Free NC P&C Exam Flashcards

A financial stake in the continued existence of the insured property or person — required at policy inception for property and at the time of loss for life. Without it, a contract is unenforceable because it would create a wagering contract.

Insurance restores the insured to the approximate financial position held before a loss — no profit, no betterment. Actual cash value (replacement cost minus depreciation) is the standard indemnity measure; replacement cost coverage is an exception that must be explicitly endorsed.

The insurer's right, after paying a claim, to step into the insured's shoes and recover from the at-fault third party. Prevents the insured from collecting twice and holds the responsible party accountable. The insured cannot impair this right by settling early.

Both parties to an insurance contract must deal honestly with full disclosure — the insured must reveal material facts, the insurer must be clear about terms. Misrepresentation or concealment of a material fact can void coverage from inception.

Replacement cost minus depreciation — the default valuation for most property losses absent a replacement-cost endorsement. Formula: ACV = Replacement Cost − Depreciation. HO policies default to ACV for dwellings unless RCV is scheduled.

The front portion of a policy that personalizes the contract: named insured, property address, policy period, coverage limits, deductibles, and premium. Any item not in the declarations is governed by the form's general language.

The heart of the policy — the insurer's promise to pay for covered losses. May be written as 'all risks' (open perils) listing only exclusions, or 'named perils' listing only covered causes. Determines what triggers coverage.

Policy clauses that define the duties the insured must satisfy for coverage to remain in force — notice of loss, proof of loss, protecting property after a loss, cooperation with the insurer. Breaching a condition can void coverage for that loss.

A written modification to the standard policy form that adds, deletes, or changes coverage. Endorsements take precedence over the underlying policy language and can be added at inception or mid-term.

A dwelling fire policy covering a limited set of named perils (fire, lightning, internal explosion, and optional wind/hail, smoke, etc.) on an actual cash value basis. Used for rental dwellings and structures not owner-occupied.

A named-perils dwelling form covering a broader list (fire, wind/hail, smoke, theft, vandalism, falling objects, weight of ice/snow, burst pipes, etc.) on a replacement-cost basis when owner-occupied. Adds broader coverage than DP-1.

An open-perils (all-risks) dwelling form covering the dwelling for direct physical loss from any cause except the listed exclusions — the broadest dwelling form. Personal property is named-perils only. Typically replacement cost on the dwelling.

Dwelling (DP) forms are designed for non-owner-occupied or rental property and exclude theft of personal property and personal liability by default. Homeowners (HO) forms bundle dwelling, contents, and personal liability and require owner occupancy.

A named-perils homeowners policy covering both dwelling and personal property against the 16 broad named perils. Less common than HO-3; often a cheaper alternative for owner-occupied homes.

The most common homeowners form — open perils (all risks) on the dwelling and named perils on personal property. Covers any direct physical loss to the dwelling unless excluded, while contents are covered only for the listed perils.

Renters insurance — covers personal property on a named-perils basis, additional living expenses, and personal liability. No dwelling coverage because the tenant does not own the structure.

The broadest homeowners form — open perils on BOTH dwelling and personal property, with higher coverage limits for valuables. Typically for newer, higher-value homes; fewer exclusions than HO-3.

Covers the unit owner's personal property, betterments, improvements, and additions to the unit, loss assessment, and personal liability. The condo association master policy covers the building and common areas.

Designed for older homes where replacement cost would exceed market value. Covers named perils on an actual cash value basis and may use functional replacement cost — used when RC is economically impractical.

Pays for direct physical damage to the dwelling itself and any attached structures. The limit must equal the dwelling's replacement cost to avoid a coinsurance penalty.

Covers the insured's personal belongings anywhere in the world (subject to off-premises limits and special limits on items like cash, jewelry, firearms). Default limit is typically 50-70% of Coverage A.

Pays additional living expenses and fair rental value when the dwelling becomes uninhabitable due to a covered loss. Typical limit is 20-30% of Coverage A. No coinsurance applies to Coverage D.

Covers bodily injury and property damage the insured becomes legally obligated to pay due to an auto accident. Split limits appear as three numbers (per person / per accident BI / per accident PD). Mandatory in NC.

Covers reasonable medical and funeral expenses for the insured and passengers injured in a covered auto accident, regardless of fault. Typically applies within 1-3 years of the accident. No fault determination required.

Covers the insured for bodily injury caused by a driver with no liability coverage or a hit-and-run. In North Carolina UM cannot be rejected and must equal the liability limits. Pays what the at-fault driver's liability would have paid.

Two coverages: Collision (upset or impact with another object) and Other Than Collision (comprehensive — fire, theft, glass, vandalism, hail, flood, animals). OTC is broader than collision and is not limited to a closed list.

For NC policies issued or renewed on or after July 1, 2025, minimum liability limits are $50,000 per person, $100,000 per accident bodily injury, and $50,000 property damage under SB 452 / Session Law 2023-133. The prior floor was 30/60/25.

North Carolina law requires Uninsured Motorist coverage on every auto policy and it cannot be rejected by the insured. UM limits must equal the liability limits. UIM applies when the at-fault driver carries less than the injured party's limits.

North Carolina is one of only four states plus DC (AL, MD, VA, DC) following pure contributory negligence — if the plaintiff is even 1% at fault, they recover nothing. Adjusters scrutinize even minor claimant fault because any fault bars recovery.

The residual market for North Carolina auto insurance — every licensed auto insurer must participate. High-risk drivers who cannot obtain coverage in the voluntary market are ceded to the Facility while 'clean risk' business stays with the carrier. Guarantees all drivers can obtain minimum-limits coverage.

North Carolina statute requiring all drivers to maintain minimum liability limits or post financial proof. Drives the 50/100/50 minimum and the UM requirement. Failure to maintain coverage can suspend registration and license plates.

A modular commercial policy combining separate coverage parts (property, general liability, auto, crime) under one declarations page. Allows businesses to tailor coverage; each part has its own insuring agreement and exclusions.

A prepackaged policy for small businesses combining property and liability coverage in one form, with limited customization. Typically covers buildings, personal property, business income, and general liability. Excludes most auto and professional liability.

Three ISO cause-of-loss options: Basic (named perils — fire, lightning, wind, etc.), Broad (adds falling objects, weight of snow, water damage), and Special (open perils — all risks except listed exclusions). The Special form is the broadest.

A clause requiring the insured to carry coverage equal to a stated percentage (often 80%) of the property's value. If underinsured at loss time, the insurer pays only a proportionate share of the loss.

Occurrence covers bodily injury or property damage that happens during the policy period, regardless of when the claim is reported. Claims-made covers claims first reported during the policy period, regardless of when the loss occurred. Tail coverage extends reporting after a claims-made policy ends.

The core general liability coverage paying for bodily injury or property damage caused by an 'occurrence' arising from the insured's premises, operations, products, or completed work. Subject to a per-occurrence and general aggregate limit.

Covers false arrest, detention, malicious prosecution, libel, slander, defamation, wrongful eviction, and copyright infringement in the insured's advertising. Smaller limit than Coverage A and excludes most intentional acts.

CGL coverage for bodily injury or property damage arising from the insured's products after they leave the insured's premises, or from completed work. Triggered by an occurrence, not the sale date. Common exclusion: expected or intended injury.

The principle that workers comp is the sole remedy an injured employee has against the employer — the employee cannot sue the employer in tort. In exchange, the employer pays benefits regardless of fault. Third parties can still be sued.

The North Carolina state agency that administers workers compensation claims, approves settlements, and resolves disputes between injured workers, employers, and insurers. NCCI classification codes set the premium basis.

Covers the employer's liability to employees in situations where workers comp does not apply (e.g., third-party-over actions, consequential bodily injury, care and loss of services). Separate limits from Part One's statutory benefits.

A surety bond is a three-party guarantee (principal, obligee, surety) that the principal will fulfill an obligation; if they default, the surety pays and can recover from the principal. Insurance is a two-party risk-transfer contract with no recovery right.

A bond that protects an employer against employee dishonesty — theft, embezzlement, or forgery of money or property. Covers the employer's direct loss, not third-party losses. Often bundled with crime coverage in commercial policies.

The elected official heading the North Carolina Department of Insurance (NCDOI), serving a 4-year term. Has authority to approve or disapprove NCRB rate filings, hold hearings, suspend producer licenses, and enforce unfair trade practice rules.

The NC rating organization that files proposed rates for property and casualty lines with the Commissioner on behalf of all NC insurers. The Commissioner may approve, modify, or disapprove filings and hold public hearings before a rate takes effect.

The North Carolina Insurance Underwriting Association — the property insurer of last resort providing wind and hail coverage in the 18 designated coastal counties. Funded by assessments on property insurers. Used when voluntary market coverage is unavailable.

The North Carolina Joint Underwriting Association — the residual property market for risks that cannot obtain coverage in the voluntary market anywhere in the state (not just coastal). Provides basic property coverage; broader than the Beach Plan's coastal wind focus.

Resident producers must complete 24 hours of CE every 2 years, including 3 ethics hours. Property licensees also need 3 hours of flood insurance training in the first renewal period and every 4 years thereafter. Renewal is tied to the last day of the producer's birth month.

Offering the insured a portion of the premium or any other unlisted inducement as an incentive to purchase insurance — prohibited in North Carolina and most states. Distinct from legitimate discounts and advertising giveaways; constitutes an unfair trade practice under NC law.