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Mississippi Psi All Lines Adjuster Practice Exam
Questions And Correct Answers (Verified Answers)
Plus Rationales 2025
1. What is the primary purpose of an insurance adjuster? A. To sell insurance policies B. To determine rates for policies C. To investigate and settle claims D. To collect premiums Rationale: Adjusters are responsible for evaluating insurance claims, determining the extent of the insurer's liability, and negotiating settlements. 2. Which of the following types of adjusters is employed directly by an insurance company? A. Independent adjuster B. Staff adjuster C. Public adjuster D. Field adjuster Rationale: Staff adjusters are salaried employees of the insurance company. Independent and public adjusters work externally.
3. Under the Mississippi Insurance Department, an adjuster's license must be renewed every: A. 3 years B. 2 years C. Annually D. 5 years Rationale: Mississippi requires adjusters to renew their license every 2 years and complete continuing education. 4. What is the standard of proof in a civil insurance claim? A. Beyond a reasonable doubt B. Preponderance of the evidence C. Clear and convincing evidence D. Reasonable suspicion Rationale: In civil claims, including insurance disputes, the standard is "preponderance of the evidence," meaning more likely than not. 5. A "reservation of rights" letter is issued by the insurer to: A. Deny a claim immediately B. Notify the insured that coverage is questionable but investigation is ongoing C. Accept the claim unconditionally D. Inform the public adjuster of the claim status Rationale: It protects the insurer’s right to later deny a claim if coverage is found lacking.
9. The Mississippi Insurance Commissioner is appointed by: A. The governor B. The voters in a general election C. The State Legislature D. The Department of Commerce Rationale: The Insurance Commissioner in Mississippi is elected, not appointed. 10. When can an insurer cancel a homeowner’s policy mid-term in Mississippi? A. At any time B. With 5 days’ notice C. For reasons such as nonpayment of premium, fraud, or increased risk D. Never Rationale: Cancellation is allowed for specific reasons and must follow state notice guidelines. 11. What must be included in a Proof of Loss? A. Only the name of the insured B. Amount claimed, time and cause of loss, and interest of all parties involved C. Copy of the police report D. A notarized affidavit Rationale: The Proof of Loss is a formal declaration with detailed claim information.
12. The deductible in a property insurance policy represents: A. The maximum amount the insurer pays B. The amount paid by the mortgage company C. The amount the policyholder must pay before insurance applies D. A fee for coverage Rationale: The deductible is the portion of the loss the insured must absorb. 13. What type of adjuster is hired by the policyholder to assist in preparing and negotiating a claim? A. Staff adjuster B. Independent adjuster C. Public adjuster D. Legal adjuster Rationale: Public adjusters work for and represent the policyholder, not the insurer. 14. Which of the following best defines “subrogation”? A. The insurer’s right to recover from a third party after paying a claim B. The right of the insured to sue a negligent party C. The process of estimating damages D. The first-party loss assessment Rationale: Subrogation allows insurers to pursue third parties responsible for the insured’s loss.
D. The deductible amount Rationale: This limit caps the insurer’s liability for each individual incident.
18. The FAIR Plan in Mississippi is intended to: A. Provide basic property insurance to high-risk property owners B. Replace all private insurance C. Act as flood insurance D. Offer auto liability coverage Rationale: The FAIR Plan helps insure properties that are otherwise uninsurable due to location or risk. 19. When an adjuster receives a claim, what is the first step in the claims process? A. Acknowledge receipt and begin investigation B. Settle the claim immediately C. Contact an attorney D. Cancel the policy Rationale: The initial action involves acknowledging and initiating the claims investigation. 20. A written contract between an insurer and policyholder is called a: A. Certificate B. Receipt C. Policy
D. Binder Rationale: The policy outlines the terms, coverage, conditions, and exclusions agreed upon.
21. Which of the following is considered a liability loss? A. Fire damage to your own home B. Injuries to a guest who slips on your icy sidewalk C. Theft of your car D. Loss of income from a fire Rationale: Liability losses occur when you are legally responsible for bodily injury or property damage to others. 22. What is the purpose of the appraisal clause in property insurance? A. To cancel the policy B. To resolve disputes about the amount of loss C. To deny coverage D. To file a police report Rationale: The appraisal clause helps settle disagreements over the value of a loss. 23. What must an adjuster do if they discover fraud during a claim investigation? A. Ignore it B. Notify the insurer and possibly law enforcement
Rationale: Mississippi requires adjusters to maintain claim records for at least 3 years.
27. What is the main purpose of a deductible in a policy? A. Increase the premium B. Cover total loss C. Reduce small claims and encourage loss prevention D. Pay commissions Rationale: Deductibles discourage small claims and reduce moral hazard. 28. When an adjuster issues a denial letter, it must include: A. The policy renewal date B. The reason for denial with policy provisions cited C. The agent’s personal opinion D. The name of other claimants Rationale: The denial must be clear, cite policy language, and explain the decision. 29. What does the term “third-party claim” mean? A. A claim for property damage only B. A claim filed by the insurer C. A liability claim filed by someone other than the insured D. A claim for reinsurance
Rationale: A third party is someone other than the insured or insurer making a claim for liability.
30. Under an auto policy, medical payments coverage provides: A. Property damage reimbursement B. Payment for injuries to the insured and passengers regardless of fault C. Collision damage coverage D. Payment for lost wages Rationale: Medical payments cover medical expenses without regard to fault. 31. Which of the following losses would be covered under the “open perils” policy? A. Only named perils B. All perils including war C. All perils except those specifically excluded D. Only fire and theft Rationale: Open perils (all-risk) policies cover all risks except those specifically excluded. 32. Which method is commonly used to settle small auto claims quickly? A. Arbitration B. Fast track claims handling C. Litigation D. Subrogation
D. At the end of the policy period Rationale: State law requires timely acknowledgment of all claims.
36. What is salvage? A. Payment for a total loss B. The deductible amount C. The insurer’s right to recover remaining value of damaged property D. Subrogation rights Rationale: Salvage helps insurers recover part of the claim payout by selling damaged property. 37. In adjusting, a “field report” is: A. A policy application B. An adjuster’s detailed report on loss investigation and findings C. A legal notice D. The final proof of loss Rationale: The field report documents the adjuster’s observations and recommendations. 38. Which type of insurance covers injuries to employees? A. Auto liability B. General liability C. Workers’ compensation
D. Commercial property Rationale: Workers’ comp covers job-related injuries and illnesses.
39. What is the primary purpose of the declarations page? A. To deny coverage B. To explain endorsements C. To summarize key policy information: who, what, where, when, how much D. To list claim settlements Rationale: The declarations page outlines key details of the policy. 40. The “insuring agreement” section of a policy describes: A. Conditions for cancellation B. The coverage provided C. The deductible amount D. The agent’s contact info Rationale: The insuring agreement specifies what is covered and the insurer’s obligations. 41. A “binder” provides: A. A permanent policy B. Temporary insurance until the policy is issued C. Proof of loss D. A claims settlement check
45. Under Mississippi’s Unfair Claims Settlement Practices Act, an adjuster may NOT: A. Promptly communicate with the claimant B. Misrepresent policy provisions C. Pay claims within policy limits D. Investigate the claim fully Rationale: Misrepresentation of policy provisions is prohibited. 46. When an insured fails to protect property after a loss, the insurer may: A. Pay the claim anyway B. Double the payment C. Reduce payment for further damage D. Cancel the policy immediately Rationale: The insured must protect property to prevent further loss. 47. What is the main purpose of the conditions section of a policy? A. To provide advertising B. To state duties and obligations of the insurer and insured C. To add perils covered D. To limit liability Rationale: Conditions outline responsibilities of both parties.
48. If an adjuster violates state insurance law, the Commissioner may: A. Promote the adjuster B. Ignore it C. Suspend or revoke the license D. Pay the adjuster a bonus Rationale: The Commissioner has authority to enforce compliance. 49. Which type of loss reserves are set aside for known claims that have not yet been paid? A. IBNR reserves B. Case reserves C. Surplus reserves D. Unearned premium reserves Rationale: Case reserves are set for reported but unpaid claims. 50. An adjuster must handle claims in: A. The insurer’s sole interest B. The insured’s sole interest C. Good faith and fair dealing for both parties D. Strict secrecy Rationale: Good faith and fair dealing are fundamental in adjusting. 51. Which type of reinsurance agreement requires the reinsurer to accept a portion of every risk the ceding insurer writes?
54. Which of the following best describes moral hazard? A. Risk of loss due to natural disasters B. Increased chance of loss from poor maintenance C. Increased chance of loss due to dishonesty or character D. Risk of loss due to location Rationale: Moral hazard is the risk from dishonesty or bad behavior. 55. Which part of a liability policy specifies who is covered? A. Declarations B. Conditions C. Definitions D. Insuring agreement Rationale: The definitions clarify the insured, additional insureds, and other key terms. 56. If an adjuster negotiates directly with a claimant represented by an attorney, this is: A. Required B. Unethical and may violate law C. Standard practice D. Encouraged Rationale: Adjusters should not negotiate directly with a represented party.
57. A non-waiver agreement does what? A. Denies coverage B. Preserves rights for both sides while a claim is investigated C. Provides more coverage D. Replaces the Proof of Loss Rationale: It protects both parties during a coverage dispute. 58. What is a fiduciary duty? A. A duty to sell more policies B. A duty of trust and good faith when handling money or property of others C. A duty to deny claims D. A duty to investigate fraud only Rationale: Adjusters have fiduciary duties when handling claims and payments. 59. A “material misrepresentation” on an insurance application may result in: A. Lower premiums B. A larger claim payment C. Rescission of the policy D. Automatic policy renewal Rationale: A material misrepresentation can void coverage. 60. What is the main purpose of underwriting? A. Handle claims B. Select and classify risks
