Arkansas Insurance Adjuster Practice Exam

Question: 1 / 400

Which of the following statements is true about an insurance policy?

The insured sets the terms of the policy

It is transferable if the property is sold to another party

The insured is obligated to the terms of the contract for the entire policy period

It relies on the utmost good faith of both the insured and the insurer

An insurance policy relies on the utmost good faith of both the insured and the insurer, meaning that both parties are expected to act honestly and disclose all pertinent information. Option A is incorrect because the insured does not set the terms of the policy, they agree to the terms set by the insurer. Option B is incorrect because an insurance policy is not transferable, it is specific to the insured and their property. Option C is incorrect because the insured can cancel the policy at any time, however they may be responsible for paying a cancellation fee. The only correct statement about an insurance policy is that it relies on the utmost good faith of both parties.

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