Glossary Of Terms For Adjuster Licensing Exams

Adjuster Licensing Glossary

• Abandonment

  Surrendering damaged property to the insurer; usually not allowed unless policy permits.

• Absolute Liability

  Liability without negligence (e.g., explosives, wild animals).

• Actual Cash Value (ACV)

  Replacement cost minus depreciation.adjuster-licensing-exam-terms

• Adjuster

  Licensed professional who investigates, negotiates, and resolves claims.

• Admitted/Authorized Insurer

  Insurer licensed by the state.

• Adverse Selection

  Tendency of high-risk individuals to seek insurance more often.adjuster-licensing-exam-terms

• Aggregate Limit

  The maximum an insurer pays during the policy term.

• Aleatory Contract

  Unequal exchange of value; performance uncertain.

• Ambiguous Language Rule

  Ambiguities are interpreted in favor of the insured.

• Appraisal Clause

  Dispute-resolution procedure for property value disagreements.

• Arbitration

  Binding or nonbinding settlement by third-party arbitrator.

• Arson

  Intentional burning; major fraud risk in property claims.

• Assignment

  Transfer of policy rights; requires insurer consent.

• At-Fault State

  State where liability must be determined before payment.

• Attractive Nuisance

  Hazard likely to attract children; imposes higher duty.

• Bad Faith

  Insurer's failure to act fairly or honestly; may lead to punitive damages.

• Bailee/Bailor

  Bailee has custody of others' property; bailor owns it.

• Basic Adjusting Process

  Verify coverage - investigate - evaluate - negotiate - settle.

• Betterment

  Improvements beyond pre-loss condition; insured pays the difference.

• Binder

  Temporary evidence of insurance.

• Blanket Coverage

  One limit covers multiple properties or categories.

• Bodily Injury Liability

  Coverage for injury, sickness, or death caused to others.

• Burden of Proof

  Responsibility to prove facts in claim (insured must prove loss; insurer proves exclusion).

• Business Interruption

  Covers loss of income due to covered property damage.

• Cancellation

  Termination of policy before expiration.

• Catastrophe (CAT)

  Large-scale event generating many claims; triggers CAT adjuster deployment.

• Cause of Loss

  Peril that caused damage.

• CE (Continuing Education)

  Required hours to maintain adjuster license.

• Claim

  Demand for payment under an insurance policy.

• Claims-Made Policy

  Responds when claim is made, not when event occurred.

• Claimant

  Person making a claim; first-party or third-party.

• Coinsurance (Property)

  Requires insured to carry certain % of value; penalty applies if underinsured.

• Collision (Auto)

  Impact with another vehicle or object.

• Comparative Negligence

  Damages reduced by claimant's share of negligence.

• Compensatory Damages

  Economic + noneconomic damages (but not punitive).

• Completed Operations Liability

  Contractor liability for work after it is finished.

• Concealment

  Intentional withholding of material information; voids coverage.

• Concurrent Causation

  Joint covered and excluded perils; coverage depends on state law.

• Consideration

  Exchange of value; premium and truthful information.

• Constructive Total Loss

  Cost of repair exceeds value of property.

• Contingent Liability

  Liability for actions of others, such as employees.

• Declarations Page

  States insured information, coverage limits, deductibles, and property covered.

• Deductible

  Amount insured pays before coverage begins.

• Depreciation

  Loss of value from age, wear, and tear.

• Direct Loss

  Physical harm to property.

• Disengagement

  When adjuster steps back and hands claim to legal or SIU.

• Duty to Defend

  Insurer must defend insured in liability lawsuit.

• Duty to Indemnify

  Insurer must pay judgment or settlement.

• Earned Premium

  Portion of premium corresponding to expired time.

• Effective Date

  Policy start date.

• Endorsement

  Written amendment modifying a policy.

• Estoppel

  Prevents a party from contradicting earlier representations.

• Evidence of Loss

  Documentation proving loss occurred.

• Examination Under Oath (EUO)

  Formal questioning of insured; used in fraud investigations.

• Exclusions

  Items not covered by the policy.

• Expiration Date

  Policy termination date.

• Face Value

  Policy limit.

• Fair Claims Practices Act

  Regulations ensuring fair claims handling.

• First Notice of Loss (FNOL)

  Initial report of a claim.

• First-Party Claim

  Claim by insured for their own property loss.

• Flood

  Rising water; covered by NFIP, not homeowners.

• Friendly Fire

  Controlled fire; usually not covered.

• Fraud

  Intentional deception for financial gain; crime.

• General Damages

  Non-economic damages (pain & suffering).

• Good Faith

  Honesty and fair dealing by insurer and adjuster.

• Gross Negligence

  Severe carelessness.

• Hazard

  Condition increasing chance of loss (moral, morale, physical).

• Hold Harmless Agreement

  One party agrees to indemnify another.

• Hostile Fire

  Fire outside intended area; covered.

• Indemnity

  Restoration to pre-loss condition.

• Indirect Loss

  Consequential loss such as business income loss.

• Insurable Interest

  Must exist at time of loss.

• Insuring Agreement

  Outlines what the policy covers.

• Investigation

  Gathering facts: statements, inspections, photography, reports.

• ISO (Insurance Services Office)

  Provides policy forms and loss cost data.

• Joint and Several Liability

  Any defendant can pay full damages.

• Judgment Rating

  Rate based on underwriter/adjuster expertise.

• Key Employee Insurance

  Covers losses when key individual becomes disabled or dies.

• K-factor

  Severity multiplier used after large CAT events.

• Liability

  Legal responsibility for damage to others.

• License

  Permission from state to act as adjuster.

• Lienholder

  Financial interest holder in insured property.

• Limit of Liability

  Maximum amount insurer will pay.

• Loss

  Damage resulting in a claim.

• Loss of Use

  Additional living expenses or loss of rental income.

• Loss Ratio

  Claims divided by premiums.

• Loss Reserves

  Money insurer sets aside for expected claim payout.

• Malicious Mischief

  Deliberate destruction of property.

• Material Misrepresentation

  Fact that affects underwriting decision.

• Mediation

  Nonbinding settlement conference.

• Mitigation

  Reasonable steps to reduce damages.

• Moral Hazard

  Dishonesty increases chance of loss.

• Morale Hazard

  Carelessness because insurance exists.

• Named Perils

  Only perils listed are covered.

• Negligence

  Failure to exercise reasonable care.

• NFIP (National Flood Insurance Program)

  Government flood insurance.

• Nonrenewal

  Decision by insurer not to continue policy.

• Occurrence

  Continuous or repeated exposure causing damage.

• Open Perils

  Everything covered unless excluded.

• Overinsurance

  Coverage exceeds property value; increases fraud risk.

• Partial Loss

  Property repairable.

• Peril

  Cause of loss.

• Personal Injury

  Libel, slander, false arrest.

• Police Report

  Key document in auto and theft claims.

• Policy Period

  Dates during which coverage applies.

• Proof of Loss

  Sworn statement verifying loss details.

• Property Damage Liability

  Damage to property of others.

• Quote

  Estimated premium rate.

• Reasonable Expectations Doctrine

  Interpret policy to match insured's expectations when

  language is unclear.

• Reinsurance

  Insurance bought by insurers.

• Released Bill of Lading

  Limits carrier’s liability.

• Repair Estimate

  Adjuster obtains or evaluates competing bids.

• Reservation of Rights

  Insurer reserves right to deny claim after investigating.

• Replacement Cost

  Full cost to replace without depreciation.

• Rescission

  Void policy from inception due to misrepresentation.

• Salvage

  Remaining value after loss; insurer may sell it.

• Schedule

  Itemized list of property covered.

• Settlement

  Resolution of claim.

• SIU (Special Investigations Unit)

  Handles suspected fraud.

• Statute of Limitations

  Time limit to file suit.

• Subrogation

  Insurer recovers from at-fault party.

• Supplemental Claim

  Additional cost arising after initial settlement.

• Tail Coverage

  Extends reporting period for claims-made policy.

• Third-Party Claim

  Claim by someone injured by insured.

• Total Loss

  Repair impossible or exceeds value.

• Tort

  Civil wrongdoing.

• Tortfeasor

  Person committing the tort.

• Umpire

  Neutral party in appraisal.

• Umbrella Policy

  Excess liability with broad coverage.

• Uninsured Motorist (UM)

  Covers insured when struck by uninsured driver.

• Unoccupancy

  No people present; contents remain.

• Underwriting

  Risk evaluation process.

• Vacancy

  No people AND no contents.

• Vandalism

  Intentional destruction of property.

• Valued Policy Law

  Pays policy limit in total loss (varies by state).

• Waiver

  Voluntary surrender of known right.

• Windstorm

  Covered peril unless excluded by endorsement.

• Workers' Compensation

  Insurance that overs injuries.

• Wrongful Death

  Liability claim for accidental death.

• XCU Exclusions

  Explosion, collapse, underground work (common in CGL).

• Yardstock

  Outdoor inventory; special coverage rules apply.

• Zone Rating

  Auto/commercial rating based on geographic zones.