North Carolina Property & Casualty Insurance License, Practice Exams

An insurer incorporated in the state where it is transacting business is classified as:

1. Alien
2. Domestic ✓
3. Foreign
4. Reciprocal

Why: A domestic insurer is one organized under the laws of the state in which it is doing business.

Underinsured motorists (UIM) coverage applies when:

1. The insured wants collision limits raised above the actual cash value of the covered auto without paying more premium
2. The at-fault driver's liability limits are insufficient to fully cover the insured's damages ✓
3. The at-fault driver has no liability insurance whatsoever
4. The insured driver is the one at fault and wants their own injuries paid from their liability limits

Why: UIM applies when the at-fault driver has insurance, but with limits lower than the damages, allowing the insured to recover the difference up to the UIM limit.

Under the BACF, the "care, custody, or control" exclusion in liability coverage means the policy does NOT cover:

1. Damage to property the insured owns, transports, or has in its care ✓
2. Bodily injury to a passenger riding in another car that the insured's covered auto strikes
3. Injury to a pedestrian struck in a crosswalk by the insured's delivery van
4. Damage to another vehicle the insured's driver strikes while backing out of a loading dock

Why: BACF liability excludes property owned, transported, or in the care, custody, or control of the insured; such exposures require other coverage (e.g., cargo or property).

Under PAP Part A, which of the following is an "insured" while using a non-owned auto?

1. The named insured and family members for any auto, and others only for the covered auto ✓
2. Any person operating the named insured's vehicle for a fee, such as a valet or mechanic on duty
3. Only the registered owner of the non-owned auto, since that owner's policy is primary
4. Anyone in the world who drives any vehicle with the named insured's verbal or written permission

Why: For Part A, the named insured and family members are insureds for the ownership/use of any auto, while other persons are insureds only for use of the named insured's covered auto.

Protection and Indemnity (P&I) coverage in ocean marine provides:

1. Freight coverage on the shipowner's earnings if the cargo is never delivered to the consignee
2. Cargo coverage on the goods carried in the holds
3. Hull physical damage to the vessel, its machinery, and its equipment from perils of the sea
4. Third-party liability coverage for the shipowner (injury, cargo damage, etc.) ✓

Why: P&I provides broad third-party liability protection for shipowners, including bodily injury, illness of crew, damage to cargo, and other liabilities not covered by hull policies.

The policy section that defines the rights and duties of both parties, such as duties after a loss and cancellation, is the:

1. Insuring agreement
2. Declarations
3. Conditions ✓
4. Definitions

Why: The conditions section spells out the rules, rights, and duties governing how the policy operates for both insurer and insured.

A clothing store's stock is destroyed by fire. The BPP with the Special Causes of Loss form is in force. Coverage applies because:

1. The Basic form lists fire as a named peril and the Special form adopts that same list
2. A flood set off the fire, and the ensuing loss provision restores the water damage
3. Fire is not excluded under the open-perils form ✓
4. Theft is the cause of loss, and stock is insured against theft on all three forms

Why: Under the open-perils Special form, fire is a covered cause of loss because it is a risk of direct physical loss that is not excluded.

Most Professional Liability/E&O and D&O policies are written on what kind of trigger?

1. Claims-made ✓
2. Named perils
3. Open peril
4. Occurrence

Why: Professional and management liability lines are typically claims-made, with a retroactive date and ERP options.

The process of grouping policyholders by similar characteristics for rating is called:

1. Reinsurance
2. Subrogation
3. Adjusting
4. Classification ✓

Why: Classification places risks with similar loss-producing characteristics into the same rating group so equitable rates can be applied.

A loss payable clause in a property policy primarily protects:

1. The state guaranty association, which is reimbursed first out of any loss payment
2. A secured creditor or lender with an interest in covered personal property ✓
3. A bailee holding the property for repair, giving it a direct claim on the proceeds
4. The named insured alone, to the exclusion of any lender

Why: A loss payable clause directs claim payments to a designated party (such as a lender) holding an interest in the covered property.

A medical professional wants protection against patient claims of negligent treatment. The correct policy is:

1. Medical Professional Liability (malpractice) / E&O ✓
2. Employee Benefits Liability, which covers errors in administering benefit plans
3. Commercial General Liability, since the patient suffered bodily injury
4. A performance bond for medical work

Why: Patient injury from professional treatment is excluded by the CGL and covered by medical professional liability (malpractice) insurance.

The main difference between a 'follow-form' excess policy and an umbrella is that the follow-form excess policy:

1. Provides coverage broader than the underlying for offenses the primary form excludes
2. Covers losses for which no underlying insurance exists at all, subject to a retention
3. Always carries a self-insured retention of at least $10,000 that the insured must pay before it responds
4. Generally provides the same coverage terms as the underlying policy, only with higher limits ✓

Why: A follow-form excess policy mirrors the underlying policy's terms and conditions, simply adding limits; an umbrella can be broader.

Under the unendorsed PAP, towing and labor (Part D) coverage is:

1. An optional coverage that must be added, with a stated per-disablement limit ✓
2. Built into Part A liability, so any tow after an accident is paid within the liability limit
3. Included automatically at full cost whenever the policy carries collision, with no separate premium
4. Available only for rental cars the insured hires while the covered auto is being repaired

Why: Towing and labor costs coverage is an optional add-on with a small per-disablement limit (e.g., $25–$75), not automatically included.

A products liability claim alleges a manufactured part injured a user three years after sale. This is covered under the CGL as:

1. Premises and operations, because the part injured the user away from the insured's premises
2. Damage to premises rented to the insured, subject to the fire damage sublimit
3. Coverage B, because selling a defective part is an advertising injury offense
4. Products and completed operations, subject to that separate aggregate ✓

Why: Injury from a sold product is a products liability claim subject to the Products-Completed Operations Aggregate.

Under PAP Part F, if the insured cancels the policy, the company will:

1. Return any unearned premium, often computed short rate or pro rata per policy terms ✓
2. Keep the entire premium as fully earned once the policy has been in force for 60 days or more
3. Convert the unused portion of the term to a Business Auto policy carrying the same limits
4. Charge a cancellation penalty equal to the full premium for the balance of the policy term

Why: On cancellation, the unearned premium is refunded; insured-requested cancellations may be calculated short rate, while insurer cancellations are typically pro rata.

Under a value reporting form, what happens if the insured underreports values at the last report before a loss?

1. The insurer pays the full policy limit because the limit was purchased for the year
2. Coverage is voided from inception and the insurer returns all the premium paid
3. The honesty/full reporting clause limits recovery to the proportion reported ✓
4. The deductible is waived on the loss

Why: The full reporting (honesty) clause penalizes underreporting by limiting recovery to the ratio of the value last reported to the actual value.

A PAP liability limit shown as 100/300/50 means:

1. $100,000 per person BI, $300,000 per accident BI, $50,000 PD per accident ✓
2. $100,000 of property damage, $300,000 of bodily injury per person, and $50,000 of medical payments
3. $100,000 combined for the whole accident, with the other two figures showing the deductibles
4. $100,000 of total coverage subject to a $300 deductible and a $50 per-claim service charge

Why: Split limits 100/300/50 mean $100,000 bodily injury per person, $300,000 bodily injury per accident, and $50,000 property damage per accident.

Market value as a basis of valuation refers to:

1. The cost to rebuild the property new at today's prices, excluding the land
2. The price the property would bring in a sale, including land ✓
3. The face amount of the policy shown on the declarations page
4. Replacement cost less an allowance for depreciation and obsolescence

Why: Market value is what a buyer would pay a seller in an open market and can differ substantially from replacement cost because it includes land and location factors.

Under the PAP, the maximum the insurer pays for a covered physical damage loss is generally:

1. The original purchase price shown on the bill of sale, with no reduction for depreciation or deductible
2. A flat amount scheduled in the Declarations for each auto, paid in full whatever the vehicle is worth at the time of loss
3. The lesser of the actual cash value or the amount to repair/replace, minus deductible ✓
4. Replacement cost for a new vehicle of like make and model, with no deductible

Why: Part D limits payment to the lesser of the ACV of the stolen/damaged property or the cost to repair or replace it, less the deductible.

An insured intentionally damages a third party's property. Under a standard liability policy, this loss is most likely:

1. Covered, since an occurrence includes any damage
2. Covered as a supplementary payment, since defense costs apply regardless of intent
3. Excluded because intentional/expected acts are not accidental ✓
4. Covered once the insurer takes salvage

Why: Liability coverage applies to occurrences (accidents); intentional acts are typically excluded because they are not accidental.

Which dwelling form would be most appropriate for the broadest property protection on an owner-occupied home?

1. DP-2
2. DP-3 ✓
3. Personal Liability Supplement
4. DP-1

Why: DP-3 provides open-perils coverage on the dwelling and is the broadest of the standard dwelling forms for the structure.

A Supplemental Extended Reporting Period (supplemental tail) differs from the basic ERP in that it:

1. Is furnished automatically at no charge for 60 days after the policy expires
2. Applies only to occurrence policies, since claims-made forms already report on a delayed basis
3. Cuts the General Aggregate in half for every claim reported during the tail
4. Must be purchased for additional premium and provides an unlimited reporting period ✓

Why: The supplemental ERP requires an extra premium and a written request, providing an unlimited reporting window for covered occurrences.

An HR administrator forgets to enroll a new hire in the group health plan, and the employee incurs large medical bills. Which coverage responds?

1. D&O
2. Employee Benefits Liability ✓
3. Workers Compensation
4. CGL Coverage C

Why: A clerical error administering benefits is an EBL claim, not a CGL or WC matter.

Under farm property coverage, livestock such as cattle and horses are usually covered:

1. Only while in transit aboard an ocean vessel to an export market
2. For every cause of loss on an open-perils basis, with no per-animal limit applied
3. On a named-peril basis (e.g., death by lightning, accidental shooting), often with per-animal limits ✓
4. Under the dwelling coverage of the farm form, which is extended to animals kept in the barn and the adjoining pasture

Why: Farm livestock is typically insured on a named-peril basis (lightning, fire, certain accidents) and is frequently subject to per-animal and aggregate limits.

Which of the following are the authorized methods for a North Carolina employer to secure workers' compensation liability?

1. Commercial insurance bought from a carrier authorized to write workers' compensation in this State, and nothing else
2. A written personal guaranty from the business owner filed with the Industrial Commission
3. Depositing cash or securities with the Industrial Commission equal to one year of payroll
4. Insurance through an authorized carrier, or obtaining a self-insurance license from the Commissioner of Insurance ✓

Why: G.S. 97-93(a) requires the employer either to insure its liability with an authorized carrier or to obtain a self-insurance license from the Commissioner of Insurance under Article 5 or Chapter 58, Article 47.

For Part Three (Other States Insurance) to respond, a state generally must be:

1. Listed in Item 3.A. of the Information Page as a state covered by Part One
2. A monopolistic fund state such as Ohio or Wyoming
3. Listed in the Other States Insurance item of the Information Page ✓
4. Approved by the federal Department of Labor

Why: Other States Insurance applies to states named in the Part Three item of the Information Page (often 'all states except' those that are monopolistic or already listed in Part One).

Insurable interest in property insurance requires that the insured:

1. Hold a state insurance license before the property can be covered at all
2. Own the property outright, free of any mortgage, lien or other encumbrance
3. Be related by blood or marriage to the previous owner of the property
4. Will suffer a financial loss if the property is damaged or destroyed ✓

Why: Insurable interest exists when a person would suffer a genuine financial loss from damage to or destruction of the property.

An insured who intentionally sets fire to insured property to collect on the policy demonstrates:

1. A moral hazard ✓
2. A physical hazard
3. A morale hazard
4. An aleatory hazard

Why: A moral hazard exists when a person's dishonesty or tendency to cause a loss, such as arson for profit, increases the chance of loss.

A common carrier's legal liability for cargo it transports is generally:

1. Identical to that of a bailee for hire, requiring only ordinary care of the goods
2. Nonexistent, because the shipper's own cargo policy is the sole source of recovery
3. Limited and based on negligence, with several exceptions like acts of God ✓
4. Absolute and unlimited for every loss

Why: Common carriers have a high but not absolute liability for goods; they are excused for losses from acts of God, public enemy, inherent vice, shipper's fault, and public authority.

A legal doctrine that reduces a plaintiff's recovery in proportion to their own degree of fault is:

1. Contributory negligence
2. Res ipsa loquitur
3. Comparative negligence ✓
4. Strict liability

Why: Comparative negligence apportions damages according to each party's percentage of fault rather than barring recovery entirely.

Which statement about Part Two (Employers Liability) limits and Part One is correct?

1. Part One has no policy limit; Part Two has stated dollar limits ✓
2. Part Two has no policy limit; Part One has stated dollar limits
3. Neither Part has any limits
4. Both Part One and Part Two have stated dollar limits

Why: Part One has no policy limit (the statute controls benefits), while Part Two carries stated dollar limits for the three employers liability exposures.

When a business hires independent contractors, the business's own CGL primarily protects it against:

1. Injuries to the contractor's own employees, which the hiring firm's CGL settles as medical payments
2. The contractor's sole negligence in performing the work, even where the hiring firm did nothing wrong
3. Vicarious liability and its own negligence in hiring or supervising the contractors ✓
4. Damage to and liability from the contractor's trucks while they are driven to and from the job

Why: The hiring firm's CGL responds to its vicarious liability and its own negligence; the contractor should carry separate coverage for its operations.

Which statement about how coverage parts combine in a CPP is correct?

1. Two or more coverage parts share the Common Declarations and Common Conditions to form a package ✓
2. A monoline policy brings every available coverage part together under one set of common declarations
3. A package may combine property coverage parts only, since liability parts must always be written by themselves
4. Each coverage part must be issued as a separate policy with its own declarations

Why: In a package, two or more coverage parts attach to common declarations and common conditions; a single coverage part written alone is monoline.

A 'nonscheduled' (unscheduled) permanent partial disability typically involves:

1. An injury to a body part named on the statutory schedule, such as a thumb or a foot, paid at a fixed number of weeks regardless of actual wage loss
2. An injury compensable only under Part Two, Employers Liability, because the statute schedules no benefit for that body part
3. An injury that resolves before maximum medical improvement is reached, so benefits end when the worker is released to full duty
4. An injury to the body as a whole (e.g., back or internal organ) valued by impairment to earning capacity ✓

Why: Nonscheduled injuries affect the body as a whole or parts not on the schedule (such as the back), and benefits are based on the impact on earning capacity or impairment rating.

Theft of property is covered automatically under which Causes of Loss form?

1. None of the forms
2. Broad only
3. Special form ✓
4. Basic only

Why: Theft is not a named peril under Basic or Broad, but the open-perils Special form covers theft (subject to special limits) since it is not excluded.

In the Business Auto Coverage Form, covered auto designation symbols determine:

1. The deductible that applies to each physical damage loss
2. The geographic territory within which the covered autos may be operated and garaged
3. Which autos are covered for each coverage shown in the Declarations ✓
4. The size of the fleet discount applied to the premium charged for each covered auto

Why: Numbered symbols (1–9) entered next to each coverage in the Declarations define which categories of autos that coverage applies to.

The National Flood Insurance Program (NFIP) is administered by which federal agency?

1. The U.S. Department of Agriculture
2. The Department of Housing and Urban Development
3. The Small Business Administration
4. The Federal Emergency Management Agency (FEMA) ✓

Why: The NFIP is administered by FEMA, an agency within the Department of Homeland Security.

May a sole proprietor, partner, or LLC member elect to be included as an employee under their business's workers' compensation coverage?

1. Yes, if actively engaged in the operation of the business and the insurer is notified of the election ✓
2. Only if the business regularly employs fewer than three workers and elects to carry the coverage voluntarily
3. Only with the prior written approval of the North Carolina Industrial Commission for each such election
4. No; owners are always excluded, and any premium charged for them must be refunded to the business at audit

Why: G.S. 97-2(2) allows a sole proprietor, partner, or LLC member to elect inclusion as an employee if actively engaged in the business and the insurer is notified of the election.

A condominium unit-owner wants to insure improvements and betterments they installed (cabinets, flooring) plus personal property and liability. The proper form is:

1. HO-8
2. HO-4
3. HO-6 ✓
4. HO-3

Why: HO-6 is the condominium unit-owners form, covering personal property, owner-installed improvements/betterments, and Section II liability.

After a covered loss, the insured's duties include all of the following EXCEPT:

1. Admitting liability to any injured third party ✓
2. Protecting the property from further damage
3. Giving prompt notice to the insurer
4. Preparing an inventory of damaged property

Why: Insureds must give notice, mitigate further damage, and document the loss, but they must NOT voluntarily assume obligations or admit liability.

Which statement about MPCI and the role of private insurers is correct?

1. Private insurers are barred from MPCI, which the Risk Management Agency writes and services itself
2. Private insurers sell and service MPCI policies under federal reinsurance through the RMA/FCIC ✓
3. MPCI is sold only by agricultural lenders as a condition of an operating loan
4. FEMA sells and adjusts all MPCI policies through the same regional offices that administer flood coverage

Why: MPCI is delivered by private insurers who sell and service the policies, with federal reinsurance and oversight provided through the RMA and the Federal Crop Insurance Corporation.

A personal articles floater (scheduled personal property) is most often classified within which line of insurance?

1. Workers compensation
2. Inland marine ✓
3. Ocean marine
4. Surety

Why: Floaters covering jewelry, furs, fine arts, and similar items are written as inland marine coverage.

Under the standard fire policy, no suit or action to recover a claim may be sustained in court unless it is commenced within what period after inception of the loss?

1. Three years ✓
2. Five years
3. One year
4. Two years

Why: The Suit provision requires that any action on the policy be commenced within three years after inception of the loss.

The Dwelling Under Construction endorsement is designed to:

1. Cover a tenant's contents in a newly built dwelling until the owner's permanent policy is issued
2. Add theft coverage to a finished home, which the unendorsed dwelling form leaves out entirely
3. Provide earthquake coverage for the foundation and framing while the structure is being erected
4. Adjust coverage and reporting for a home being built where value increases over time ✓

Why: The dwelling under construction endorsement tailors coverage to a home being built, where the insurable value grows as construction progresses.

A homeowner stores a guest's furniture temporarily. Property of others while on the residence premises is:

1. Covered only under Section ii liability, since the guest is not an insured
2. Subject to the $200 special limit for money
3. Never covered while owned by a non-insured
4. Coverable at the insured's option under Coverage C ✓

Why: Coverage C may, at the insured's option, apply to property of others while on the part of the residence premises occupied by an insured.

In a surety bond, the company that guarantees the principal's performance is the:

1. Surety ✓
2. Obligee
3. Indemnitor
4. Principal

Why: The surety is the entity guaranteeing that the principal will fulfill its obligation to the obligee.

Symbol 1 in the Business Auto Coverage Form means:

1. Any auto ✓
2. Non-owned autos only
3. Owned autos only
4. Hired autos only

Why: Symbol 1 represents "Any Auto" and provides the broadest scope; it is most commonly used for liability coverage.

May a North Carolina driver satisfy a demand to prove insurance by displaying an electronic image of the insurance card on a mobile phone?

1. Only if the driver has registered the device with the Division of Motor Vehicles and also carries the paper card in the vehicle
2. Yes, proof may be produced in either physical or electronic format, including an image displayed on a portable device ✓
3. No; the physical card issued by the insurer must be carried in the vehicle whenever it is operated
4. Only for commercial vehicles; private passenger drivers must produce a paper card

Why: N.C. Gen. Stat. §20-309(c1) allows proof of insurance to be satisfied in either physical or electronic format, including display of electronic images on a mobile phone or other portable device.

Under the exclusive remedy doctrine, what does an employee generally give up in exchange for statutory workers' compensation benefits?

1. The right to be reinstated to the same job and shift once the treating physician issues a release
2. The right to employer-paid medical care
3. The right to two-thirds wage benefits
4. The right to sue the employer in tort for the work-related injury ✓

Why: The exclusive remedy doctrine means workers' compensation is the employee's sole remedy against the employer; the employee gives up the right to sue the employer in tort in exchange for guaranteed no-fault benefits.

Under the PAP, if the named insured dies, coverage is typically extended to:

1. No one, because the policy terminates immediately on the date of the named insured's death
2. The surviving spouse if a resident and the legal representative while acting as such, for a limited period ✓
3. Any heir named in the will, for an unlimited period, because ownership of the covered auto passes through the estate
4. Only the funeral director or other party holding custody of the vehicle until the estate is settled in probate

Why: Part F's death provision continues coverage for the surviving resident spouse and the deceased's legal representative (and certain custodians) for a limited time.

What notice requirement does the Act impose on employers who are in compliance with the coverage provisions?

1. Mail a written notice to each employee's home address every year within 30 days of the policy's anniversary date, and file proof with the Commission
2. File a public notice of coverage with the register of deeds in each county where the employer has a place of business, renewed each January 1
3. No notice is required once the carrier files the coverage with the Commission
4. Post a conspicuous notice at the workplace stating the employment is subject to the Act and whether the employer is insured or self-insured ✓

Why: G.S. 97-93(e) requires the employer to post in a conspicuous place a notice stating the employment is subject to the Act and whether the employer is insured or qualifies as self-insured.

Under the liberalization clause, if the insurer broadens coverage during the policy term without additional premium:

1. The broadened form applies only to policies written on or after its effective date
2. The insured must request an endorsement and pay additional premium to obtain it
3. The broadened coverage automatically applies to the existing policy ✓
4. The policy is rewritten at the next renewal

Why: The liberalization clause automatically extends any coverage-broadening change to existing policies at no extra cost.

The CGL Medical Expense (Coverage C) limit typically applies:

1. Only to the named insured and resident family
2. Per occurrence to everyone hurt, not per person
3. Per person and is subject to the each occurrence limit ✓
4. As a separate aggregate outside Coverage A

Why: The Medical Expense Limit applies per person and the total is subject to the Each Occurrence Limit.

Saying that a property insurance contract is personal means that it:

1. Can only be sold to individuals in their own names, and never to a partnership, corporation or other business entity
2. Covers only personal property such as furniture and clothing, and never the dwelling or other real property
3. Must be signed in person by the named insured before the coverage can attach
4. Insures a person, not the property itself, and generally cannot be transferred without the insurer's consent ✓

Why: A personal contract insures the individual against loss, not the property; it cannot be assigned to another party without the insurer's consent.

The CGL 'Other Insurance' condition typically makes the CGL coverage:

1. Primary, but excess over certain other coverages in specified situations ✓
2. Always pro rata with all other collectible insurance, regardless of type
3. Void from inception if other insurance covers the loss
4. Always excess over every other policy the insured carries

Why: The CGL is generally primary but becomes excess in specified situations (e.g., certain additional-insured or fire scenarios) per the Other Insurance condition.

Vocational rehabilitation benefits under workers' compensation are intended to:

1. Reimburse the employer for the cost of recruiting and training a replacement worker
2. Pay for all of the medical treatment the injured worker receives during the recovery period
3. Permanently replace the worker's lost wages once statutory indemnity benefits are exhausted
4. Help an injured worker retrain or be re-educated to return to gainful employment ✓

Why: Vocational rehabilitation provides retraining, education, or job-placement assistance so an injured worker can return to suitable employment.

A business entity wishes to sell, solicit, or negotiate insurance in North Carolina. Under G.S. 58-33-31(b), the entity must apply using the:

1. Uniform Application for individual producers
2. Uniform Business Entity Application ✓
3. Statement of Financial Condition
4. NAIC biographical affidavit

Why: G.S. 58-33-31(b) requires a business entity to apply using the Uniform Business Entity Application.

Under the Building and Personal Property Coverage Form, which coverage applies to the building structure and permanently installed fixtures?

1. Coverage A — Building ✓
2. Coverage C — Personal Property of Others
3. Coverage B — Business Personal Property
4. Coverage D — Extra Expense

Why: Coverage A (Building) covers the described building, completed additions, fixtures, permanently installed machinery, and equipment.

What is the maximum per-person / per-accident bodily injury limit an insurer can be required to sell for UM or UIM coverage in North Carolina?

1. $300,000 per person / $500,000 per accident
2. $1,000,000 per person / $1,000,000 per accident ✓
3. There is no statutory cap on required UM/UIM limits
4. $500,000 per person / $1,000,000 per accident

Why: Under N.C. Gen. Stat. §20-279.21(b)(3) and (b)(4), an insurer cannot be required to sell UM or UIM bodily injury coverage at limits exceeding $1,000,000 per person and $1,000,000 per accident.

Loss of use (transportation expenses) coverage in the PAP for a theft loss typically begins:

1. After a waiting period (e.g., 48 hours) following the theft ✓
2. At the moment the auto is stolen, with no waiting period, provided the theft is reported to police
3. Never for theft losses, since transportation expense follows only collision repairs to the covered auto
4. Only once the stolen auto is recovered and the insured learns how long the repairs will take

Why: For a theft of the covered auto, transportation expense coverage typically begins a set number of hours (e.g., 48) after the theft is reported.

Which of the following losses is covered under "Other Than Collision" (comprehensive) rather than Collision?

1. Rolling the vehicle over in a ditch
2. Striking a guardrail
3. Damage from hail, fire, theft, or hitting a deer ✓
4. Colliding with another vehicle at an intersection

Why: Other Than Collision (comprehensive) covers losses such as fire, theft, hail, vandalism, glass breakage, and contact with animals like a deer.

If a work injury results in disability of more than 21 days, how is the seven-day waiting period treated?

1. The seven-day waiting period still applies and is never paid, however long the disability lasts
2. Compensation is allowed from the date of the disability (the waiting period becomes payable) ✓
3. Only medical compensation is paid for the waiting period; indemnity for those days is forfeited
4. The waiting period is extended to 14 days once disability passes 21 days

Why: G.S. 97-28 provides that if the injury results in disability of more than 21 days, compensation shall be allowed from the date of the disability, making the waiting period retroactively payable.

A Difference in Conditions (DIC) policy is generally purchased to:

1. Covers only automobile liability arising from vehicles the insured owns, hires, or borrows anywhere in the United States and Canada
2. Replaces the underlying property policy entirely, so the insured may cancel the primary form once the difference in conditions coverage is bound
3. Provides statutory workers compensation benefits in any state the insured has not listed on the information page of its own policy
4. Provide broad, all-risk coverage that fills gaps and covers perils excluded by underlying policies, such as flood and earthquake ✓

Why: DIC coverage supplements an insured's underlying property program by broadening perils and filling coverage gaps, frequently adding flood and earthquake.

The MCS-90 endorsement is best described as a:

1. Physical damage coverage paying collision and comprehensive losses to trailers and semitrailers a carrier pulls under lease
2. State-filed certificate showing that no-fault benefits are in force
3. Motor truck cargo form paying for freight damaged in transit
4. Federally mandated public liability endorsement assuring payment for bodily injury and property damage to the public ✓

Why: The MCS-90 is a federally required endorsement guaranteeing the motor carrier will pay for public bodily injury and property damage, ensuring financial responsibility.

Under North Carolina law, uninsured motorist (UM) coverage on a motor vehicle liability policy is:

1. Available only to policyholders insured through the Reinsurance Facility
2. Mandatory on every motor vehicle liability policy issued in the State ✓
3. Required on a motor vehicle policy only when liability limits exceed the statutory minimum
4. Optional and available only on request

Why: N.C. Gen. Stat. §20-279.21(b)(3) requires that no bodily injury liability policy be issued in the State without UM coverage; it is mandatory on all such policies.

A key feature of Coverage C — Medical Payments under the CGL is that it pays:

1. Regardless of the insured's legal liability, up to the medical expense limit ✓
2. Only after a court has found the insured legally liable for the injury
3. Only for the insured's own employees hurt on the job
4. Punitive damages awarded against the insured in addition to the medical bills incurred

Why: Medical Payments coverage is a goodwill, no-fault coverage paying medical expenses regardless of the insured's legal liability, within the medical expense limit.

Transportation expenses coverage under PAP Part D typically reimburses the insured for:

1. Rental/temporary transportation costs after a covered loss, subject to a daily and total maximum ✓
2. Lost wages for the days the insured cannot drive to work while the auto is repaired
3. Towing and labor at the scene of any mechanical breakdown, whether or not a loss occurred
4. The full daily cost of a rental car until the insured chooses to return it

Why: Transportation expenses coverage pays temporary transportation (e.g., rental) costs following a covered Part D loss, subject to per-day and per-occurrence limits.

A building worth $800,000 has 80% coinsurance. The insured carries $700,000. A $100,000 loss occurs. After applying coinsurance, how much is paid (before deductible)?

1. $70,000
2. $80,000
3. $87,500
4. $100,000 ✓

Why: Required = 80% x $800,000 = $640,000. The insured carries $700,000, which exceeds the requirement, so no penalty applies and the full $100,000 is paid.

The Business Pursuits endorsement on a Homeowners policy is used to:

1. Extend liability for certain business activities of an insured (e.g., a teacher or clerk) ✓
2. Cover an insured's full-scale business operation, replacing the need for a commercial general liability policy
3. Add scheduled coverage for jewelry, silverware and other valuables kept at the insured's place of work
4. Provide flood coverage for a home office

Why: The business pursuits endorsement extends Section II liability to certain employee business activities that would otherwise be excluded; it does not cover an owned business.

The portion of the rate intended to cover the insurer's expected losses and loss-adjustment expenses is the:

1. Expense loading
2. Pure premium / loss cost ✓
3. Profit factor
4. Reserve

Why: The pure premium (loss cost) component reflects expected claim costs; loading is added for expenses and profit.

The primary purpose of a coinsurance clause in property insurance is to:

1. Increase the deductible automatically whenever property values rise during the term
2. Lower every insured's premium by a fixed percentage regardless of the amount carried
3. Extend liability protection to others who share ownership of the insured property
4. Encourage insureds to carry coverage close to the full value of the property ✓

Why: Coinsurance encourages insureds to insure to value (e.g., 80%, 90%, or 100%) by penalizing underinsurance at the time of a loss.

A driver with multiple at-fault accidents and DUIs is repeatedly declined by standard auto insurers. The mechanism most likely to provide required liability coverage is:

1. An automobile assigned-risk plan ✓
2. A FAIR Plan
3. A beach and windstorm plan
4. A risk retention group

Why: Drivers unable to obtain coverage voluntarily are placed through the automobile assigned-risk plan, the residual market for auto insurance.

Before workers' compensation laws, employers defending common-law negligence suits could use several defenses. Which of the following was one of those defenses that WC laws effectively removed?

1. The collateral source rule
2. The fellow-servant rule ✓
3. The statutory employer rule
4. The exclusive remedy rule

Why: The common-law defenses WC removed were contributory negligence, assumption of risk, and the fellow-servant rule (injury caused by a coworker). WC made these defenses irrelevant to benefit eligibility.

The CAN-SPAM Act primarily regulates:

1. In-person sales presentations at a consumer's home or workplace, including the required cooling-off disclosure
2. The issuance and renewal of federal flood policies written by private carriers under the Write Your Own program
3. Commercial email messages, requiring honest headers, a valid opt-out, and a physical address ✓
4. Telephone solicitations, requiring callers to identify themselves and to check a national suppression list

Why: CAN-SPAM sets rules for commercial email, including truthful subject lines and sender information, a functioning opt-out, and inclusion of a valid postal address.

The requirement that contracting parties be of legal age, sane, and not under the influence refers to which contract element?

1. Offer and acceptance
2. Competent parties ✓
3. Legal purpose
4. Consideration

Why: Competent parties means each party must have the legal capacity to contract, being of legal age, mentally competent, and sober.

Particular average differs from general average in that particular average is:

1. A partial loss borne solely by the owner of the property that was damaged ✓
2. Always a total loss of the whole venture, requiring the underwriter to pay the full policy limit
3. A discount off the premium earned when a shipper insures more than one voyage in a policy year
4. Shared proportionally by the ship, cargo, and freight interests according to their saved values

Why: A particular average loss is a partial loss that falls only on the owner of the specific property damaged, unlike general average which is shared among all interests.

When an applicant submits a completed application with the initial premium, the applicant is generally making the:

1. Consideration only
2. Counteroffer by the insurer
3. Offer ✓
4. Acceptance

Why: In insurance, the applicant typically makes the offer by submitting the application and premium; the insurer accepts by issuing the policy.