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WASHINGTON PSI ALL LINES ADJUSTER
PRACTICE EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2025
- What is the primary purpose of insurance? A. To prevent losses from occurring B. To transfer risk C. To reduce liability D. To eliminate uncertainty Insurance is a mechanism to transfer the risk of financial loss from an individual or business to an insurer.
- Which of the following best describes an insurable interest? A. The interest in another person's property B. A financial interest in the property or person insured C. A moral obligation to prevent loss D. A professional relationship with the insured
An insurable interest exists when the policyholder would suffer a financial loss if the insured event occurs.
- What is indemnity in insurance? A. Paying more than the loss B. Sharing profits with the insured C. Restoring the insured to their original financial position before the loss D. Preventing a loss from happening Indemnity ensures the insured is compensated fairly without profiting from a claim.
- A temporary contract of insurance is known as: A. A binder B. A binder C. A policy endorsement D. A certificate of insurance A binder is a temporary agreement that provides coverage until a formal policy is issued.
- What is the purpose of subrogation? A. To avoid duplicate coverage B. To allow the insurer to recover their loss from a third party C. To waive the deductible D. To increase policy limits Subrogation allows insurers to pursue a third party that caused an insurance loss to the insured.
C. Replacement Cost Value (RCV) D. Fair Market Value ACV is calculated as replacement cost less depreciation. 10.Which of the following is not a duty of the insured after a loss? A. Notify the insurer promptly B. Protect the property from further damage C. Cooperate with the adjuster D. Replace all damaged property immediately The insured is not required to replace property before the claim is settled. 11.Which of the following parties has the responsibility to prove a loss occurred under an insurance claim? A. The insurer B. The broker C. The insured D. The agent The insured must provide proof of loss to the insurer. 12.In Washington, the adjuster license renewal period is typically: A. Every year B. Every 3 years C. Every 2 years D. Every 5 years Adjusters must renew their licenses every two years in Washington.
13.What is the primary role of a public adjuster? A. Represent the insurance company B. Represent the insured in preparing and negotiating claims C. Underwrite policies D. Investigate fraud exclusively Public adjusters work on behalf of the insured to ensure fair claims settlement. 14.What does the term "liability" refer to in insurance? A. Property damage only B. Legal responsibility for injury or damage C. A type of property coverage D. An endorsement Liability means legal responsibility for harm caused to others. 15.Which of the following is considered a "third party" in an insurance claim? A. The insured B. Anyone other than the insured and insurer C. The insurer only D. The policyholder Third party refers to someone other than the insured or insurer. 16.What is the purpose of an appraisal clause in a policy? A. To increase coverage limits B. To cancel a policy C. To resolve disputes over the value of a loss D. To extend the deductible
Replacement cost pays the amount to repair or replace without deduction for depreciation. 20.What does the term "exclusion" mean in an insurance policy? A. Coverage added by endorsement B. Specific risks or conditions not covered by the policy C. The amount paid by the insurer D. The deductible amount Exclusions identify what losses or perils are not covered. 21.What is a peril in insurance terminology? A. A clause in the contract B. A cause of loss, such as fire or theft C. The insured's property D. The amount of coverage A peril is a specific risk or cause of loss insured against. 22.Which of the following is an example of a named peril policy? A. A policy that covers all risks except those specifically excluded B. A policy that covers only the perils specifically listed in the policy C. A policy without deductibles D. A policy that excludes flood and fire Named peril policies cover only those risks expressly listed. 23.In the claims process, what is the purpose of a reserve? A. To increase premiums B. To set aside funds to pay an anticipated claim
C. To settle disputes between parties D. To pay the insured Reserves are estimates of the amount the insurer expects to pay on a claim. 24.What type of insurance policy protects against legal liability arising out of business operations? A. Property insurance B. Commercial general liability insurance C. Workers compensation D. Health insurance Commercial general liability policies cover legal liabilities from business operations. 25.Which of the following is a common factor in determining insurance premiums? A. The insured’s marital status B. The time of year the policy is issued C. The risk characteristics of the insured and exposure D. The policyholder's political affiliation Premiums are based on risk characteristics and exposure to loss. 26.When does a binder typically expire? A. 10 days after issuance B. When the policy is issued or after a short period (usually 30 days) C. After 90 days D. Only when canceled
C. Direct loss D. Indirect loss Direct loss is physical damage to property. 31.What is the definition of proximate cause in insurance? A. The last event in a chain B. The primary cause that sets other events in motion resulting in loss C. A secondary cause D. An excluded peril Proximate cause is the main cause leading to the loss. 32.What is meant by “assignment” in an insurance policy? A. Transferring a policy to another party B. Transferring rights or benefits under the policy to another C. Renewing a policy D. Paying a claim Assignment transfers the insured’s rights to someone else. 33.Which of the following statements is true regarding waiver and estoppel? A. They increase the insurer's liability B. They prevent an insurer from denying coverage if certain actions are taken or not taken C. They apply only to property insurance D. They are endorsements Waiver and estoppel can prevent an insurer from enforcing policy provisions.
34.Which of the following losses would likely be covered under an inland marine policy? A. A fire in a building B. Flood damage to a basement C. Goods in transit by truck D. Earthquake damage Inland marine insurance covers property in transit or movable property. 35.What is the “proof of loss” form used for? A. To apply for insurance B. To document details of a claim and support the amount requested C. To reject a claim D. To renew a policy Proof of loss is submitted to validate a claim. 36.In Washington, what entity regulates insurance companies and agents? A. Department of Financial Services B. Department of Commerce C. Office of the Insurance Commissioner D. Federal Trade Commission The Office of the Insurance Commissioner regulates insurance activities in Washington. 37.What is “coinsurance” in property insurance? A. Sharing premiums equally B. An additional deductible
employees D. There is no difference Independent adjusters are independent contractors; staff adjusters are insurer employees. 41.In liability insurance, what does “aggregate limit” mean? A. The per occurrence limit B. The deductible amount C. The maximum total amount payable during the policy period D. The premium paid Aggregate limit caps the total insurer liability for all claims during the policy period. 42.What is the principle of utmost good faith in insurance? A. Insurers can deny claims for any reason B. Both parties must disclose all relevant facts honestly C. Only the insurer has disclosure obligations D. It applies only to liability policies Utmost good faith requires honesty and full disclosure by both insurer and insured. 43.What does “claims-made” policy mean? A. Coverage applies to losses occurring during the policy period B. Claims can be made anytime after loss C. Coverage applies to claims reported during the policy period regardless of
when loss occurred D. Claims are paid immediately Claims-made policies cover claims made during the policy period. 44.In Washington, how many hours of continuing education are required for license renewal for adjusters? A. 10 hours B. 20 hours C. 24 hours D. 30 hours Washington requires 24 hours of continuing education every two years. 45.The “notice of claim” clause requires the insured to: A. Pay the deductible first B. Notify the insurer promptly of a loss C. File a lawsuit immediately D. Provide proof of loss Prompt notification is required so the insurer can investigate timely. 46.What is the purpose of the “liberalization” clause? A. To limit coverage B. To automatically extend broader coverage without additional premium C. To increase premiums D. To shorten the policy term If the insurer broadens coverage during the policy term without extra charge, the liberalization clause applies those changes automatically.
Hazards are conditions that increase the likelihood or severity of a loss.
