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Claims Adjuster practice questions

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Question 1Insurance Principles and Policy Fundamentals

Which principle holds that a property insurance payment should restore the insured to approximately the same financial position held before the loss, no better and no worse?

  1. The principle of utmost good faith
  2. The principle of subrogation
  3. The principle of contribution
  4. The principle of indemnity Correct answer.

Explanation

Indemnity limits recovery to the value of the actual loss so the insured cannot profit from insurance. Subrogation and contribution are supporting doctrines that help enforce indemnity but do not define it. Utmost good faith governs disclosure during underwriting rather than the size of a settlement.

Question 2Insurance Principles and Policy Fundamentals

Insurable interest in property insurance generally must exist at which point?

  1. Only when the policy is first issued
  2. Only at the time the application is signed
  3. At the time of the loss Correct answer.
  4. Only after a claim has been reported

Explanation

For property coverage the insured must have a financial stake in the property when the loss occurs, because a person cannot collect for damage to property they no longer own. Life insurance differs, requiring insurable interest at the time of application. The requirement prevents insurance from becoming a wagering contract.

Question 3Insurance Principles and Policy Fundamentals

The doctrine of utmost good faith places which obligation on an insurance applicant?

  1. To pay all premiums before any loss occurs
  2. To report every claim within twenty-four hours
  3. To disclose material facts affecting the risk Correct answer.
  4. To purchase the broadest coverage the insurer offers

Explanation

Utmost good faith requires the applicant to reveal facts that would influence the insurer's decision to accept the risk or set the rate. Failure to disclose a material fact can allow rescission of the policy. The duty supplements the written answers on the application.

Question 4Insurance Principles and Policy Fundamentals

A property owner who intentionally damages his own building to collect insurance proceeds is an example of which type of hazard?

  1. Legal hazard
  2. Physical hazard
  3. Moral hazard Correct answer.
  4. Morale hazard

Explanation

Moral hazard refers to dishonesty or intentional conduct that increases the likelihood or severity of loss. Morale hazard is carelessness or indifference that arises simply because insurance exists. Physical hazard is a tangible condition of the property, such as faulty wiring.

Question 5Insurance Principles and Policy Fundamentals

What is the primary function of a deductible in most property and liability policies?

  1. To share small losses with the insured Correct answer.
  2. To transfer the entire loss to a reinsurer
  3. To waive the insurer's right of subrogation
  4. To increase the policy limit by the deductible amount

Explanation

A deductible is the amount of each loss the insured absorbs before the insurer pays, which removes small claims from the system and gives the insured a reason to prevent losses. It reduces premium but does not change the policy limit upward. It has no effect on the insurer's subrogation rights.

Question 6Insurance Principles and Policy Fundamentals

The declarations page of an insurance policy typically provides which information?

  1. The causes of loss the policy does not cover
  2. The insured's duties after a loss occurs
  3. The policy period, limits, and property insured Correct answer.
  4. The insurer's written promises to pay covered claims

Explanation

Declarations identify the parties, the policy term, the limits and premiums, and the property or risk being insured. The insuring agreement states the insurer's promises, conditions list the insured's duties, and exclusions name what is not covered. Together these form the structure of the policy.

Question 7Insurance Principles and Policy Fundamentals

A document used to change the terms of an already issued policy is called:

  1. A certificate of insurance
  2. A binder
  3. A declarations page
  4. An endorsement Correct answer.

Explanation

An endorsement, also called a rider, amends, adds to, or restricts the terms of an existing policy and becomes part of the contract. A binder provides temporary evidence of coverage before the policy is issued. A certificate merely evidences coverage for someone such as a lender or landlord.

Question 8Insurance Principles and Policy Fundamentals

Why do property and liability policies contain exclusions?

  1. To guarantee the insurer a predictable profit on every policy sold
  2. To keep out uninsurable or unusually severe exposures Correct answer.
  3. To remove every risk of loss from the policy entirely
  4. To satisfy state laws that require narrower coverage forms

Explanation

Exclusions carve out losses the insurer does not intend to cover, such as catastrophic, intentional, or duplicated exposures, and risks better handled by other insurance or government programs. They define the boundaries of the insuring agreement and help keep premiums affordable. They do not eliminate coverage generally.

Question 9Insurance Principles and Policy Fundamentals

An insured's building is damaged by a negligent contractor, and the insurer pays the claim. The insurer then sues the contractor to recover the amount paid. This is:

  1. Coinsurance
  2. Salvage
  3. Contribution
  4. Subrogation Correct answer.

Explanation

Subrogation transfers the insured's right of recovery against a responsible third party to the insurer once it pays the loss. It prevents double recovery by the insured and places the cost on the party at fault. Contribution and salvage serve different purposes.

Question 10Insurance Principles and Policy Fundamentals

Two property policies with identical terms cover the same building for the same loss. Each insurer pays a share of the loss under which principle?

  1. The rule of abandonment
  2. Contribution Correct answer.
  3. The doctrine of warranty
  4. The principle of indemnity

Explanation

Contribution lets insurers with concurrent coverage share a loss so the insured collects no more than the actual loss. Most policies contain an other-insurance condition that specifies how shares are calculated. Indemnity is the broader goal, but contribution is the mechanism used among insurers.

Question 11Insurance Principles and Policy Fundamentals

A building valued at $500,000 is insured for $300,000 under a policy with an 80% coinsurance clause. A $100,000 covered loss occurs. Ignoring deductibles, what does the insurer pay?

  1. $80,000
  2. $100,000
  3. $60,000
  4. $75,000 Correct answer.

Explanation

The coinsurance requirement is 80% of $500,000, or $400,000. Because the insured carried only $300,000, the payment is ($300,000 / $400,000) x $100,000, which equals $75,000. Carrying the full required amount would have produced payment of the entire $100,000 loss.

Question 12Insurance Principles and Policy Fundamentals

A windstorm blows down a power line, starting a fire that destroys a store. The policy covers windstorm and fire but excludes faulty wiring. Windstorm is treated as the cause that triggers coverage because it is the:

  1. Concurrent cause
  2. Contributing cause
  3. Remote cause
  4. Proximate cause Correct answer.

Explanation

The proximate cause is the dominant, effective cause that sets the loss in motion without which the loss would not have occurred. A covered peril such as windstorm remains the proximate cause even though fire was the final agent of damage. Courts look to the initiating cause rather than the last event.

Question 13Insurance Principles and Policy Fundamentals

Actual cash value in property insurance is best described as:

  1. Replacement cost minus depreciation Correct answer.
  2. The outstanding mortgage balance on the property
  3. The full cost to rebuild without any deduction
  4. The original purchase price of the property

Explanation

Actual cash value measures the damaged property's worth at the time of loss, commonly calculated as replacement cost less depreciation. Replacement cost coverage pays to rebuild without deducting depreciation. Neither original cost nor a mortgage balance measures the loss.

Question 14Insurance Principles and Policy Fundamentals

An agent issues a binder on Monday for a new building and the policy is issued two weeks later. If a fire occurs on Wednesday, the insurer:

  1. Owes only the return of any premium paid
  2. Is bound by the binder's temporary coverage Correct answer.
  3. Owes nothing, since no policy was issued
  4. May void the binder because underwriting was incomplete

Explanation

A binder is a temporary contract that provides coverage from the agreed date until the policy is issued or the binder expires. It is enforceable even though formal underwriting has not been completed, assuming the risk would have been acceptable. The insurer cannot deny a loss that occurs while the binder is in force.

Question 15Insurance Principles and Policy Fundamentals

An applicant for homeowners insurance fails to disclose three prior fire losses. The insurer would have declined the risk had it known. After a fire loss, the insurer may:

  1. Deny the claim only if the fire was caused by the undisclosed losses
  2. Take no action once the policy has been issued
  3. Deny the claim only if the misstatement was in writing
  4. Rescind the policy for material misrepresentation Correct answer.

Explanation

A misrepresentation is material when a reasonable insurer would have made a different underwriting decision had it known the truth. Material misrepresentation in the application permits the insurer to rescind the policy, which defeats the claim. Some jurisdictions additionally require intent to deceive.

Question 16Insurance Principles and Policy Fundamentals

An adjuster repeatedly tells an insured that proof-of-loss deadlines will not be enforced and accepts late documents without objection. The insurer later denies the claim for late filing. The insured may argue:

  1. That the insurer waived the deadline and is estopped Correct answer.
  2. That the policy was ambiguous and must be reformed
  3. That the insurer breached an implied warranty of habitability
  4. That the adjuster's statements created a binder

Explanation

Waiver is the voluntary relinquishment of a known right, and estoppel prevents an insurer from asserting a right after conduct on which the insured reasonably relied to their detriment. Accepting late documents without objection can waive a proof-of-loss condition. The insurer's conduct, not the policy wording, creates the bar.

Question 17Insurance Principles and Policy Fundamentals

Which statement best distinguishes a warranty from a representation in insurance underwriting?

  1. A warranty is made after a loss occurs, while a representation is made before the policy is issued
  2. A warranty is never enforceable by an insurer, while a representation always voids the policy
  3. A warranty applies only to life insurance policies, while a representation applies only to property insurance policies
  4. A warranty is a condition that must be literally true; a representation is a belief statement Correct answer.

Explanation

Historically a warranty is a policy condition the insured promises is exactly true, and any breach could void coverage. A representation is a statement of fact or belief made during underwriting that voids the policy only if it is material and, in many states, intentionally false. Statutes and case law have softened the harsh common-law treatment of warranties.

Question 18Insurance Principles and Policy Fundamentals

Because an insurance policy is a contract of adhesion drafted by the insurer, an ambiguous coverage term is generally:

  1. Ignored and replaced by state statute
  2. Enforced exactly as the insurer intended it
  3. Construed in favor of the insurer that drafted it
  4. Construed against the insurer that drafted it Correct answer.

Explanation

The insured has no meaningful chance to negotiate the wording, so courts apply the rule of contra proferentem and resolve genuine ambiguity in favor of the insured. Some courts go further and honor the insured's reasonable expectations. Ambiguity must be real; clear language is enforced as written.

Question 19Insurance Principles and Policy Fundamentals

An insurance contract is described as aleatory because:

  1. Both parties exchange promises of equal value at inception
  2. The insurer's payment may greatly exceed the premium Correct answer.
  3. The insured may cancel at any time without penalty
  4. The insurer must always renew the policy

Explanation

In an aleatory contract the amounts exchanged are unequal and depend on chance, so a small premium can produce a large claim payment or no payment at all. This distinguishes insurance from contracts where the values exchanged are roughly equal. The element of uncertainty is central to the arrangement.

Question 20Insurance Principles and Policy Fundamentals

An insurer's agent, acting outside the authority granted in the agency agreement, tells a client that a particular loss is covered and issues a policy. The insurer may still be bound because of:

  1. Express authority granted in the agency agreement
  2. The parol evidence rule
  3. The doctrine of contribution
  4. The doctrine of apparent authority Correct answer.

Explanation

Apparent authority arises when the insurer's conduct leads a reasonable person to believe the agent has authority to act. The insurer is bound by acts that fall within that appearance even when the agency agreement says otherwise. Express authority, by contrast, is the actual written grant the agent exceeded here.

Question 21Insurance Principles and Policy Fundamentals

A primary insurer cedes part of its risk to a reinsurer. In this relationship, the reinsurer:

  1. Indemnifies the ceding insurer only Correct answer.
  2. Collects the original premium from the insured
  3. Assumes the original insured's policy directly
  4. Handles all claims made by the original insured

Explanation

Reinsurance is insurance for insurers, so the reinsurer's obligation runs to the ceding company rather than to the original insured. The original insured has no direct contractual claim against the reinsurer. The ceding insurer continues to handle and pay claims under its own policy.

Question 22Insurance Principles and Policy Fundamentals

After paying a total loss on a truck, the insurer takes title to the damaged vehicle and sells it for parts. This right is known as:

  1. Subrogation
  2. Salvage Correct answer.
  3. Abandonment
  4. Contribution

Explanation

Salvage is the insurer's right to take possession of damaged property after paying a total loss and to recover whatever value remains. Policies typically require the insured to protect salvage and allow the insurer to inspect it before disposal. Abandonment is the insured's attempt to hand over damaged property in exchange for a full payment.

Question 23Insurance Principles and Policy Fundamentals

A valued policy pays a stated amount for a total loss of the described property. Its main legal effect is to:

  1. Limit recovery to the depreciated value of the property
  2. Make the agreed value conclusive without further proof Correct answer.
  3. Reduce the policy limit by the amount of any deductible
  4. Require the insured to prove the property's value after a total loss

Explanation

In a valued policy the parties fix the property's value in advance, and that figure is conclusive in the event of a total loss, avoiding later disputes over value. Valued forms are common for fine art and are required in some states after a total fire loss. They differ from open policies, which require proof of the loss amount.

Question 24Insurance Principles and Policy Fundamentals

Insurers can predict losses more accurately as they insure a larger number of similar, independent exposure units because of:

  1. The doctrine of subrogation
  2. The principle of indemnity
  3. The law of large numbers Correct answer.
  4. The rule of contra proferentem

Explanation

The law of large numbers holds that actual experience approaches expected experience as the number of similar exposure units grows. This lets insurers forecast losses with greater confidence and set rates accordingly. The concept underlies pooling of risks and the statistical basis of ratemaking.

Question 25Insurance Principles and Policy Fundamentals

An occurrence-based liability policy is triggered by:

  1. The claim being filed during the policy period, whenever the injury happened
  2. Injury that occurs during the policy period Correct answer.
  3. Both the injury and the claim falling within the same policy period
  4. The policy expiring before the claim is filed

Explanation

Occurrence policies respond to injury or damage that takes place during the policy period, even if the claim is reported years later. A claims-made policy, by contrast, is triggered by the date the claim is made, subject to any retroactive date. Coverage under an occurrence form can therefore be available long after the policy expires.

Question 26Insurance Principles and Policy Fundamentals

Insurance is designed primarily to transfer which type of risk?

  1. Business risk, which arises from uncertainty about operating profit
  2. Pure risk, which involves only loss or no loss Correct answer.
  3. Investment risk, which reflects changes in the market value of assets
  4. Speculative risk, which involves the possibility of gain as well as loss

Explanation

Insurance transfers pure risk, which involves only the chance of loss or no loss. Speculative, investment, and business risks involve the possibility of gain and are generally not insurable because they can create a profit motive.

Question 27Insurance Principles and Policy Fundamentals

For property insurance, insurable interest generally must exist at which point?

  1. Only when the application is signed
  2. Only when the policy is delivered
  3. At the time of the loss Correct answer.
  4. Continuously from application through policy expiration

Explanation

Property insurance indemnifies the insured for an actual loss, so the insured must have an insurable interest when the loss occurs. Life insurance differs because insurable interest is required at inception.

Question 28Insurance Principles and Policy Fundamentals

The principle of indemnity means that a property insurance payment should:

  1. Provide a profit that allows the insured to upgrade the property
  2. Reimburse the insured for emotional distress caused by the loss
  3. Restore the insured to the pre-loss financial position
  4. Pay the full policy limit for every covered loss regardless of damage Correct answer.

Explanation

The principle of indemnity limits recovery to the actual financial loss so the insured is restored, not enriched. Paying more would create a profit motive and undermine the purpose of insurance.

Question 29Insurance Principles and Policy Fundamentals

A homeowner leaves a space heater running unattended because he believes his insurance will cover any resulting fire. This attitude is an example of:

  1. A morale hazard Correct answer.
  2. A physical hazard
  3. A speculative risk
  4. A moral hazard

Explanation

A morale hazard is carelessness or indifference toward loss because insurance is expected to pay. Moral hazard involves dishonesty or intentional conduct, and physical hazard is a tangible condition.

Question 30Insurance Principles and Policy Fundamentals

A one-year policy with a $1,200 premium is canceled by the insured after six months. Under pro rata cancellation, the insurer returns:

  1. $480
  2. $720
  3. $600 Correct answer.
  4. $1,200

Explanation

Pro rata cancellation returns the unearned premium in proportion to the unused policy period. Six months of a one-year term is unused, so half of $1,200, or $600, is returned.

Question 31Insurance Principles and Policy Fundamentals

A mortgagee clause in a property policy gives the lender the right to:

  1. Cancel the policy without notifying the insured
  2. Receive loss proceeds to the extent of its interest Correct answer.
  3. Increase the policy limit at any time without the insured's consent
  4. Take ownership of the damaged property after a total loss

Explanation

A mortgagee clause protects the lender's separate interest in the property. The mortgagee can receive loss proceeds up to its interest and is not defeated by certain acts of the insured.

Question 32Insurance Principles and Policy Fundamentals

In a liability policy, the aggregate limit is the maximum the insurer will pay for:

  1. All covered claims during the policy period Correct answer.
  2. Any single occurrence during the policy period
  3. Defense costs only, apart from indemnity payments
  4. All covered claims arising from one accident

Explanation

The aggregate limit caps the insurer's total liability for all covered claims during the policy period. Per-occurrence limits still apply to each individual occurrence.

Question 33Insurance Principles and Policy Fundamentals

Supplementary payments in a liability policy, such as defense costs, are generally:

  1. Subject to a separate sublimit lower than the occurrence limit
  2. Paid in addition to the policy limits Correct answer.
  3. Deducted from the policy's occurrence limit
  4. Payable only after the insured pays a deductible

Explanation

Supplementary payments are amounts the insurer pays in addition to the liability limits, such as defense costs and certain expenses. They do not reduce the occurrence or aggregate limits.

Question 34Insurance Principles and Policy Fundamentals

When the insurer and insured disagree only about the amount of a covered loss, the policy provision used to resolve the dispute is:

  1. Appraisal Correct answer.
  2. Subrogation
  3. Salvage
  4. Arbitration

Explanation

Appraisal is the policy mechanism for resolving a disagreement about the amount of loss when coverage itself is not disputed. Each side selects an appraiser, and an umpire resolves differences.

Question 35Insurance Principles and Policy Fundamentals

An insured sells a business and wants to transfer its commercial property policy to the buyer. The policy generally requires:

  1. The insurer's written consent to the assignment Correct answer.
  2. Approval by the state insurance department
  3. Automatic assignment if the buyer has an insurable interest
  4. Only written notice to the agent after the transfer

Explanation

Insurance policies are personal contracts, so assignment requires the insurer's written consent. The insurer must evaluate the new owner's risk before extending coverage.

Question 36Insurance Principles and Policy Fundamentals

After a covered fire, the insured uses staff and equipment to board up windows and move inventory to a dry location. These expenses are best addressed under the policy's:

  1. The mortgagee clause, which protects the lender
  2. The vacancy condition, which limits coverage for empty buildings
  3. The coinsurance clause, which adjusts for underinsurance
  4. The duties-after-loss provision Correct answer.

Explanation

The duties-after-loss condition requires the insured to take reasonable steps to protect covered property from further damage. Reasonable expenses incurred for that purpose are typically reimbursed under the policy.

Question 37Insurance Principles and Policy Fundamentals

A building insured for $400,000 has a 2% windstorm deductible. A covered windstorm causes $50,000 in damage. The insured's out-of-pocket deductible is:

  1. $8,000 Correct answer.
  2. $2,000
  3. $1,000
  4. $5,000

Explanation

A percentage deductible is calculated by applying the stated percentage to the building's insurance limit. Two percent of $400,000 is $8,000, and that amount is subtracted from the covered loss.

Question 38Insurance Principles and Policy Fundamentals

An insurer issues a policy with a liberalization clause. Six months later, without additional premium, the insurer adopts a broader coverage form for the same policy type in the same state. Under the clause:

  1. The broader coverage applies only at the next renewal
  2. The insurer may cancel the policy to avoid providing the broader coverage
  3. The insured must request an endorsement and pay additional premium
  4. The broader coverage applies automatically to the existing policy Correct answer.

Explanation

A liberalization clause automatically extends broader coverage the insurer later adopts in its forms for the same policy type in the same state. The insured does not need to request an endorsement or pay extra during the policy period.

Question 39Insurance Principles and Policy Fundamentals

A painting contractor is hired to paint a client's house. The contractor's commercial general liability policy contains a care, custody, or control exclusion. The exclusion most likely bars coverage for:

  1. Bodily injury to the contractor's employee
  2. Bodily injury to the homeowner's guest who slips on paint
  3. Damage to a neighbor's car caused by overspray
  4. Damage to the house the contractor is painting Correct answer.

Explanation

The care, custody, or control exclusion bars coverage for property damage to property in the insured's care or on which the insured is working. It does not exclude bodily injury to persons or damage to unrelated property.

Question 40Insurance Principles and Policy Fundamentals

A policy contains a broad insuring agreement and a specific exclusion that clearly applies to the loss. In construing the policy, the specific exclusion will:

  1. Apply only if the insurer proves the insured intended the loss
  2. Control over the general insuring agreement Correct answer.
  3. Be interpreted in favor of the insured as an ambiguity
  4. Be ignored because the insuring agreement is broader

Explanation

When a specific provision and a general provision conflict, the specific provision controls. A clear exclusion therefore narrows the broad insuring agreement rather than being ignored.

Question 41Claims Investigation and Fact Gathering

During the first notice of loss call, which practice best preserves the accuracy of the information gathered?

  1. Recording the caller's own words as the call proceeds Correct answer.
  2. Summarizing the loss only with standardized cause-of-loss codes
  3. Waiting until the site inspection to commit any details to the file
  4. Asking the caller to send a written narrative within thirty days

Explanation

First notice of loss is the earliest and often most reliable record of what happened, so capturing the caller's account as it is given limits later distortion. Codes and follow-up narratives are useful supplements, but they lose the immediacy of the initial report.

Question 42Claims Investigation and Fact Gathering

In a property claim, the primary function of a sworn proof of loss is to:

  1. Release the insurer from any further obligation to investigate
  2. Set out the insured's sworn statement of the amount claimed Correct answer.
  3. Transfer ownership of the damaged property to the insurer
  4. Serve as a substitute for a recorded statement in every state

Explanation

A proof of loss is the insured's signed, usually notarized declaration of the amount, date, and circumstances of the claim. Insurers use it to fix the claim position while retaining the right to keep investigating.

Question 43Claims Investigation and Fact Gathering

Which question is most appropriate for opening a recorded statement of an insured?

  1. You understood this loss was excluded, correct?
  2. You were speeding when the collision happened that morning, weren't you?
  3. Did the other driver admit fault to you at the scene?
  4. Please describe in your own words what happened that morning. Correct answer.

Explanation

Open-ended prompts invite an uninterrupted account in the witness's own words, revealing what the witness actually recalls before it is shaped by the interviewer. Leading and fault-focused questions are reserved for later, if they are asked at all.

Question 44Claims Investigation and Fact Gathering

When documenting a water-damaged kitchen, the adjuster should begin by:

  1. Switch off the room lights to reduce glare
  2. Mop the standing water to expose the flooring
  3. Photograph conditions as found before anything is moved Correct answer.
  4. Move the wet contents outside so the lighting is better

Explanation

Scene documentation should capture loss conditions in their original state, since the position of contents and standing water can reveal the source and path of the damage. Altering the scene first destroys that evidence permanently.

Question 45Claims Investigation and Fact Gathering

How should an adjuster treat a police traffic crash report?

  1. As a replacement for the adjuster's own scene investigation
  2. As a public record that corroborates facts but does not fix fault Correct answer.
  3. As an expert opinion establishing the cause of the collision
  4. As a binding determination of civil liability between the drivers

Explanation

A crash report is an official record of what an officer observed and was told, and it is useful for corroboration. Officers do not decide civil liability, and their conclusions do not bind an insurer's coverage analysis.

Question 46Claims Investigation and Fact Gathering

Why is neighborhood canvassing valuable after a residential fire?

  1. Neighbors can authorize release of the insured's records
  2. It satisfies the policy condition requiring a proof of loss
  3. Independent observers may recall facts the insured omitted Correct answer.
  4. It automatically transfers subrogation rights to the insurer

Explanation

Neighbors and passersby have no stake in the claim and can describe what they saw or heard before, during, and after the fire. Their accounts may confirm, contradict, or add to the insured's version of events.

Question 47Claims Investigation and Fact Gathering

Before an adjuster requests a claimant's medical records from a treating provider, the adjuster generally must obtain:

  1. A signed authorization from the claimant Correct answer.
  2. Approval from the insurer's medical director
  3. A subpoena issued by a court of record
  4. The police report number for the incident

Explanation

Medical information is protected, and providers will not release records without the patient's written authorization or a legal order. A valid authorization identifies the provider, the records covered, the recipient, and an expiration.

Question 48Claims Investigation and Fact Gathering

Chain-of-custody records for physical evidence are used to:

  1. Establish the insured's liability for the loss
  2. Satisfy the policy's appraisal provision
  3. Show each transfer of the item after collection Correct answer.
  4. Replace the need for an expert's written report

Explanation

Chain of custody is a chronological log showing who held the evidence, when, and under what conditions. Gaps in the log can make the item inadmissible or diminish the weight it is given.

Question 49Claims Investigation and Fact Gathering

An examination under oath differs from a routine recorded statement mainly because it is:

  1. Limited to questions about the insured's personal background
  2. A formal sworn proceeding transcribed by a court reporter Correct answer.
  3. A voluntary conversation the insured may end at any time
  4. Permitted only after suit has been filed against the insured

Explanation

An EUO is compelled by the cooperation and examination provisions of the policy, given under oath, and recorded by a court reporter. Its formality reflects that the transcript may later be used in coverage litigation.

Question 50Claims Investigation and Fact Gathering

Which circumstance most warrants further scrutiny of a theft claim?

  1. The insured supplied receipts for items bought years earlier
  2. The loss occurred shortly after the policy limits were increased Correct answer.
  3. The insured asked for a copy of the police report
  4. The insured called police before notifying the insurer

Explanation

A sharp increase in coverage immediately before a loss is a recognized red flag because it can show a motive to profit. It is not proof of fraud, but it justifies closer verification of the claim.