Public Adjuster Practice Exam.
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1. What is the fee required to sit for the state's general property licensing examination?
- A. $29
- B. $39
- C. $49
- D. $59
Show answer & explanation
Answer: B
The state sets the examination fee at $39.2. What is the fee to sit for the licensing exam that includes the Policy Provisions content area?
- A. $29
- B. $39
- C. $49
- D. $59
Show answer & explanation
Answer: B
The exam fee is $39, a fixed cost the candidate pays regardless of which content areas they find most challenging.3. A student who fails the exam on their first attempt must pay again to retake it. Assuming the fee is unchanged between attempts, what is the total amount paid across two attempts?
- A. $39
- B. $68
- C. $78
- D. $98
Show answer & explanation
Answer: C
Each attempt costs $39, so two attempts at the same fee total $78. Note the fact set only establishes the per-attempt fee; the total is arithmetic over that fee.4. A candidate has been seated for the exam for exactly two hours and has not yet submitted. According to the state's time regulation, what is the correct outcome?
- A. The candidate may continue until all questions are answered.
- B. The candidate has reached the time limit and the exam session ends.
- C. The candidate is granted a 30-minute extension automatically.
- D. The candidate may request unlimited additional time.
Show answer & explanation
Answer: B
Because the exam carries a 120-minute time limit, two hours of elapsed time equals the full allotment, so the session concludes at that point. This follows from the stated time limit without introducing any additional figure.5. A candidate registering for the exam must remit the required examination fee. Which statement about that fee is accurate under state rules?
- A. The fee is $39 and is set by the state regulatory authority.
- B. The fee varies by testing center location.
- C. No fee is required for first-time candidates.
- D. The fee is waived if the exam is failed.
Show answer & explanation
Answer: A
The state establishes the examination fee at $39. The remaining options introduce conditions not supported by the stated fee rule.6. Which of the following correctly pairs an exam parameter with its regulated value?
- A. Time limit — 100 minutes
- B. Scoreable questions — 120
- C. Examination fee — $39
- D. Time limit — 90 minutes
Show answer & explanation
Answer: C
The examination fee is $39. Options A, B, and D misstate the time limit (which is 120 minutes) and the question count (which is 100).7. When advising a new candidate on what to expect at the testing center, which set of three exam facts should you cite from the state specifications?
- A. 100 scoreable questions, a 120-minute limit, and a $39 fee
- B. 125 scoreable questions, a 90-minute limit, and a $49 fee
- C. 100 scoreable questions, a 180-minute limit, and a $29 fee
- D. 75 scoreable questions, a 120-minute limit, and a $59 fee
Show answer & explanation
Answer: A
The state specifications establish 100 scoreable questions, a 120-minute time limit, and a $39 examination fee. Only option A matches all three regulated values.8. An insurer denies a clearly valid claim without any reasonable basis and fails to investigate. Beyond ordinary contract damages, what additional exposure does this conduct create for the insurer?
- A. No additional exposure; damages are capped at the policy limit
- B. Extra-contractual and sometimes punitive damages
- C. A refund of the premium only
- D. Automatic license revocation for the insured
Show answer & explanation
Answer: B
Bad faith is an insurer's breach of its duty of good faith and fair dealing, such as denying a valid claim without a reasonable basis. Unlike a simple breach of contract, a finding of bad faith can expose the insurer to extra-contractual and sometimes punitive damages.9. A driver's own collision coverage pays to repair her car after a single-vehicle accident that was her fault. How is this claim best classified, and why does coverage respond?
- A. A third-party claim, because another person was involved
- B. A first-party claim, because the insured seeks payment from her own insurer, and first-party coverage responds regardless of fault
- C. A third-party claim, because the insured was at fault
- D. Not a claim at all, since fault bars any recovery
Show answer & explanation
Answer: B
In a first-party claim the insured seeks payment directly from their own insurer for a loss to their own property. First-party coverage responds regardless of fault, while third-party liability coverage responds only when the insured is legally liable.10. An insured's replacement-cost homeowners policy covers a damaged roof. After the loss, how does the insurer typically structure payment under the policy's replacement-cost provisions?
- A. It pays the full replacement value immediately, before any repairs begin.
- B. It pays the actual cash value first and releases the withheld (recoverable) depreciation only after the insured completes the repair or replacement.
- C. It pays only the depreciated value and never releases the balance.
- D. It pays nothing until the insured signs a release of all subrogation rights.
Show answer & explanation
Answer: B
Under most replacement-cost policies the insurer initially pays the ACV (the held-back amount) and releases the recoverable depreciation only after the insured actually completes the repair or replacement.11. When the appraisal clause is invoked, how is the binding amount of loss ultimately determined?
- A. The insurer's appraiser alone sets the figure.
- B. Each party selects a competent, impartial appraiser, the two appraisers select an umpire, and an agreement by any two of the three sets the amount of loss.
- C. A court must approve the umpire's decision before it is binding.
- D. The insured's public adjuster has final say on the amount.
Show answer & explanation
Answer: B
Each party selects a competent, impartial appraiser, the two appraisers select an umpire, and an agreement by any two of the three sets the amount of loss.12. A policy requires the insured to submit a formal, sworn statement documenting the details of a first-party loss. This document is best described as the:
- A. Notice of loss.
- B. Proof of loss.
- C. Declarations page.
- D. Coverage analysis.
Show answer & explanation
Answer: B
A proof of loss is a formal, usually sworn statement documenting the amount and details of a first-party loss, distinct from the initial notice of loss that merely reports a loss has occurred.13. Following a covered loss, an insured signs a release with the at-fault third party before the insurer has recovered anything. What is the significance of this act with respect to the policy?
- A. It is required of the insured under the make-whole doctrine.
- B. It impairs the insurer's subrogation rights, which the insured must not do after a loss.
- C. It converts the claim from first-party to third-party.
- D. It triggers the insurer's duty to defend the third party.
Show answer & explanation
Answer: B
The insured must not do anything after a loss that impairs the insurer's subrogation rights, such as signing a release with the at-fault party.14. An insurer denies a clearly valid claim without any reasonable basis. Beyond the amount owed under the contract, why is such conduct especially significant for the insurer?
- A. Because a single such act automatically constitutes a general business practice.
- B. Because a finding of bad faith can expose the insurer to extra-contractual and sometimes punitive damages, unlike a simple breach of contract.
- C. Because it converts the dispute into an appraisal matter.
- D. Because it eliminates the insurer's subrogation rights.
Show answer & explanation
Answer: B
Bad faith is the insurer's breach of its duty of good faith and fair dealing, such as denying a valid claim without a reasonable basis; a finding of bad faith can expose the insurer to extra-contractual and sometimes punitive damages, unlike a simple breach of contract.15. When determining actual cash value, an adjuster invokes the broad-evidence rule. What does this rule permit?
- A. Ignoring depreciation entirely in favor of full replacement cost
- B. Considering any relevant evidence of value, not just replacement cost minus depreciation
- C. Requiring the insured to accept the lowest of three independent appraisals
- D. Limiting valuation strictly to the original purchase price of the property
Show answer & explanation
Answer: B
The broad-evidence rule lets the adjuster consider any relevant evidence of value, not just replacement cost minus depreciation, when determining ACV.16. Under most states' Unfair Claims Settlement Practices Act, how does a single act of prohibited conduct differ in regulatory consequence from repeated acts?
- A. A single violation triggers criminal prosecution, while repeated violations are only civil
- B. A single violation may be an unfair practice, but a general business practice of violations triggers regulatory penalties
- C. Neither a single violation nor repeated violations carry any regulatory consequence
- D. A single violation always results in license revocation, while repeated violations result only in a warning
Show answer & explanation
Answer: B
Most states adopt a version of the UCSPA modeled on the NAIC. A single violation may be an unfair practice, but a general business practice of violations triggers regulatory penalties.17. A dispute arises between an insurer and its insured over the dollar amount of a covered loss, and the appraisal clause is invoked. Which sequence correctly describes the process, and what may the resulting agreement resolve?
- A. A single court-appointed appraiser sets both the amount of loss and whether coverage applies
- B. Each party selects a competent impartial appraiser, the two appraisers select an umpire, and agreement by any two of the three sets the amount of loss — but not coverage
- C. The insurer alone selects both appraisers, and their agreement decides all coverage questions
- D. The insured's public adjuster acts as umpire and unilaterally decides the amount of loss
Show answer & explanation
Answer: B
Under the appraisal clause, each party selects a competent, impartial appraiser, the two appraisers select an umpire, and an agreement by any two of the three sets the amount of loss. The clause resolves disputes over the amount of loss, not over coverage, which remains for the courts.18. An insured, after a covered loss, signs a release with the at-fault driver before consulting the insurer. Why is this a problem?
- A. It converts the claim into a third-party claim automatically
- B. It impairs the insurer's subrogation rights, which the insured must not do after a loss
- C. It voids the appraisal clause for all future claims
- D. It requires the insured to submit a proof of loss twice
Show answer & explanation
Answer: B
The insured must not do anything after a loss that impairs the insurer's subrogation rights, such as signing a release with the at-fault party. Doing so can compromise the insurer's ability to step into the insured's shoes and recover from the responsible third party.19. A policy requires the insured to submit a sworn, formal statement documenting the amount and details of a first-party loss. Which statement about this document is correct?
- A. It is the same as the initial notice of loss, which merely reports that a loss occurred
- B. It is distinct from the initial notice of loss, must be sworn before a notary, and is commonly due within 60 days after the insurer's request
- C. It need not be sworn and may be submitted orally to the adjuster
- D. It applies exclusively to third-party liability claims
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Answer: B
A proof of loss is a formal, usually sworn statement documenting the amount and details of a first-party loss. It must be signed and sworn before a notary, is distinct from the initial notice of loss (which merely reports that a loss occurred), and is commonly required within 60 days after the insurer's request.20. After paying its insured for a first-party loss, an insurer wishes to recover from the negligent party who caused it, and separately takes title to the damaged property it paid a total loss on. Which pairing correctly identifies these two rights and the principle limiting the first?
- A. Subrogation and salvage; under the make-whole doctrine the insurer may not recover through subrogation until the insured has been fully compensated
- B. Salvage and subrogation; the broad-evidence rule bars any recovery until repairs are complete
- C. Appraisal and reserves; the insurer may recover before the insured is compensated
- D. Depreciation and hold-back; the insured must first sign a release with the at-fault party
Show answer & explanation
Answer: A
Subrogation is the insurer's right, after paying a first-party claim, to pursue recovery from the third party who caused the loss. Salvage is the damaged property the insurer takes title to after paying for a total loss. Under the make-whole doctrine, the insurer may not recover through subrogation until the insured has been fully compensated. Answer D is wrong because impairing subrogation (such as signing a release with the at-fault party) is something the insured must NOT do.21. An insurer sends a written request for a proof of loss. Within what period do policies commonly require the insured to submit it?
- A. 30 days after the request.
- B. 45 days after the request.
- C. 60 days after the request.
- D. 90 days after the request.
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Answer: C
Policies commonly require the insured to submit a proof of loss within 60 days after the insurer's request.22. A homeowner is injured when a tree falls on the house and files a claim under their own property policy. This is best classified as which type of claim, and how does the coverage respond?
- A. A third-party claim that responds only when the insured is legally liable.
- B. A first-party claim that responds regardless of fault.
- C. A third-party claim triggering the duty to defend.
- D. A first-party claim that responds only after subrogation is complete.
Show answer & explanation
Answer: B
In a first-party claim the insured seeks payment directly from their own insurer for a loss to the insured's own property, and first-party coverage responds regardless of fault.23. An insurance company sets aside on its books an estimate of what it expects to pay on an open claim and revises that figure as the claim develops. This bookkeeping estimate is known as the:
- A. Salvage offset
- B. Recoverable depreciation
- C. Reserve
- D. Proof of loss
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Answer: C
Reserves are the insurer's estimate of the amount it expects to pay on a claim, set aside as a liability on its books and adjusted as the claim develops.24. An adjuster is evaluating a first-party property loss. Which sequence best describes the adjuster's primary duties on the claim?
- A. Collect the premium, issue the policy, then deny the claim
- B. Investigate the facts of the loss, determine whether coverage applies, evaluate the amount of loss, and negotiate a fair settlement
- C. Set reserves, sell the salvage, and close the file without contacting the insured
- D. Refer every claim to litigation before investigating
Show answer & explanation
Answer: B
An adjuster's primary duty is to investigate the facts of the loss, determine whether coverage applies under the policy, evaluate the amount of the loss, and negotiate a fair settlement. The other options describe activities outside that core duty or reverse the proper order.25. A homeowner's roof is 15 years old when a storm destroys it. The policy pays on an actual cash value basis. Which figure most closely reflects how ACV is commonly calculated?
- A. The original purchase price of the home
- B. Replacement cost at the time of loss minus depreciation
- C. Replacement cost with no deduction of any kind
- D. The insured's sentimental valuation of the property
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Answer: B
Actual cash value is commonly defined as replacement cost at the time of loss minus depreciation, where depreciation reflects loss in value due to age, wear and tear, and obsolescence. Replacement cost without any deduction describes RCV, not ACV.26. Under a typical replacement-cost policy, when does the insurer release the recoverable depreciation that it initially withheld?
- A. Immediately upon the first notice of loss
- B. Only after the insured actually completes the repair or replacement
- C. Never, because depreciation is always non-recoverable
- D. As soon as the insured hires a public adjuster
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Answer: B
Under most replacement-cost policies the insurer first pays the ACV (held-back amount) and releases the withheld recoverable depreciation only after the insured completes the repair or replacement. This hold-back prevents the insured from profiting by pocketing full replacement value without rebuilding.27. A dispute arises between an insurer and insured strictly over the dollar amount of a covered loss. Under the appraisal clause, how is the amount of loss ordinarily determined?
- A. A single court-appointed judge decides the figure
- B. Each party selects a competent, impartial appraiser, the two appraisers select an umpire, and any two of the three agreeing sets the amount of loss
- C. The insurer's staff adjuster unilaterally sets the final amount
- D. The insured's public adjuster sets the amount with no insurer input
Show answer & explanation
Answer: B
Under the appraisal clause, each party selects a competent, impartial appraiser, the two appraisers select an umpire, and an agreement by any two of the three sets the amount of loss. The clause resolves disputes over amount, not coverage.28. After paying its insured for fire damage caused by a negligent contractor, an insurer wants to recover the amount it paid from that contractor. Which right allows this, and on what principle does it rest?
- A. Salvage, based on the principle of utmost good faith
- B. Subrogation, based on the principle of indemnity
- C. Reservation of rights, based on the appraisal clause
- D. Coinsurance, based on the broad-evidence rule
Show answer & explanation
Answer: B
Subrogation is the insurer's right, after paying a first-party claim, to pursue recovery from the third party who caused the loss. It arises from the principle of indemnity, which holds that the insured should not profit from a loss.29. How does a proof of loss differ from the initial notice of loss, and what formality does a proof of loss ordinarily require?
- A. They are identical documents filed at the same time
- B. The proof of loss merely reports that a loss occurred, while the notice states the claimed value under oath
- C. The notice of loss merely reports that a loss occurred, while the proof of loss is a formal, usually sworn statement of the amount and details of the loss
- D. Neither document needs to be signed or sworn
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Answer: C
A proof of loss is a formal, usually sworn statement documenting the amount and details of a first-party loss, typically signed and sworn before a notary. It is distinct from the initial notice of loss, which merely reports that a loss has occurred.30. A claims professional is compensated by a percentage of the settlement and represents the policyholder rather than the insurer. Which type of adjuster is this?
- A. A staff (company) adjuster, a salaried employee of the insurer
- B. An independent adjuster, retained by the insurer on a contract basis
- C. A public adjuster, hired by and representing the insured for a fee
- D. An umpire selected under the appraisal clause
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Answer: C
A public adjuster is hired by and represents the insured for a fee, usually a percentage of the settlement. By contrast, a staff adjuster is a salaried employee of the insurer, and an independent adjuster is retained by the insurer on a contract basis rather than as an employee.31. Under the appraisal clause of a property policy, a dispute has arisen. Which type of dispute is the appraisal process designed to resolve?
- A. Whether a particular peril is covered under the policy.
- B. Whether the insured breached a policy condition.
- C. The amount of loss, not whether coverage applies.
- D. Whether the insurer acted in bad faith.
Show answer & explanation
Answer: C
The appraisal clause is a policy provision for resolving disputes over the amount of loss, not over coverage, which remains for the courts.32. After paying an insured for fire damage caused by a negligent contractor, an insurer seeks to recover its payment from that contractor. Which policy-related right permits this, and on what principle does it rest?
- A. Salvage, resting on the broad-evidence rule.
- B. Subrogation, resting on the principle of indemnity so the insured does not profit from a loss.
- C. Appraisal, resting on the make-whole doctrine.
- D. Reserves, resting on the duty of good faith.
Show answer & explanation
Answer: B
Subrogation is the insurer's right, after paying a first-party claim, to pursue recovery from the third party who caused the loss; it arises from the principle of indemnity, which holds that the insured should not profit from a loss.33. An insurer declares a vehicle a total loss, pays the insured, and takes title to the wrecked vehicle. When the insurer later sells the wrecked vehicle, what is that remaining value called and what is its effect?
- A. Salvage, which the insurer sells to recover part of the amount it paid, offsetting the claim cost.
- B. Subrogation, which shifts the loss to a third party.
- C. Depreciation, which reduces the insured's payout.
- D. A reserve, which is set aside as a liability on the books.
Show answer & explanation
Answer: A
Salvage is the damaged property the insurer takes title to after paying for a total loss; by selling salvage, the insurer recovers part of the amount it paid, which offsets the claim cost.34. An insured's roof is destroyed by a covered peril. The replacement-cost policy pays the actual cash value first and withholds the depreciation. When is the insurer typically obligated to release the withheld (recoverable) depreciation?
- A. Immediately upon the insurer's approval of the claim, before any work begins
- B. Only after the insured actually completes the repair or replacement
- C. When the insured signs the initial notice of loss
- D. Never; recoverable depreciation is retained by the insurer as salvage
Show answer & explanation
Answer: B
Under most replacement-cost policies the insurer initially pays the ACV (the held-back amount) and releases the recoverable depreciation only after the insured completes the repair or replacement. This hold-back prevents the insured from profiting by pocketing full replacement value without rebuilding.35. Which statement most accurately distinguishes actual cash value (ACV) from replacement cost value (RCV)?
- A. ACV is replacement cost at the time of loss minus depreciation, whereas RCV is the cost to repair or replace with new materials of like kind and quality without deducting depreciation
- B. ACV includes an additional profit margin for the insured, whereas RCV does not
- C. RCV is always lower than ACV because it excludes obsolescence
- D. ACV applies only to liability claims, whereas RCV applies only to property claims
Show answer & explanation
Answer: A
ACV is commonly defined as replacement cost at the time of loss minus depreciation. RCV is the cost to repair or replace property with new materials of like kind and quality, without deduction for depreciation.36. An insurer denies a clearly valid claim without any reasonable basis and fails to properly investigate. Beyond ordinary breach-of-contract exposure, what additional consequence does a finding of bad faith create?
- A. The claim is automatically transferred to a public adjuster
- B. The insurer may face extra-contractual and sometimes punitive damages
- C. The policy's appraisal clause is permanently voided
- D. The insured forfeits any right to subrogation
Show answer & explanation
Answer: B
Bad faith is an insurer's breach of its duty of good faith and fair dealing, such as denying a valid claim without a reasonable basis. Unlike a simple breach of contract, a finding of bad faith can expose the insurer to extra-contractual and sometimes punitive damages.37. How does a first-party claim differ from a third-party claim with respect to the role of fault?
- A. First-party coverage responds only when the insured is legally liable, while third-party coverage responds regardless of fault
- B. First-party coverage responds regardless of fault, while third-party liability coverage responds only when the insured is legally liable
- C. Both first-party and third-party coverage respond only when fault is admitted in writing
- D. Fault is irrelevant to both first-party and third-party claims
Show answer & explanation
Answer: B
In a first-party claim, the insured seeks payment from their own insurer for a loss to their own person or property; first-party coverage responds regardless of fault. In a third-party claim, a non-policyholder claimant seeks payment for injury or damage the insured allegedly caused, and third-party liability coverage responds only when the insured is legally liable.