not in one fixed location. Includes domestic shipments, instrumentalities of transportation and communication, and commercial property floater risks.

Commercial Property Floater

Based on court decisions and customs when statutory law does not provide an answer; creates precedent.

Common Law

Money awarded in civil court for tangible and intangible damages caused by a policyholder. There are two types: general and special.

Compensatory Damages

Money awarded for the emotional losses of the plaintiff that will continue after the trial date. These are a subjective value and are determined by the court.

Compensatory Damages - General

Money awarded for the exact value of the physical damage caused to the plaintiff up to the trial date. This is an objective value determined by receipts and medical bills.

Compensatory Damages - Specia

A severe flood causes $100,000 in damage to Latisha's home and $25,000 in damage to her detached garage. If Latisha has a Dwelling Form flood policy with a $150,000 limit, how much can she expect to receive for the damages to her garage? (Ignore deductible amounts.)

Coverage A allows 10% of the limit to be applied to detached structures. This means that Latisha may apply up to 10% of her $150,000 limit ($15,000) to repair her garage. Note that this 10% is included within, not in addition to, the Coverage A limit.

A third party is injured on your property. Which part of a homeowners policy provides coverage for their medical expenses?

Coverage F in a HO policy pays for medical expenses of third parties who are injured on the insured's property.

What is the minimum limit for Coverage L of the Personal Liability Supplement in a dwelling policy? A. None B. $1,000 C. $10,000 D. $100,000

D. $100,000

Harry's farm is insured with a farm policy. Which of the following would fall under Coverage A of Harry's policy? A. The patio furniture on the back deck of Harry's house. B. Harry's backyard TV satellite dish. C. The small guest house located behind Harry's main house. D. The grave markers in Harry's family cemetery.

D. The grave markers in Harry's family cemetery.

Coverage L in a Personal Liability Supplement provides: A. coverage similar to Coverage E in a homeowners policy, but it doesn't cover the insured's legal defense. B. no-fault coverage for necessary, reasonable medical expenses for a third party injured on the insured's premises. C. at least $1,000 in loss assessment coverage. D. coverage for both bodily injury and property damage to a third party for which the insured is legally liable.

D. coverage for both bodily injury and property damage to a third party for which the insured is legally liable.

An insurer in North Carolina that wishes to cancel a motor vehicle liability policy must:

D. give the policyholder a written explanation of the right to request a review of the termination.

Part D of the Personal Auto Policy does NOT cover:

Freezing is excluded from Part D - Coverage for Damage to Your Auto.

"Special form" of homeowners insurance; all-peril coverage for structures, named-peril coverage for contents.

H0-3

"Modified coverage form" of homeowners insurance; named-peril coverage for structures and contents, fewer perils covered.

H0-8

Liability limits in a Personal Auto Policy are applied per...

Liability limits apply per person and per accident, depending on the type of limit.

A garage policy is almost identical to a BAP, but it covers which two additional hazards?

Premises & Operations and Products & Completed Operations

Intangible damages awarded to the plaintiff when the defendant's actions show intentional heinous, antisocial behavior or extreme indifference to harm. These damages are determined by the court and the adjuster cannot negotiate them.

Punitive Damages

What document do insurance companies give to claimants when they think something in the claim is not covered by the policy, but they are not sure yet?

Reservation of Rights letter

Which Dwelling policy form provides open-peril coverage?

The DP-3 provides open-peril coverage for the property's structures, and named-peril coverage for personal property.

Michelle just purchased a homeowners policy for her new single-family home. Although she would have liked the best coverage money can buy, she could not afford the most expensive policy. She compromised with a policy that provides open-peril coverage for her house and detached garage, and named-peril coverage for her personal property. Which homeowners policy did Michelle purchase?

The HO-3 provides open peril coverage for the Dwelling and other structures and named peril coverage for personal property.

Jim owns a home valued at $187,500, but he only has a $100,000 homeowner's policy and is underinsured. During a storm, lightning strikes Jim's home causing $45,000 in damages. The insurer decides to invoke a coinsurance penalty. How much will Jim be required to pay for the penalty?

The coinsurance requirement of 80% means that Jim should have maintained a minimum policy of $150,000 in coverage. Instead, Jim maintained a $100,000 policy, under-insuring himself by a third. When the insurer invokes the coinsurance penalty, Jim is then responsible for a third of the damages, which in this case totaled $45,000. So, Jim must pay $15,000.

If the named insured on an insurance policy dies, what happens?

The policy is transferred to the insured's legal representative, and lasts until the next policy renewal date.

During a heavy thunderstorm, lightning strikes a tree right outside Carl's house, which splinters and falls onto Carl's roof. The room under the roof floods with water, damaging Carl's expensive flooring. Carl's roof damage would be considered:

The roof is tangible property that has suffered physical damage, making it a direct loss.

In the context of insurance adjusting, who is the principal?

The source of the adjuster's authority

In a homeowners policy, the additional coverage "Tree and Shrub Replacement" will pay:

Tree and Shrub Replacement pays up to $500 per plant for the replacement of trees, shrubs, or other plants destroyed by a covered peril.

Eve's Organic Applesauce makes a family sick, and Eve has to recall thousands of boxes of product. Her base policy does not cover product liability but a(n) ________ could help pay for Eve's losses associated with the recall?

Umbrella policy

What is North Carolina's approach to Workers' Comp insurance?

WC is compulsory, and North Carolina has no state WC fund.

A typical homeowners policy without a Home Business endorsement has how much coverage available for business personal property?

Without the Home Business endorsement, a typical homeowners policy pays up to $2,500 for business personal property under Coverage C.

HO-4 only covers _______

a renter's personal property, not the structure

In a personal auto policy, the Miscellaneous Vehicle Coverage endorsement:

allows coverage to be added for motorcycles and motor homes.

In ______court, one party files a lawsuit against another, asking for money or for a court order against the other party.

civil

Common law is based upon

court decisions and customs.

In _______court, the government (usually referred to as "the State") prosecutes a person for breaking the law, with the possibility of punishment like jail time or a fine.

criminal

Liability coverage excludes damages incurred under the scope of ____since these fall under...

employment, workers comp or employer's liability.

The North Carolina Reinsurance Facility (NCRF) coverage does not extend however to FT,PS,WD,RR,TE

farm tractors, power shovels, well drillers, road rollers, or traction engines.

In North Carolina, the Commissioner of Insurance is elected to serve a _______ term.

four year

An HO-3 policy is intended for a/an:

individual

cause of loss or damage

peril

Jeremy is purchasing a homeowners policy for his house in the country. He is a beer enthusiast and is especially concerned with protecting his home brewing equipment from the black bears commonly seen in the area. Which of the following is the least expensive option that meets Jeremy's special need? A. Homeowners 5 B. Homeowners 3 C. Homeowners 2 D. Homeowners 8

A. Homeowners 5

D'Anton spills coffee in his lap while driving, causing him to veer off the road and smash into a lamp post. Which part of his Personal Auto Policy will help him pay for the repairs to the lamp post? A. Liability Coverage B. Coverage B: detached structures C. Comprehensive Coverage D. Collision Coverage

A. Liability Coverage

Mindy filed a claim against XYZ Consulting on March 5, 2016 for an accident that happened on September 15, 2015. XYZ Consulting was previously covered by a claims-made CGL policy, but changed to an occurrence policy in January 2016, when the policy came up for annual renewal. How will XYZ Consulting's insurer respond to Mindy's claim? A. The claim will not be covered because the accident did not occur during the current policy period. B. The claim will not be covered because the current policy is triggered when a claim is filed, not when the accident occurred. C. The claim will be covered because both the claim and the accident occurred while XYZ Consulting was insured by the same insurer. D. The claim will be covered as long as the current policy has a retroactive date of September 15, 2015 or earlier.

A. The claim will not be covered because the accident did not occur during the current policy period.

Of the following, who would qualify as an insured on a homeowners policy without being named on the declarations page? A. The named insured's 23-year-old daughter who is at an out-of-state college B. The named insured's nephew who lives next door C. The named insured's 26-year-old son who is a full-time graduate student D. The named insured's ex-husband who lives 2 hours away

A. The named insured's 23-year-old daughter who is at an out-of-state college

Which of the following does NOT apply to Tort Law? A. The state charges the defendant B. Only a simple majority is required to reward the claimant for damages C. Tort law applies only to civil trials D. The defendant is called the tortfeasor

A. The state charges the defendant

Which of the following is NOT a reason why an adjuster would collect written or recorded witness statements during a claim investigation? A. To fully comply with the Conditions section of the insurance policy B. To dispute an account provided by the claimant or another witness C. To impeach a witness's credibility if he changes his story when the claim goes to court D. To expose data that may have been overlooked in the claim handling process

A. To fully comply with the Conditions section of the insurance policy

An adjuster who is hired to represent the claimant and help determine a fair indemnification. Usually specializes in appraisals and negotiation. Paid commission, usually a percentage of final settlement.

Adjuster - Public

The agent's authority to act on behalf of someone else (the principal), usually an insurer. This authority is derived from the agent's contract with the principal. It can be apparent, express, or implied.

Agency Authority

Indirect authority that the agent can reasonably be assumed to have, based on appearances. If an adjuster is equipped to represent an insurer (with the insurer's permission), then an individual can assume that the adjuster has the authority to act on the insurer's behalf.

Agency Authority - Apparent

Authority that is expressly given to the agent in writing. Allows the agent to act on behalf of the principal.

Agency Authority - Express

Authority that an agent possesses by implication of her behavior, regardless of whether this authority is granted in writing. For example, a person portraying herself as a representative for an insurance company, even though she is not employed by that company.

Agency Authority - Implied

Quincy is in court attempting to convince the jury through a preponderance of evidence that his insurer is deliberately withholding his rightful indemnification for his property claim. In which type of legal proceeding are Quincy and his insurer currently involved? A. Criminal trial B. Civil trial C. Contributory negligence hearing D. Comparative negligence hearing

B. Civil trial

Nichole's car was damaged while it was being serviced at Don's Auto Shop. Nichole's auto insurance policy covers physical damage to her vehicle, but it will not cover the damage that occurred while the vehicle was under the control of Don's Auto Shop. Which provision in her policy states this? A. Control of Property B. No Benefit to Bailee C. Assignment D. Severability of Interests

B. No Benefit to Bailee

Tom works for Home Improvement Corporation. One day Tom reports to work and is told to deliver a load of lumber to a customer in his truck. Tom loads up the lumber and heads off to the client's house. On the way, he runs a red light and causes an accident. Why might Tom's PAP liability insurance deny coverage to Tom? A. Tom broke the law when he ran the red light, making him at fault for the accident. B. Tom's accident occurred during employment related activities, so it would be covered by the employer's liability. C. Tom needed a commercial license to use his truck for work purposes. D. Tom's accident occurred when using his truck for "transport" purposes, which excludes it from coverage.

B. Tom's accident occurred during employment related activities, so it would be covered by the employer's liability.

Even after Ed finished his investigation and told Adeline that her damages were covered, she was still concerned that her insurer would deny her claim. Ed assured her that there was no need to worry and that her insurer would back up his decision. Why might Ed be so sure of this fact? A. As an adjuster, Ed's primary responsibility is to settle the claim in a way that makes the claimant happy. B. Ed was confident that he was thorough enough in his investigation that the insurer would agree with his findings. C. As an adjuster, Ed has the power to bind the insurer to the decision he makes on their behalf. D. Ed spoke out of turn. He should not guarantee the outcome of a claim without approval from the insurer.

C. As an adjuster, Ed has the power to bind the insurer to the decision he makes on their behalf.

Under a North Carolina motor vehicle liability policy, which of the following types of liability would be covered? A. Damage to property that the insured is transporting B. Intentional damages above the minimum required liability limits C. Injury occurring while occupying a covered vehicle being used as part of a shared-expense car pool D. Damage to personal property that the insured is holding for someone else

C. Injury occurring while occupying a covered vehicle being used as part of a shared-expense car pool

Which of the following is TRUE of the Equipment Breakdown Protection Coverage Form? A. It includes a maximum of $25,000 of liability coverage. B. If damage is also covered by another policy, the Equipment Breakdown Protection Coverage Form is primary and the other policy is secondary. C. It normally pays replacement cost, unless endorsed to pay actual cash value. D. It has a standard deductible of $1,000 that applies to each occurrence or breakdown.

C. It normally pays replacement cost, unless endorsed to pay actual cash value.

Terry is renting half of a duplex. During a severe storm, lightning strikes a tree in the front yard and causes a large portion of the tree to fall on Terry's side of the duplex. Which of the following losses will be covered by Terry's Homeowners 4 policy? A. Removal of the tree and debris will cost hundreds of dollars. B. Terry's roof and front wall were damaged when the tree fell on the house. C. Terry's TV and entertainment system were damaged when the tree fell through the roof. D. Terry's attached carport was damage when the tree ripped it from the side of the house.

C. Terry's TV and entertainment system were damaged when the tree fell through the roof.

What is the best reference for reconstructing the details of a claim? A. The claimant B. An eyewitness C. The claim file D. The insured who was present

C. The claim file

Which of the following would NOT fall under the definition of "Residence Premises" in Shannon's homeowners policy? A. The beach house that Shannon and her family rent for a weekend getaway each month B. Shannon's detached 4-car garage C. The two-bedroom house that Shannon owns in town, which she rents out to four college students D. The vacant lot that Shannon owns, located right next to her own house

C. The two-bedroom house that Shannon owns in town, which she rents out to four college students

Which of the following losses would NOT be covered under Part D-Coverage for Damage to Your Watercraft in a Personal Watercraft Policy? A. John has to pay transport charges to have his damaged craft delivered to a repair facility. B. Jack has to pay recovery charges to salvage his sunken craft. C. Tim damages another boat while cruising on a lake. D. Jennifer's $500 Nikon Camera is damaged when her boat starts taking on water.

C. Tim damages another boat while cruising on a lake.

Which of the following insurers is NOT engaging in an Unfair Claims Settlement Practice? A. Antelope Insurance Company is understaffed and generally does not respond to claims until after a couple of months have passed. B. Nellis Insurance Company does not usually send an explanation of why claims are denied, unless a policyholder specifically requests one. C. XYZ Insurance Company owns its own auto repair shop and sends policyholders' cars there to be repaired. D. ABC Insurance Company routinely offers policyholders substantially smaller settlement amounts than what is due to them.

C. XYZ Insurance Company owns its own auto repair shop and sends policyholders' cars there to be repaired.

An adjuster's preliminary claim report should: A. update the insurer every 30 days with any new or important information. B. list the disposition of the claim. C. establish a claim reserve. D. list all of the evidence of the claim.

C. establish a claim reserve.

In a Business Owners Policy, Business Income coverage:

C. provides coverage from 72 hours after a loss occurs, up to a maximum of 12 months.

In a Dwelling policy, Coverage A provides protection for: A. land surrounding the principal dwelling. B. construction tools left outside next to the building. C. structures attached to the principal dwelling. D. a detached garage.

C. structures attached to the principal dwelling.

Which of the following situations does NOT involve misrepresentation? A. Angie is trying to sell a homeowners policy to Anne. When Anne asks Angie if the policy involves RC coverage, Angie says it does, without telling Anne that she will have to purchase an endorsement in order for RC coverage to apply. B. Astrid, a public adjuster, agrees to reduce her damage estimates by 5%, in exchange for $500 in cash per claim from LMN Insurance. C. ABC insurance runs an ad that implies that XYZ insurance is going out of business, when this is not the case. D. Atticus manages an insurance agency and posts the salespeoples' numbers publicly each month, to promote competition.

D. Atticus manages an insurance agency and posts the salespeoples' numbers publicly each month, to promote competition.

Barry, the CEO of Company X, has been kidnapped. The kidnappers have demanded $1,000,000 in ransom for Barry. Company X is insured with a Commercial Crime policy. What endorsement may cover the loss of money turned over to the kidnappers in exchange for Barry's return?

D. Extortion Endorsement

As a direct writer for ABC Insurance, Grace enjoys the benefit of receiving a regular salary. What other aspect applies to her position as a direct writer? A. Grace receives a commission on every policy she sells. B. Grace helps to train other insurance agents within the company. C. Grace sells a variety of policies for several insurers. D. Grace sells policies solely for ABC Insurance.

D. Grace sells policies solely for ABC Insurance.

Missy lives on the top floor at Lakewood Condominiums. One day, a windstorm severely damages the building, including structural damage, broken windows, and interior water damage to most of the units. Part of the roof over Missy's unit is torn off by the high winds, and the rain ruins her furniture and hardwood floors. Which of these losses would be covered by Missy's HO-6 policy? A. Missy would be indemnified for all of the damage to her unit, including the roof, furniture, and hardwood floors. B. Missy would not receive any indemnification because all of the damage would be covered under Lakewood Condominiums' policy. C. Missy would be indemnified for her furniture, but the roof and floors would fall under Lakewood Condominiums' policy. D. Missy would be indemnified for her furniture and floors, but not the roof.

D. Missy would be indemnified for her furniture and floors, but not the roof.

"Contents broad form"; named-peril renter's policy covering only personal property and any structural improvements made at the tenant's own expense.

H0-4

The "broad" form of homeowners insurance; a basic, named-peril HO form that nevertheless is less limited than the HO-8.

HO-2

Covers insured's house and personal property against all Broad Form perils

HO-2 "Broad Form"

List all HO Named Peril Forms

HO-2 "Broad Form", HO-4 "Contents Broad Form", HO-6 "Unit Owner's Form", HO-8 "Modified Coverage Form"

Most common form; provides open-peril coverage for dwelling and other structures and named-peril Broad Form coverage for personal property

HO-3 "Special Form"

List all HO Open Peril Forms

HO-3 "Special Form", HO-5 "Comprehensive Form", HO-7 "Mobile Home Form"

Also called "renters insurance" (think "4-Rent"); Insures personal property against all Broad Form perils; does not insure house and other structures

HO-4 "Contents Broad Form"

Most comprehensive coverage available; provides open-peril coverage for both structures and personal property

HO-5 "Comprehensive Form"

Also known as the "Condo Form"; covers owner's belongings and all finished surfaces of the individual condominium unit for all Broad Form perils

HO-6 "Unit Owner's Form"

Similar to HO-3, but for mobile homes; provides open peril coverage for dwelling and other structures and named peril coverage for personal property (covered perils vary by insurer)

HO-7 "Mobile Home Form"

Covers property at ACV for fewer perils (fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, volcanic eruption)

HO-8 "Modified Coverage Form"

Unconscious tendency of insured people to engage in riskier behavior.

Hazard - Morale

A characteristic in a thing itself that causes gradual deterioration or self-destruction. Losses or damage related to inherent vice are not insurable.

Inherent Vice

With a ____ deductible, the policyholder only pays for damages that are less than his deductible. If the cost of damages equals or exceeds his deductible, the insurer pays the full amount and the policyholder pays nothing.

franchise

Ian has started his own health insurance company online. Because of the low premiums he offers, he's been selling a lot of policies and collecting a lot of money from people who think they're getting a great deal on their insurance. However, he won't pay any claims and he will shut down the website and disappear when people start to get suspicious. Ian is committing:

insurer fraud.

HO-6 covers what?

the finished surfaces of the insured's unit, but not the overall building, since this is owned collectively.

Business Income coverage has a valuation condition that requires...

the insured to give the insurance company a yearly report detailing the values of covered equipment. If the insured fails to supply this report, the insurer may apply a coinsurance penalty on covered losses.