NC PROPERTY AND CASUALTY INSURANCE
| COMPREHENSIVE EXAM PREP, PRACTICE
QUESTIONS, CORRECT ANSWERS AND
STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Removal- Standard Fire Policy is the process of removing property to protect it from the perils of fire and lightening at
the insured premises or when fire or lightening at neighboring premises endanger
property located at the insured premises. SFP automatically provides removal coverages
for 5 days.
SFP Losses Covered Damage by the peril
Damage as a direct result of the peril
Water damage from putting out a fire
Water damage from rain, hole burnes in roof.
SFP Exclusions A- T-O-N-E-R
Acts of War
Orders of Civil Authority
Theft
Neglect
Explosion or Riot
SFP Conditional Exclusions Increase in hazard. ex. making fireworks in a home
Vacancy or Unoccupancy for more than 60 days.
SFP Inception & Expiration starts 12:01 am
expires 12:01 am
4 limits on SFP policy Recovery may not exceed the lowest amount of:
Policy limit
ACV
Cost to repair or replace
Interest of the insured
Pro Rata Liability condition when more than one policy covers the same loss.
(Policy A limits of liab/ A+B) x Loss
(Policy B limits of liab/ A+B) x Loss
Equals the amount both policies will contribute.
,Insurer's Option in Loss Settlement Take posession of all property and pay the insured the appraised value
or
Repair, Rebuild or Replace damaged properties.
Either option, insured must be notified within 30 days.
Requirements for the insured in the event of a Loss Immediate written notice
Protect property from further damage
Separate damage and undamaged property
Furnish inventory of damaged and undamaged
Submit signed proof of loss within 60 days
Produce books and records, exhibit remains of damaged property, Submit to examination
under oath.
Appraisal If insurer and insured don't agree on value. Both parties hires an appraiser within 20 days.
The two appraisers then chose an umpire. Who reviews both appraisals and makes the
ultimate decision.
Suits against the Company North Carolina allows 3 years for a suit to be presented. All conditions must be met first.
Insurance -A plan of spreading risk of possible loss over a large number of people.
-Based on a mathematical principle called the law of large numbers.
-It protects against the uncertainty of risk of when a financial loss might occur.
Speculative Risk Chance of loss or gain. Buying stock or gambling is example (cannot Insure)
Pure Risk Chance of loss only. Not all are insurance
insurable risk A risk that an insurance company is willing to accept.
-low probability of loss occurring
-less than catastrophic results
-Loss must be measurable
-Loss must be significant
-Loss must be accidental and unintended
Probability Measures the chance of an event occurring. Measure of uncertainty.
, Law of Large Numbers A mathematical principle that makes it possible to predict future losses based upon prior
experience . The law states that as a large number of events are included, the difference
between actual and expected results becomes smaller. Insurance relies upon the past
results of a large population of similar people to predict future loss experience.
Spread of risk/geographical dispersion Decreases probability of loss. Spreading the companies exposures over a broad
geographical area in order to avoid large losses in the event of a catastrophic event
(hurricane)
adverse selection Occurs when insureds with a high risk of loss attempt to purchase insurance and are
successful in obtaining insurance
Retention When liability for a loss is maintained by the individual by not purchasing insurance.
Another Example is a deductible, retaining a portion of a covered loss
Transfer Shift responsibility for a loss to an insurance company through the purchase of insurance
Control/Reduction Attempt to prevent a loss or to reduce the amount of the loss. *Example* (installation of
a sprinkler system)
Perils Cause of loss
Such as fire, theft, wind, hail, etc.
Hazards Increase the probability of a peril occurring.
*example*. Bald tires on a car increase a wreck happening
Principle of Indemnity Pays to the insured only what has been lost without a gain. (Restore) to the original
financial position.
Reinsurance Insurers sell portions of their individual contracts of insurance to other companies. This
helps with the spread of risk
social insurance government policy aimed at protecting people against the risk of adverse events.
**examples are reinsurance, workers comp, flood insurance
Private or voluntary insurance Individuals seek coverage to meet recognized needs. Example is: if you pay something
off, it's your choice to get insurance on it. (Not required)
| COMPREHENSIVE EXAM PREP, PRACTICE
QUESTIONS, CORRECT ANSWERS AND
STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Removal- Standard Fire Policy is the process of removing property to protect it from the perils of fire and lightening at
the insured premises or when fire or lightening at neighboring premises endanger
property located at the insured premises. SFP automatically provides removal coverages
for 5 days.
SFP Losses Covered Damage by the peril
Damage as a direct result of the peril
Water damage from putting out a fire
Water damage from rain, hole burnes in roof.
SFP Exclusions A- T-O-N-E-R
Acts of War
Orders of Civil Authority
Theft
Neglect
Explosion or Riot
SFP Conditional Exclusions Increase in hazard. ex. making fireworks in a home
Vacancy or Unoccupancy for more than 60 days.
SFP Inception & Expiration starts 12:01 am
expires 12:01 am
4 limits on SFP policy Recovery may not exceed the lowest amount of:
Policy limit
ACV
Cost to repair or replace
Interest of the insured
Pro Rata Liability condition when more than one policy covers the same loss.
(Policy A limits of liab/ A+B) x Loss
(Policy B limits of liab/ A+B) x Loss
Equals the amount both policies will contribute.
,Insurer's Option in Loss Settlement Take posession of all property and pay the insured the appraised value
or
Repair, Rebuild or Replace damaged properties.
Either option, insured must be notified within 30 days.
Requirements for the insured in the event of a Loss Immediate written notice
Protect property from further damage
Separate damage and undamaged property
Furnish inventory of damaged and undamaged
Submit signed proof of loss within 60 days
Produce books and records, exhibit remains of damaged property, Submit to examination
under oath.
Appraisal If insurer and insured don't agree on value. Both parties hires an appraiser within 20 days.
The two appraisers then chose an umpire. Who reviews both appraisals and makes the
ultimate decision.
Suits against the Company North Carolina allows 3 years for a suit to be presented. All conditions must be met first.
Insurance -A plan of spreading risk of possible loss over a large number of people.
-Based on a mathematical principle called the law of large numbers.
-It protects against the uncertainty of risk of when a financial loss might occur.
Speculative Risk Chance of loss or gain. Buying stock or gambling is example (cannot Insure)
Pure Risk Chance of loss only. Not all are insurance
insurable risk A risk that an insurance company is willing to accept.
-low probability of loss occurring
-less than catastrophic results
-Loss must be measurable
-Loss must be significant
-Loss must be accidental and unintended
Probability Measures the chance of an event occurring. Measure of uncertainty.
, Law of Large Numbers A mathematical principle that makes it possible to predict future losses based upon prior
experience . The law states that as a large number of events are included, the difference
between actual and expected results becomes smaller. Insurance relies upon the past
results of a large population of similar people to predict future loss experience.
Spread of risk/geographical dispersion Decreases probability of loss. Spreading the companies exposures over a broad
geographical area in order to avoid large losses in the event of a catastrophic event
(hurricane)
adverse selection Occurs when insureds with a high risk of loss attempt to purchase insurance and are
successful in obtaining insurance
Retention When liability for a loss is maintained by the individual by not purchasing insurance.
Another Example is a deductible, retaining a portion of a covered loss
Transfer Shift responsibility for a loss to an insurance company through the purchase of insurance
Control/Reduction Attempt to prevent a loss or to reduce the amount of the loss. *Example* (installation of
a sprinkler system)
Perils Cause of loss
Such as fire, theft, wind, hail, etc.
Hazards Increase the probability of a peril occurring.
*example*. Bald tires on a car increase a wreck happening
Principle of Indemnity Pays to the insured only what has been lost without a gain. (Restore) to the original
financial position.
Reinsurance Insurers sell portions of their individual contracts of insurance to other companies. This
helps with the spread of risk
social insurance government policy aimed at protecting people against the risk of adverse events.
**examples are reinsurance, workers comp, flood insurance
Private or voluntary insurance Individuals seek coverage to meet recognized needs. Example is: if you pay something
off, it's your choice to get insurance on it. (Not required)
