Claims Adjusting Principles and Practices: Coverage, Investigation, and Valuation
This domain tests the working method of an adjuster: deciding whether a loss is covered, proving the facts, valuing the loss under the policy's terms, and closing the file with defensible documentation. Most exam questions here are disguised versions of three questions.
The three questions of every claim
- Is there coverage? Insurable interest, policy in force on the date of loss, loss within the policy territory, a covered peril, no applicable exclusion, and compliance with conditions (notice, proof of loss, cooperation, appraisal if invoked).
- What is owed? Apply the valuation clause, deductible, any coinsurance or margin clause, policy limits, other-insurance provisions, and salvage or subrogation recoveries.
- Who gets paid? Confirm mortgagee or loss-payee rights on property claims, and resolve liens and title on auto total losses before issuing a draft.
Investigation and file discipline
Use recorded statements, scene and damage photographs, ISO claim searches, cause-and-origin analysis on fire losses, examinations under oath where the policy allows, and a reservation-of-rights letter whenever a coverage question exists while the investigation continues. Document every contact; a defensible file shows what you knew and when.
Worked example
An HO-3 kitchen fire: $60,000 replacement cost, $45,000 actual cash value, $2,000 deductible, replacement cost settlement. The initial payment is ACV minus deductible: $45,000 − $2,000 = $43,000. The $15,000 depreciation holdback is released only after the insured actually repairs or replaces, and only up to the amount spent. Paying $58,000 up front overpays and destroys the insurer's leverage.
Traps that cost marks
Paying replacement cost before repairs are complete; forgetting the mortgagee clause on a dwelling draft; treating the reserve as the payment; assuming a signed proof of loss proves coverage; and ignoring comparative fault allocation on liability claims.