Claims Adjuster Practice Questions (2026) — Free Sample Questions with Answers

Answer: C

Insurer B's policy, in force when the claim was made: This applies a claims-made trigger to occurrence policies.

Both policies, sharing the loss pro rata: Only the policy in force when the bodily injury occurred is triggered here.

Insurer A's policy, in force when the injury occurred: Correct. An occurrence form covers bodily injury that occurs during its policy period, no matter when the claim is made.

Neither, unless a tail was bought on Insurer A's policy: Extended reporting (tail) coverage is a claims-made concept; occurrence coverage needs no tail.

Occurrence policies are triggered by when the injury or damage happens; claims-made policies by when the claim is made.

Answer: D

Symbol 2 — owned autos only: Symbol 2 covers only autos the company owns; the employee's car is not owned by Larkin.

Symbol 7 — specifically described autos: Symbol 7 covers only autos listed on the policy schedule.

Symbol 8 — hired autos only: Symbol 8 covers autos the company leases, hires, rents or borrows, not autos owned by its employees.

Symbol 9 — non-owned autos only: Correct. Symbol 9 covers autos the company does not own, lease, hire, rent or borrow that are used in its business, including employees' own cars.

Symbol 9 (non-owned autos) protects a business when employees use their own cars on company business; symbol 1 (any auto) also would.

Answer: C

1. Contributing values: ship $5,000,000 + Cargo A $3,000,000 + Cargo C $1,600,000 + $400,000 made good = $10,000,000.
2. General average rate: $400,000 ÷ $10,000,000 = 4%.
3. Contributions: ship $200,000; Cargo A $120,000; Cargo C 4% × $2,000,000 = $80,000.
4. Cargo C receives $400,000 made good and pays $80,000, so its net loss is $80,000 (the ship and Cargo A pay the other $320,000).

$0: This forgets that the owner of the sacrificed cargo also contributes its share; it is made whole only for the others' shares.

$64,000: This applies the 4% rate only to the arrived $1,600,000 and omits the $400,000 made good from Cargo C's contributing value.

$80,000: Correct. Contributing values total $10,000,000 including the $400,000 made good, a 4% rate; Cargo C contributes 4% × $2,000,000 = $80,000 and receives $400,000, so its net loss is $80,000.

$400,000: This treats the jettison as particular average borne entirely by Cargo C, but a voluntary sacrifice to save the venture is general average.

In general average every interest saved, including the sacrificed cargo (at its arrived value plus the amount made good), contributes in proportion to its value.

Answer: D

Other than collision, because an animal caused the loss: Contact with a bird or animal is other than collision, but there was no contact; impact with the guardrail is collision.

Part A property damage, because the guardrail is not the insured's: Part A may pay for the guardrail, but damage to the insured's own car falls under Part D.

Collision, but only if the insured is found at fault: Collision coverage pays regardless of fault; fault matters only for subrogation.

Collision, because the car struck an object: Correct. The PAP defines collision as the upset of the covered auto or its impact with another vehicle or object; the car never contacted the deer.

Hitting an animal is other than collision; swerving and hitting something else is collision.

Answer: D

HO-2: The HO-2 broad form covers personal property for named perils only, and an accidental spill is not a named peril.

HO-3: The HO-3 special form insures the dwelling on an open-perils basis but personal property (Coverage C) only for named perils.

HO-4: The HO-4 contents form covers personal property for the broad named perils, which do not include an accidental spill.

HO-5: Correct. The HO-5 covers personal property on an open-perils (special) basis, so an accidental spill that is not excluded is covered.

Only the HO-5 (among unendorsed forms) insures personal property against open perils; HO-2, HO-3 and HO-4 cover contents for named perils.

Answer: C

1. 80% of replacement cost at time of loss: 0.80 × $400,000 = $320,000.
2. Insured carried $280,000, less than $320,000, so full replacement cost does not apply.
3. HO-3 applies the deductible first: $20,000 − $1,000 = $19,000.
4. Proportional replacement cost: 0.875 × $19,000 = $16,625.
5. ACV less the deductible: $12,000 − $1,000 = $11,000. The larger amount is $16,625.

$11,000: This pays actual cash value less the deductible ($12,000 − $1,000), but HO-3 pays the larger of ACV or the proportional replacement cost.

$13,300: Uses $280,000 ÷ $400,000 = 70% (full replacement cost instead of 80% of it): 0.70 × ($20,000 − $1,000) = $13,300.

$16,625: Correct. HO-3 pays the larger of ACV or the proportion of the replacement cost after the deductible: ($280,000 ÷ $320,000) × ($20,000 − $1,000) = 0.875 × $19,000 = $16,625, which exceeds ACV less the deductible ($11,000).

$19,000: This pays full replacement cost less the deductible, ignoring that the insured carried less than 80% of replacement cost.

Under the HO replacement cost condition, an insured below 80% of replacement cost receives the larger of ACV or (carried ÷ required) × replacement cost, less the deductible.

Answer: A

As one occurrence, even though it happened gradually: Correct. The CGL occurrence definition includes continuous or repeated exposure to the same harmful condition, so gradual damage from one leak is one accidental occurrence.

As no occurrence, because the damage was not sudden: The CGL does not require suddenness; its definition expressly includes continuous or repeated exposure.

As a separate occurrence for each day of dripping: Repeated exposure to substantially the same condition is treated as a single occurrence, not one per day.

As no occurrence until the leak is discovered: Discovery does not create the occurrence; the damage happened as the water dripped.

Under the CGL, an occurrence is an accident, including continuous or repeated exposure to substantially the same harmful conditions, so gradual damage can be one occurrence.

Answer: A

Defend the suit under a reservation of rights: Correct. The negligence allegation is potentially covered, which triggers the duty to defend; reserving rights preserves the intentional-injury exclusion while the insurer defends.

Deny a defense, since intentional injury is excluded: The duty to defend turns on any potentially covered allegation; the negligence count is potentially covered.

Defend the suit with no reservation of rights: Defending without reserving rights risks waiving the intentional-injury exclusion.

Seek a declaratory judgment and defend only if it rules for coverage: An insurer may seek a declaratory judgment, but it must still defend in the meantime; delaying the defense breaches the duty to defend.

When a suit mixes covered and excluded allegations, the insurer defends under a reservation of rights; the duty to defend is broader than the duty to pay.

Answer: D

Its claim fails along with the insured's claim: The mortgage clause makes the mortgagee's protection independent of the insured's conduct; the insured's arson does not defeat it.

It must foreclose first and then claim as owner: No foreclosure is needed; the mortgagee claims under the mortgage clause in its own right.

It is paid the full Coverage A limit: The mortgagee is protected only up to its interest in the property, not the full limit.

It is paid up to its interest despite the arson: Correct. A denial of the insured's claim does not apply to a valid mortgagee claim; the insurer pays the mortgagee to the extent of its interest and is then subrogated to its rights.

The standard mortgage clause protects the named mortgagee even when the insured's act or neglect voids coverage, provided the mortgagee meets its own duties under the clause.

Answer: C

By appraisal, which either party may demand: Appraisal is the Part D physical damage provision for the amount of loss to an auto; it does not resolve bodily injury damages under Part C.

By arbitration, which the insurer may require: The insurer cannot compel Part C arbitration on its own; both parties must agree.

By arbitration, if both parties agree to it: Correct. Part C allows arbitration of legal entitlement or the amount of damages, but only if both the insured and the insurer agree; coverage disputes cannot be arbitrated.

By an umpire chosen by the two parties' adjusters: An umpire is part of the appraisal procedure, not the Part C arbitration provision, which uses arbitrators.

Appraisal settles the amount of a physical damage loss; PAP Part C arbitration settles UM entitlement or damages and requires both parties' agreement.

Answer: B

1. 80% of $300,000 = $240,000; Coverage A of $150,000 falls short.
2. Proportional RC = $150,000 ÷ $240,000 × $40,000 = $25,000.
3. ACV of the damage = $28,000.
4. Pay the greater: $28,000.

$25,000: This is the proportional replacement cost ($150,000 ÷ $240,000 × $40,000), but the form pays the greater of that amount or ACV.

$28,000: Correct. Coverage A is below 80% of replacement cost ($240,000), so the insurer pays the greater of ACV ($28,000) or proportional replacement cost ($25,000).

$32,000: Pays 80% of the repair cost, confusing the 80% insurance-to-value test with a payment percentage.

$40,000: Full replacement cost requires Coverage A of at least 80% of replacement cost; $150,000 is only 50%.

Under the HO-3, a dwelling insured below 80% of replacement cost is paid the greater of ACV or the proportional replacement cost.

Answer: A

1. Required insurance = 80% × $400,000 = $320,000.
2. Ratio = $240,000 ÷ $320,000 = 0.75.
3. 0.75 × $50,000 loss = $37,500.
4. $37,500 − $1,000 deductible = $36,500 (below the $240,000 limit).

$36,500: Correct. The insured needed $320,000 (80% of $400,000) but carried $240,000, so the insurer pays 75% of the $50,000 loss ($37,500) and then subtracts the $1,000 deductible.

$36,750: Subtracts the deductible before applying the coinsurance ratio ($49,000 × 75%); the ratio is applied to the loss first.

$37,500: Applies the coinsurance ratio correctly but never subtracts the $1,000 deductible.

$49,000: Ignores the coinsurance penalty; the insured carried only 75% of the insurance the clause requires.

Coinsurance payment = (carried ÷ required) × loss − deductible, never more than the limit or the loss; the required amount is based on value at the time of loss.

Answer: C

Ask the insured to sign and return a copy: A signature is what a non-waiver agreement needs; a reservation of rights letter is a one-sided notice.

Reserve all of the insurer's rights in general terms: A vague, blanket reservation may not give fair notice; courts often refuse to enforce reservations that do not identify the issue.

Cite the late-notice condition and the facts behind it: Correct. A reservation of rights letter should identify the specific policy provision and the facts creating the coverage question, so the insured has clear notice while the investigation continues.

State that the claim will be denied unless the delay is explained: This prejudges the claim before the investigation; the letter reserves the right to rely on the condition, not a threatened denial.

A reservation of rights letter preserves a coverage defense only when it gives the insured clear notice: the specific provision, the facts behind the question, and that investigation continues.

Answer: A

Give her written notice at least 60 days before the limit expires: Correct. Model #902 requires written notice to an unrepresented third-party claimant of an expiring statute of limitations or other time limit at least 60 days before it expires.

Give her written notice at least 30 days before the limit expires: Thirty days is the model notice period for first-party claimants, not third-party claimants.

Say nothing, because discussing time limits is legal advice: The model regulation specifically requires this notice; giving it is not the practice of law.

Tell her the limit will not apply while negotiations continue: Negotiations do not stop the limitation period, and saying so would misrepresent a pertinent fact.

Under NAIC Model #902, unrepresented claimants get written notice of expiring time limits: 30 days before for first-party, 60 days before for third-party claims. Exact time frames vary by state; check your state's insurance code.

Answer: A

Misrepresenting pertinent facts or policy provisions: Correct. Model #900 lists knowingly misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue as an unfair claims practice.

Failing to affirm or deny coverage within a reasonable time: The adjuster did respond; the problem is that the statement about coverage was false.

Compelling suit by offering substantially less than is due: This practice concerns lowball offers that force litigation; no offer was involved.

Failing to adopt standards for prompt investigation: This is a company-level failure to set investigation standards, not a false statement about coverage.

Telling a claimant that a coverage does not exist when it does is misrepresentation of policy provisions under Model #900.