Arkansas Insurance Adjuster Practice Exam

Jason's auto policy states that the insurer may cancel coverage if a premium is more than 30 days late. What is likely to happen when Jason gets into an accident after being late on his payment more than 30 days for the fifth time in a year?

1. The insurer will pay the claim because of the express waiver they have made by not canceling Jason's policy the previous times he was late with his payments.

2. The insurer will pay the claim because of the implied waiver they have made by not canceling Jason's policy the previous times he was late with his payments.

3. The insurer will deny the claim and cancel Jason's policy because of the implied waiver they have made by not canceling his policy the previous times he was late with his payments.

4. The insurer will deny the claim and cancel Jason's policy because he is more than 30 days late.

The correct answer is: The insurer will pay the claim because of the implied waiver they have made by not canceling Jason's policy the previous times he was late with his payments.

The likely outcome in this situation is that the insurer will pay the claim because of an implied waiver they have made by not canceling Jason's policy in the previous instances of late payments. This is because the insurer has a pattern of not enforcing the cancellation policy despite Jason's late payments, creating an implied understanding that they are willing to overlook the late payments. Option A is incorrect because it references an "express waiver" which is not mentioned in the question. Option C is incorrect because it states that the insurer will also cancel Jason's policy, which is not stated in the question. Option D is incorrect because it only addresses Jason being late and does not mention the insurer's actions. Therefore, option B is the best answer as it directly relates to the question and provides a reasonable explanation.