247SimpleTests
Insurance · General

What is the purpose of a 'reservation of rights' letter?

Correct answer

To notify the insured that the insurer is investigating the claim while reserving the right to deny coverage if investigation reveals non-coverage

  1. A To reserve the best hotel during a CAT deployment
  2. B To notify the insured that the insurer is investigating the claim while reserving the right to deny coverage if investigation reveals non-coverage
  3. C To reserve the insured's rights against a third party
  4. D To guarantee payment of a claim

Why this is the answer

A reservation of rights (ROR) letter is sent when an adjuster is uncertain whether a claim is covered but investigates anyway. It preserves the insurer's right to later deny coverage without waiving that right through the act of investigating. Without an ROR, an insurer that investigates extensively might be held to have waived coverage defenses under estoppel principles.
Source: Adjuster Exam, Reservation of Rights

Practice more questions

This question is from our Insurance License Practice Tests practice test. Take the full practice test to test your knowledge across all General and other topics.

Take the Insurance Adjuster practice test →

New to this exam? Our Insurance exam guide explains the format, scoring, and how to prepare.

Related questions

General

When must an adjuster send an acknowledgment of a new claim to the insured?

State-specific guides

Need information for your state? Our state guides cover local requirements, fees, and what to expect on exam day.

California Texas Florida New York Pennsylvania Illinois Ohio Georgia

Recommended study materials

Study guide

Life & Health Insurance License Exam Manual (Kaplan)

Kaplan's comprehensive life and health producer licensing prep with chapter quizzes and full practice exams.

Check Price → Study guide

Property & Casualty Insurance License Exam Manual (Kaplan)

Personal and commercial lines, policy structure, and state law concepts for P&C producer licensing.

Check Price → Study guide

Insurance Adjuster Licensing Exam Prep (Xcel Solutions)

State adjuster exam prep covering policy interpretation, investigation, valuation, and claims handling.

Check Price →

As an Amazon Associate, CJ Affiliate, and AWIN publisher we earn from qualifying purchases. Links above are affiliate links. Full disclosure →