Arkansas Insurance Adjuster Practice Exam

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Prepare for the Arkansas Insurance Adjuster Exam with flashcards and multiple choice questions, each offering hints and explanations. Equip yourself for your test confidently!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is the purpose of the principle of indemnity?

to transfer the risk of financial loss from one party to another.
to prevent an insured from making a profit on a loss.
to prevent an insurer from making a profit on a loss.
to transfer the right to collect a debt from one party to another.

The correct answer is: to prevent an insured from making a profit on a loss.

The principle of indemnity is an important concept in insurance that ensures the insured is restored to their original financial state in the event of a loss, without gaining any financial profit. This principle is meant to protect both the insurer from paying out more than necessary and the insured from profiting from their loss. Options A and D are incorrect because they deal with transferring risk or debt, which is not the purpose of the principle of indemnity. Option C is incorrect because it is the insurer and not the insured who is prevented from making a profit on a loss.