Anna Mattei
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a practice exam in preparation for the licensing exam

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Anna Mattei
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Arkansas Adjuster Practice Exam

Question 1 of 36

1

Mark incurred $8,000. damage to his car in an accident. He received $8,000. from his insurance company and $4,000. from the other driver. By receiving a profit from the loss, Mark could be violation of:

Select one of the following:

  • the principle of indemnity

  • the principle of financial status.

  • the principle of financial restoration

  • the principle of profit and loss.

Explanation

Question 2 of 36

1

What is a reserve, in insurance terms?

Select one of the following:

  • The amount of revenue that the insurer sets aside to pay employee salaries.

  • A pool of collected premiums that the insurer sets aside to pay claims.

  • A group of policyholders who pay into the same pool of premiums.

  • A set of rules governing how the insurance industry should work.

Explanation

Question 3 of 36

1

The purpose of the principle of indemnity is:

Select one of the following:

  • To transfer the risk of financial loss from one party to another.

  • to transfer the right to collect a debt from one party to another.

  • to prevent an insured from making a profit on a loss.

  • to prevent an insurer from making a profit on a loss.

Explanation

Question 4 of 36

1

Greg plays trombone in his school band during football games. During a rally song in the stands on day. Greg annoys one of the opposing team's fans, who grabs his $400 trombone and hurls it down the bleachers, completely destroying it. Greg's insurance pays him $400 to replace the trombone, but then the opposing team's coach also offers to replace the instrument, at whatever the cost. So Greg orders a new 3,200 trombone and has the opposing team's athletic department absorb the cost. Which principle has Greg violated?

Select one of the following:

  • the principle of indemnity

  • the principle of consideration

  • the principle of legal purpose

  • the principle of opposing team

Explanation

Question 5 of 36

1

Which of the following refers to being restored to the financial condition you were in before a loss?

Select one of the following:

  • Estoppel

  • Subjugation

  • indemnification

  • restoration

Explanation

Question 6 of 36

1

Bobby just purchased an insurance policy for his home from xyz insurance. Which of the following would be a reason this policy may not be legally binding?

Select one of the following:

  • Bobby has an outstanding warrant for selling marijuana

  • Bobby has been diagnosed with schizophrenia

  • Bobby is only 19 years old

  • Bobby paid his first premium when he and his agent agreed on a policy, but he is waiting for the policy documents to be prepared so he can sign them.

Explanation

Question 7 of 36

1

Indemnification may include all of the following except:

Select one of the following:

  • payment for pain and suffering.

  • payment for repairs to property.

  • reimbursement for hotel costs.

  • reimbursement for rental car costs.

Explanation

Question 8 of 36

1

Which of the following is NOT a requirement for a legally binding contract?

Select one of the following:

  • There must be a legal purpose

  • There must be mutual consent

  • Both parties must bring something of value

  • It must be notarized document

Explanation

Question 9 of 36

1

The fee paid by the insured in exchange for an insurance policy is called a:

Select one of the following:

  • Premium

  • legal purpose

  • binder

  • contract

Explanation

Question 10 of 36

1

Which of the following best defines the principle of indemnity?

Select one of the following:

  • Both parties to an insurance contract must contribute something of value.

  • After a loss, the insured should be restored to his approximate financial condition before the loss.

  • In order to be legally binding, a contract must have agreement, consideration,competent parties, and legal purpose.

  • In exchange for a premium, the insurer grants peace of mind by reducing the insured's insecurity about the future.

Explanation

Question 11 of 36

1

Which one of the following is found on the declarations page of an insurance policy?

Select one of the following:

  • Declarations

  • Conditions

  • Exclusions

  • The name of the insured party.

Explanation

Question 12 of 36

1

In which section of an insurance policy might you find the following statement? "We, us, and our' refers to ABC insurance company.

Select one of the following:

  • Declarations

  • Conditions

  • Definitions

  • Exclusions

Explanation

Question 13 of 36

1

In which section of an insurance policy might you find the following statement? "Damage to insured property must be reported within 15 days of the damaging occurrence."

Select one of the following:

  • Conditions

  • Exclusions

  • Definitions

  • Declaration Page

Explanation

Question 14 of 36

1

Which section of an insurance policy is designed to OMIT certain risks from coverage?

Select one of the following:

  • Insurance agreement

  • Exclsions

  • Definitions

  • Coverage Forms

Explanation

Question 15 of 36

1

Which of the following would you find in the conditions section of an insurance policy?

Select one of the following:

  • The meaning of certain important words in the contract.

  • Policy limits.

  • The insured's duty after a loss.

  • Causes of loss that are not covered.

Explanation

Question 16 of 36

1

All of the following are typical exclusions in an insurance policy, EXCEPT:

Select one of the following:

  • nuclear hazards

  • explosion

  • flooding

  • earthquakes

Explanation

Question 17 of 36

1

All of the following pieces of information can be found in the Conditions section of an insurance policy, EXCEPT:

Select one of the following:

  • the insured's duties after loss.

  • anything the insured must do for coverage to remain in effect.

  • What the insured must do in the event of a lawsuit

  • causes of loss that are not covered.

Explanation

Question 18 of 36

1

Which of the following statements is true about an insurance policy?

Select one of the following:

  • The insured is obligated to the terms of the contract for the entire policy period.

  • It is transferable if the property is sold to another party.

  • The insured sets the terms of the policy.

  • It relies on the utmost good faith of both the insured and the insurer.

Explanation

Question 19 of 36

1

In an insurance policy, the summary of what the insurer will do in the even of a covered loss is called.

Select one of the following:

  • the dec page.

  • the insurance agreement.

  • the conditions section.

  • the definitions section.

Explanation

Question 20 of 36

1

In a ________________ , only one party is legally obligated to perform.

Select one of the following:

  • Unilateral contract

  • conditional contract

  • contract of adhesion

  • contract of utmost good faith

Explanation

Question 21 of 36

1

Insurance policies are unilateral contracts. This means:

Select one of the following:

  • they rely on the honesty of both parties

  • they depend on an unknown future event.

  • only one party has an obligation to perform.

  • ambiguities are settled in favor of the insured.

Explanation

Question 22 of 36

1

Which of the following is not a characteristic of insurance contracts?

Select one of the following:

  • Conditional

  • Unilateral

  • Universal

  • Aleatory

Explanation

Question 23 of 36

1

Which of the following best describes a Fraternal Benefit Society?

Select one of the following:

  • A fraternal benefit society is a for-profit provider of insurance.

  • A fraternal benefit society uses investors' money to pay claims.

  • A fraternal benefit society pays dividends to its stockholders.

  • A fraternal benefit society is a social organization

  • A fraternal benefit society is a social organization based around common interests and beliefs.

Explanation

Question 24 of 36

1

When an insurer buys insurance to reduce its exposure to loss, this called.

Select one of the following:

  • re-insurance

  • mitigation

  • loss reduction

  • co-insurance

Explanation

Question 25 of 36

1

Which of the following is NOT a characteristic of social insurance programs?

Select one of the following:

  • Social insurance programs involve mandatory participation.

  • Social insurance programs are for-profit programs.

  • The benefits of a social insurance program may be prescribed by federal law.

  • Social insurance programs are designed to meet the needs of the general public as a whole.

Explanation

Question 26 of 36

1

When an insurer buys insurance to reduce its exposure to loss, this is called.

Select one of the following:

  • re-insurance

  • mitigation

  • loss reduction

  • co-insurance

Explanation

Question 27 of 36

1

Frank purchases an automobile policy from publicly traded xyz insurance. He pays regular monthly premiums, and also purchases stock in xyz and receives dividends when the company turns a profit. From which type of company has Frank purchased insurance?

Select one of the following:

  • Re-insurer

  • Mutual insurer

  • Stock insurer

  • Reciprocal insurer

Explanation

Question 28 of 36

1

Xavier owns a small insurance company. Recently the company won a bid to insure a new housing development in Omaha, NE. His company can handle any claims that arise, but if a series of tornado were to tear through the area and destroy the entire development, Xavier's company would suffer financially. Which type of insurer could help Xavier's company protect itself the most from this potential loss?

Select one of the following:

  • A fraternal benefits society

  • A re-insurer

  • A stock insurer

  • A reciprocal insurance group

Explanation

Question 29 of 36

1

Cindy holds an insurance policy from Sine Nomine Insurance. This is not a publicly traded company, and Cindy can participate in the election of the board, receiving dividends if the company does well. Sine Nomine insurance could be best described as a:

Select one of the following:

  • Mutual insurance company

  • A risk retention group

  • fraternal benefits society

  • stock insurance company

Explanation

Question 30 of 36

1

Edward is a member of the Knights of Columbus, a religious group dedicated to voluntary service to the benefit of society. He also recently purchased a $100,000 life insurance policy from the organization. This was possible because the Knights of Columbus is:

Select one of the following:

  • a risk retention group

  • a mutual insurer

  • a fraternal benefit society

  • a reciprocal insurer

Explanation

Question 31 of 36

1

An insurer that adheres to the laws of a state but is located outside of that state is called a(n) _____

Select one of the following:

  • national

  • foreign

  • alien

  • domestic

Explanation

Question 32 of 36

1

Sure trust insurance was founded and operates in Texas. In Texas, Sure Trust is condsidered:

Select one of the following:

  • a domestic insurer

  • a state insurer

  • an alien insurer

  • a foreign insurer

Explanation

Question 33 of 36

1

A reciprocal insurer is:

Select one of the following:

  • a publicly traded insurance company owned by stockholders, which provide capital and participate in the insurer's profits and losses.

  • An insurance company that is owned by its policyholders, is not traded publicly, and is governed by a board of directors elected by the policyholders.

  • An unincorporated organization of subscribers that operates through an attorney-in-fact to provide insurance benefits for its member's.

  • A non-profit mutual aid organization that engages in charitable or benevolent activities and provides insurance to its members.

Explanation

Question 34 of 36

1

A captive insurance company:

Select one of the following:

  • exists solely to provide insurance for its parent company.

  • provides insurance that is designed to meet the needs of the general public.

  • provides insurance for insurers

  • operates through an attorney-in-fact to provide insurance benefits for its members.

Explanation

Question 35 of 36

1

An insurance company might consider any of the following a risk, EXCEPT:

Select one of the following:

  • a jewelry collection

  • an automobile

  • a high crime neighborhood.

  • a home

Explanation

Question 36 of 36

1

Which of the following would be considered an insurable risk?

Select one of the following:

  • The gold stored in Fort Knox

  • A high crime area

  • A riverbank

  • A squadron of police cars

Explanation

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