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KENTUCKY INDEPENDENT ADJUSTER LICENSE (ALL LINES) EXAM QUESTIONS AND CORRECT ANSWERS (VER, Exams of Insurance law

KENTUCKY INDEPENDENT ADJUSTER LICENSE (ALL LINES) EXAM QUESTIONS AND CORRECT ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2025

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2024/2025

Available from 07/01/2025

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KENTUCKY INDEPENDENT ADJUSTER LICENSE (ALL
LINES) EXAM QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2025
1. What is the primary purpose of an insurance adjuster?
A. Sell insurance policies
B. Investigate and settle insurance claims
C. Provide legal advice
D. Underwrite insurance policies
An adjuster’s main role is to evaluate insurance claims and ensure
settlements are fair and within policy limits.
2. Which of the following best defines an “all lines” adjuster in Kentucky?
A. An adjuster who works only with auto claims
B. An adjuster licensed to handle property, casualty, auto, and workers' comp
claims
C. An adjuster that sells multiple types of insurance
D. A claims processor at a call center
The “all lines” designation means the adjuster can handle multiple claim
types including property and casualty.
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KENTUCKY INDEPENDENT ADJUSTER LICENSE (ALL

LINES) EXAM QUESTIONS AND CORRECT ANSWERS (VERIFIED

ANSWERS) PLUS RATIONALES 2025

  1. What is the primary purpose of an insurance adjuster? A. Sell insurance policies B. Investigate and settle insurance claims C. Provide legal advice D. Underwrite insurance policies

An adjuster’s main role is to evaluate insurance claims and ensure

settlements are fair and within policy limits.

  1. Which of the following best defines an “all lines” adjuster in Kentucky? A. An adjuster who works only with auto claims B. An adjuster licensed to handle property, casualty, auto, and workers' comp claims C. An adjuster that sells multiple types of insurance D. A claims processor at a call center

The “all lines” designation means the adjuster can handle multiple claim

types including property and casualty.

  1. When must a Kentucky licensed adjuster notify the Department of Insurance of a change in address? A. Within 90 days B. At time of license renewal C. Within 30 days D. There is no requirement

Adjusters must notify the Department within 30 days of any address or

contact information change.

  1. What type of bond must a Kentucky independent adjuster have? A. Fidelity bond B. Surety bond C. $1,000 surety bond D. $10,000 performance bond

Kentucky requires a $1,000 surety bond to protect the public against

misconduct.

  1. Which of the following is NOT a duty of an independent adjuster? A. Investigate claims B. Negotiate settlements C. Represent the insured in court D. Provide legal representation

Adjusters cannot practice law or represent clients in court; their role is

investigative and administrative.

  1. What does the term “insurable interest” mean?

C. Kentucky Department of Insurance (DOI) D. National Insurance Bureau

The Kentucky Department of Insurance oversees the licensing and

conduct of insurance professionals.

10.What is considered an unfair claims settlement practice? A. Investigating a claim within 10 days B. Paying a claim within policy limits C. Failing to promptly investigate a claim D. Issuing a reservation of rights letter

Delays in investigating or paying claims without reason can be deemed

unfair practices.

11.What is actual cash value (ACV)? A. The amount it costs to replace an item B. Replacement cost minus depreciation C. Market value D. Agreed value

ACV is the item's value after depreciation has been subtracted from its

replacement cost.

12.Which term refers to the maximum amount an insurer will pay under a policy? A. Deductible B. Policy limit

C. Subrogation limit D. Underwriting amount

The policy limit defines the upper boundary of coverage under an

insurance contract.

13.What is a deductible? A. The amount the insurer pays first B. The co-payment by the insurer C. The amount the insured must pay before coverage begins D. The premium

Deductibles reduce the insurer's liability by having the insured pay a

portion of the loss.

14.In property insurance, what does replacement cost refer to? A. The original purchase price B. The amount owed on a mortgage C. The cost to replace property without deduction for depreciation D. The depreciated value

Replacement cost is the expense of replacing damaged property with

new of like kind and quality.

15.Which of the following must an adjuster do first after being assigned a claim? A. Contact the insured and schedule an inspection B. Issue payment C. Deny the claim

19.A claim is fraudulent if: A. The loss was preventable B. The loss was intentionally fabricated or exaggerated C. The insured had a prior claim D. The adjuster made a mistake

Fraud involves deception or misrepresentation to gain insurance

benefits.

20.What type of insurance policy covers businesses for loss of income after a covered event? A. General liability B. Commercial auto C. Business interruption insurance D. Inland marine

Business interruption covers lost income and ongoing expenses after a

covered disruption.

21.What is a liability insurance policy designed to cover? A. Damage to your own property B. Fire loss C. Legal obligations to third parties D. Equipment breakdown

Liability policies cover damages the insured is legally required to pay

others for injury or property damage.

22.What is an endorsement? A. A written change to an insurance policy B. A denial letter C. A receipt of premium D. A claims estimate

Endorsements modify the terms or coverage of the original policy, either

adding or excluding coverage.

23.What type of loss occurs when property is stolen or damaged unexpectedly? A. Moral hazard B. Direct loss C. Accidental loss D. Indirect loss

Accidental losses are those that are sudden, unforeseen, and

unintended.

24.Which of the following best defines "negligence"? A. Intentional act causing harm B. Failure to use reasonable care C. Vandalism D. A criminal act

Negligence is the failure to act with the care that a reasonably prudent

person would under similar circumstances.

25.The term "proximate cause" refers to:

A. A fire damages inventory B. Business income lost due to a fire C. Hail damage to a car D. Wind damage to a roof

Indirect losses are the secondary consequences of a covered direct loss,

like lost income.

29.What does the appraisal clause in a property policy address? A. Subrogation rights B. Disputes about the value of a loss C. Premium changes D. Liability determinations

The appraisal clause helps resolve disagreements between the insured

and insurer on the amount of a loss.

30.What is an adjuster required to do if they suspect insurance fraud? A. Do nothing B. Pay the claim C. Report it to the Department of Insurance or insurer’s fraud unit D. Notify the police directly

Adjusters must report suspected fraud to the appropriate authority or

internal fraud unit.

31.What is an aleatory contract?

A. One where terms are non-binding B. One in which the exchange of value is unequal C. A short-term agreement D. A conditional refund agreement

In insurance, contracts are aleatory because the insured may pay

premiums for years without filing a claim, or receive large payments

after one.

32.What does "insuring agreement" describe in a policy? A. Exclusions B. What is covered and under what conditions C. Deductibles D. Endorsements

The insuring agreement outlines the coverage provided and the

circumstances under which benefits are paid.

33.Which part of a policy describes what is not covered? A. Declarations B. Conditions C. Exclusions D. Endorsements

Exclusions clarify which losses, perils, or property are not covered by the

policy.

34.What is the purpose of the declarations page in a policy?

A. A claim between two insurers B. A claim submitted by an agent C. A liability claim filed by someone other than the insured D. A duplicate claim

A third-party claim arises when someone other than the insured files

against the policyholder’s liability coverage.

38.When must continuing education (CE) be completed in Kentucky for adjusters? A. Every 3 years B. Only for public adjusters C. Every 2 years before license renewal D. No CE is required

Independent adjusters in Kentucky must complete CE requirements

every 2 years to maintain their license.

39.What does the term “binder” refer to? A. A policy denial B. A loss report C. Temporary evidence of insurance coverage D. A claims form

Binders provide temporary insurance coverage until the actual policy is

issued.

40.Which of the following is a type of compensatory damage?

A. Special damages B. Punitive damages C. Criminal penalties D. Insurance premiums

Special damages are measurable losses like medical bills or lost wages.

They compensate the claimant.

41.What is the purpose of a non-waiver agreement? A. To preserve insurer rights during a claim investigation B. To deny coverage C. To release the insured from liability D. To increase the deductible

It protects the insurer's rights while it investigates coverage issues.

42.What is the Kentucky Insurance Code? A. A set of claim forms B. An underwriting manual C. A body of laws that governs insurance practices in the state D. A list of insurance companies

This legal framework outlines the rules and regulations for insurers and

adjusters operating in Kentucky.

43.Which of the following is a duty of the insured after a loss? A. Ignore the adjuster’s call B. Rebuild immediately

Comparative negligence assigns fault percentages and adjusts

compensation accordingly.

47.What type of coverage would pay for a customer’s injury on business premises? A. Property coverage B. General liability coverage C. Workers’ compensation D. Auto coverage

General liability policies protect businesses from legal claims for bodily

injury or property damage to others.

48.Under Kentucky law, how long must an insurer retain claim records? A. 3 years B. 7 years C. 5 years D. 1 year

The law requires insurers to retain claim records for at least 5 years.

49.What type of adjuster represents the policyholder? A. Independent adjuster B. Staff adjuster C. Public adjuster D. Company adjuster

Public adjusters are hired by and represent the interests of the insured,

not the insurer.

50.What is the penalty for adjusting without a license in Kentucky? A. No penalty B. Fines and possible criminal charges C. Temporary suspension D. CE requirements waived

Adjusting without a license is illegal and punishable by fines or criminal

prosecution.

51.What is required before an insurer can deny a claim? A. Verbal notification B. Written explanation of denial with policy reference C. Supervisor's approval D. A call to the agent

Insurers must provide a written reason for denial, citing the relevant

policy provisions.

52.Which of the following is not a type of adjuster? A. Staff B. Independent C. Public D. Agent

Agents sell policies; they are not licensed to adjust claims.

53.What is a “first-party claim”?

C. An unlicensed insurer D. An insurer from another country

A foreign insurer is based in another state but licensed to operate in

Kentucky.

57.The "doctrine of adhesion" refers to: A. Shared fault B. Optional terms C. Policy language is interpreted in favor of the insured D. Voluntary agreements

Because the insurer writes the policy, any ambiguity is interpreted in

favor of the policyholder.

58.What happens if an insured intentionally sets fire to their own property? A. The claim is paid B. The claim is denied for arson C. The insurer must prove intent D. The deductible is increased

Intentional acts are excluded from coverage, and arson voids the claim.

59.A claims adjuster must remain: A. Biased toward the insurer B. A policyholder advocate C. Fair and impartial D. Focused only on the bottom line

Adjusters must act professionally, objectively, and ethically during claim

handling.

60.The Kentucky Insurance Code is enforced by: A. U.S. Congress B. The Commissioner of Insurance C. The Supreme Court D. The Insurance Services Office (ISO)

The Kentucky Department of Insurance and the Commissioner enforce

state insurance law.

61.What does the term “contract of indemnity” mean? A. All policies pay the same B. The insured profits from a loss C. The insured is restored to their financial position prior to loss D. The policy only covers cash losses

Indemnity means the purpose is to make the insured whole—not to

provide a profit.

62.Which of the following is an intentional tort? A. Assault B. Negligence C. Breach of contract D. Accident

Intentional torts are deliberate acts, such as assault or fraud.