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SOUTH CAROLINA “INDEPENDENT ADJUSTER” LICENSE
COVERS ALL LINES PRACTICE EXAM QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2025
- What is the primary responsibility of an independent adjuster? A. Sell insurance policies B. Investigate and settle claims C. Represent the insured during litigation D. Underwrite new risks
Correct Answer: B
Rationale: Independent adjusters are hired to investigate, evaluate, and
negotiate insurance claims on behalf of insurers.
- Which of the following best describes an "occurrence" policy? A. Covers claims filed during the policy period B. Covers incidents occurring during the policy period regardless of when the claim is filed C. Covers claims filed after the policy expires D. Only covers accidents involving property
Correct Answer: B
Rationale: An occurrence policy provides coverage for incidents that
happen during the policy period, even if the claim is reported later.
- What is the South Carolina minimum requirement for maintaining adjuster records? A. 3 years B. 5 years C. 1 year D. 10 years
Correct Answer: B
Rationale: South Carolina requires adjusters to keep records of
transactions and adjuster activities for a minimum of 5 years.
- Which type of insurance covers liability from faulty work or products? A. Personal auto B. Inland marine C. General liability D. Commercial property
Correct Answer: C
Rationale: General liability insurance includes coverage for bodily injury,
property damage, and products/completed operations.
- The South Carolina Department of Insurance can suspend or revoke an adjuster’s license for: A. Working more than 40 hours per week B. Declining a claim C. Losing a policyholder’s file D. Committing fraudulent or dishonest acts
A. The process of claim denial B. The insurer seeking reimbursement from a third party after paying a claim C. The insured appealing a claim D. An optional endorsement
Correct Answer: B
Rationale: Subrogation allows an insurer to recover costs from the at-
fault party after compensating the insured.
- What is the purpose of a reservation of rights letter? A. Deny the claim B. Notify the insured that coverage may not apply while the investigation continues C. Approve payment immediately D. Assign a new adjuster
Correct Answer: B
Rationale: A reservation of rights letter protects the insurer’s ability to
deny coverage while continuing to investigate.
10.What type of damages compensate for actual monetary losses? A. Punitive B. Special C. General D. Exemplary
Correct Answer: B
Rationale: Special damages cover quantifiable financial losses such as
medical bills or lost wages.
11.What type of property is not covered under a standard homeowner’s policy? A. Dwelling B. Detached garage C. Personal belongings D. Land
Correct Answer: D
Rationale: Land is not insurable under a homeowner's policy; only
structures and personal property are.
12.Which policy provision prevents the insured from collecting more than the actual loss? A. Indemnity B. Subrogation C. Coinsurance D. Limits of liability
Correct Answer: A
Rationale: The principle of indemnity ensures that the insured is
restored to their original financial condition, not profiting from a loss.
13.What is actual cash value (ACV)?
16.Which of the following is an example of an “open peril” policy? A. A policy that covers all perils except those specifically excluded B. A policy listing covered perils C. A named-peril policy D. An expired policy
Correct Answer: A
Rationale: An open peril policy provides broader coverage by including
all causes of loss unless excluded.
17.In a commercial property policy, what does the coinsurance clause encourage? A. Avoiding claims B. Insuring property to its full value C. Underinsuring for lower premiums D. Only insuring personal property
Correct Answer: B
Rationale: Coinsurance requires the insured to carry insurance equal to
a percentage of the property’s value to receive full payment in a loss.
18.The term “proximate cause” refers to: A. Who is at fault B. The primary cause of loss in a chain of events C. The latest event in a loss chain D. Criminal activity
Correct Answer: B
Rationale: Proximate cause is the dominant, effective cause of a loss
that sets other events in motion.
19.What coverage is designed to protect an insured if they are sued for damages they cause to others? A. Medical payments B. Liability coverage C. Property damage D. Uninsured motorist
Correct Answer: B
Rationale: Liability insurance covers legal defense and damages if the
insured is legally responsible for injury or damage.
20.Which South Carolina law protects consumers from unfair claim practices? A. The Insurance Exchange Act B. Consumer Protection Act C. Unfair Claim Settlement Practices Act D. Adjuster Conduct Act
Correct Answer: C
Rationale: This act outlines unfair practices insurers and adjusters must
avoid when handling claims.
21.In liability insurance, what does “limits of liability” mean?
24.What does a “declaration page” in a policy include? A. A list of excluded coverages B. Key facts: insured’s name, coverage, limits, and premium C. A claim resolution summary D. Warranty information
Correct Answer: B
Rationale: The declarations page summarizes vital policy information
like limits, parties, and cost.
25.Which of the following best describes moral hazard? A. Living in a high-crime area B. Faulty wiring C. Dishonest behavior to profit from a loss D. A car parked on the street
Correct Answer: C
Rationale: Moral hazard refers to increased risk due to the insured’s
intentional or dishonest actions.
26.Which is a duty of the insured after a loss? A. Notify the insurer promptly B. Call the police C. Repair the damage immediately D. Pay the deductible upfront
Correct Answer: A
Rationale: The insured is contractually obligated to report losses
promptly and cooperate with the insurer.
27.What is the deductible in an insurance policy? A. A bonus B. The premium paid C. The portion of the loss the insured must pay before coverage applies D. The full claim amount
Correct Answer: C
Rationale: Deductibles are used to reduce small claims and share risk
between insurer and insured.
28.What is an "assignment" in a policy context? A. Canceling a policy B. Transfer of policy rights to another party C. Proof of insurance D. A claims report
Correct Answer: B
Rationale: An assignment transfers the rights under a policy, often
requiring insurer approval.
29.Which of the following types of adjusters work for policyholders? A. Independent adjuster B. Staff adjuster C. Public adjuster D. Field adjuster
A. A bystander to the incident B. The insured against their own policy C. The insurer D. The government
Correct Answer: B
Rationale: A first-party claim is made by the insured directly to their
insurer for a covered loss.
33.Which policy section contains the insurer’s promise to pay? A. Exclusions B. Declarations C. Insuring agreement D. Conditions
Correct Answer: C
Rationale: The insuring agreement outlines the insurer’s duties and
what is covered under the policy.
34.A liability policy that pays all claims up to a stated limit regardless of how many claims occur is called: A. Aggregate limit policy B. Per occurrence policy C. Umbrella policy D. Split-limit policy
Correct Answer: A
Rationale: An aggregate limit is the maximum the insurer will pay for all
claims within the policy period.
35.Which coverage would apply to a loss caused by a windstorm? A. Peril coverage B. Liability coverage C. Umbrella coverage D. Inland marine
Correct Answer: A
Rationale: Peril coverage includes specific causes of loss like fire,
windstorm, or theft.
36.In insurance, the principle of utmost good faith means: A. Both parties must be honest and disclose relevant information B. The insurer always pays C. Claims must be filed immediately D. Only the adjuster must be truthful
Correct Answer: A
Rationale: Insurance contracts rely on full disclosure and honesty from
both the insured and the insurer.
37.What is salvage? A. The deductible amount B. A type of fraud C. Remaining value of damaged property the insurer can recover D. The subrogation process
C. Cover cosmetic home damage D. Provide excess liability protection above underlying policies
Correct Answer: D
Rationale: Umbrella policies provide higher limits and broader liability
coverage once primary limits are exhausted.
41.Which of the following is considered a contract of adhesion? A. A lease B. An insurance policy C. A warranty D. A court judgment
Correct Answer: B
Rationale: Insurance contracts are written by the insurer, and the
insured must accept or reject the terms without negotiation.
42.A staff adjuster works: A. For the insured B. Directly for one insurance company C. As an independent contractor D. For a public agency
Correct Answer: B
Rationale: Staff adjusters are employees of a specific insurer and
represent only that company.
43.What is insurable interest? A. The value of the loss B. A financial interest in the property or person insured C. The claim amount D. The coverage limit
Correct Answer: B
Rationale: The insured must have a financial stake in the subject being
insured at the time of loss.
44.What does "waiver" mean in insurance? A. Policy cancellation B. Claim denial C. Voluntary surrender of a known right D. Fraudulent activity
Correct Answer: C
Rationale: A waiver is when a party voluntarily gives up a legal right,
often related to claims or policy enforcement.
45.What does “nonrenewal” mean? A. Immediate cancellation B. Insurer’s decision not to continue coverage at policy expiration C. Insured's claim denial D. Refund of premium
Correct Answer: B
D. Windstorm
Correct Answer: B
Rationale: Earthquake is often excluded and must be added by
endorsement or a separate policy.
49.In workers’ compensation, what is the exclusive remedy doctrine? A. Allows lawsuits against employers B. Limits employee recovery to workers' comp benefits only C. Requires private insurance D. Denies coverage for occupational illness
Correct Answer: B
Rationale: This doctrine bars employees from suing their employer in
most cases if workers' comp is available.
50.Which type of coverage protects a business if it can’t operate due to a covered loss? A. Inland marine B. Extra expense C. Business income (interruption) D. Commercial general liability
Correct Answer: C
Rationale: Business income insurance replaces lost income when a
business is unable to operate due to covered property damage.
