Texas Adjuster Practice Test

What are incurred expenses?

1. Expenses unpaid but already sustained

2. Future expenses anticipated for the year

3. Expenses regularly paid by the policyholder

4. Any costs associated with filing a claim

The correct answer is: Expenses unpaid but already sustained

Incurred expenses refer to costs that have already been sustained or occurred but have not yet been paid. This means that even if the policyholder has not yet settled these expenses with payment, they are still considered "incurred" because the obligation exists due to the services rendered or goods provided. This concept is important in the context of insurance, as it helps determine what costs can be reimbursed under a policy after a claim is made. For instance, if a policyholder receives medical treatment, even if the bill has not been paid yet, the cost of that treatment is an incurred expense because the service has already been utilized. This differentiation is crucial in adjusting claims and understanding financial liabilities, as it allows both adjusters and policyholders to navigate their responsibilities clear. The other options do not accurately describe incurred expenses. Future expenses are about anticipated costs, which have not yet been realized. Regularly paid expenses relate to ongoing financial outflows rather than those that are already accounted for. Costs associated with filing a claim may include various fees but do not specifically define incurred expenses, as they could also incorporate costs that are not yet realized or owed. Consequently, understanding the specific definition of incurred expenses as already sustained costs is essential for insurance claims processing and adjustments.