Arkansas Insurance Adjuster Practice Exam 2025 - Free Insurance Adjuster Practice Questions and Study Guide

Question: 1 / 400

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.

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.

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to prevent an insurer from making a profit on a loss.

to transfer the right to collect a debt from one party to another.

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