NORTH CAROLINA PEARSON VUE ALL LINES ADJUSTER
PRACTICE EXAM QUESTIONS AND CORRECT ANSWERS
Question 1 An adjuster is explaining the concept of indemnity to a claimant. Which statement
best describes indemnity?
A) The insured is restored to the same financial position they were in before the loss
B) The insured receives more than the actual cash value of the loss
C) The insurer pays only the replacement cost regardless of policy limits
D) The insured must prove negligence before any payment is made
Correct Answer: A Rationale: Indemnity means the insured is placed in the same financial
condition they were in prior to the loss (no better, no worse). B and C violate the principle of
indemnity; D confuses liability with property coverage.
Question 2 Which of the following is an example of an insurable interest?
A) A neighbor insuring another neighbor’s house
B) A mortgagee insuring the mortgaged property
C) A stranger insuring a celebrity’s life
D) An ex-spouse insuring their former spouse’s car after divorce
Correct Answer: B Rationale: A mortgagee has a financial interest in the property (the loan). A,
C, and D lack a financial or legal relationship at the time of loss.
1: Under NC law, who regulates insurance licensing and market conduct?
A. NC Department of Revenue
B. NC Department of Insurance (NCDOI)
C. NC Secretary of State
D. NC General Assembly
CORRECT ANSWER: B. NC Department of Insurance (NCDOI)
Rationale: The NCDOI, led by the Commissioner of Insurance, regulates licensing, market
conduct, rates, and consumer protection for insurance in North Carolina.
2: What is the primary purpose of an insurance adjuster?
,A. To sell insurance policies
B. To investigate, evaluate, and settle insurance claims
C. To underwrite new business
D. To defend lawsuits
CORRECT ANSWER: B. To investigate, evaluate, and settle insurance claims
Rationale: Adjusters represent insurers or insureds in investigating losses, determining coverage,
evaluating damages, and negotiating settlements.
3: Which NC statute governs unfair trade practices in insurance?
A. NC Gen. Stat. Chapter 58, Article 63
B. NC Gen. Stat. Chapter 20
C. NC Gen. Stat. Chapter 14
D. NC Gen. Stat. Chapter 95
CORRECT ANSWER: A. NC Gen. Stat. Chapter 58, Article 63
Rationale: Article 63 of Chapter 58 contains NC's Unfair Claims Settlement Practices Act,
prohibiting deceptive or unfair claims handling.
4: What is "actual cash value" (ACV) in property claims?
A. Replacement cost without depreciation
B. Replacement cost minus depreciation
C. Market value of the property
D. Agreed value in the policy
CORRECT ANSWER: B. Replacement cost minus depreciation
Rationale: ACV typically equals replacement cost at the time of loss, minus depreciation for age,
wear, and obsolescence.
5: Which coverage in a standard homeowners policy covers the dwelling structure?
A. Coverage A
B. Coverage B
C. Coverage C
D. Coverage D
CORRECT ANSWER: A. Coverage A
Rationale: Coverage A (Dwelling) covers the main residence structure; Coverage B is other
structures; C is personal property; D is loss of use.
,6: Under NC law, what is required for an adjuster license?
A. High school diploma only
B. Pre-licensing education, exam, and background check
C. College degree in insurance
D. No requirements
CORRECT ANSWER: B. Pre-licensing education, exam, and background check
Rationale: NC requires adjusters to complete approved pre-licensing education, pass the state
exam, and undergo a criminal background check.
7: What is "subrogation" in insurance claims?
A. The insured's right to appeal a denial
B. The insurer's right to pursue recovery from a responsible third party
C. The adjuster's right to deny claims
D. The state's right to regulate rates
CORRECT ANSWER: B. The insurer's right to pursue recovery from a responsible third party
Rationale: Subrogation allows an insurer who paid a claim to step into the insured's shoes and
seek reimbursement from the party legally responsible for the loss.
8: Which auto insurance coverage pays for damage to the insured's vehicle from non-collision
perils?
A. Liability
B. Collision
C. Comprehensive
D. Medical Payments
CORRECT ANSWER: C. Comprehensive
Rationale: Comprehensive (Other Than Collision) covers damage from theft, fire, vandalism,
weather, animals, etc., excluding collision with another vehicle or object.
9: Under NC law, what is the minimum liability limit for auto insurance?
A. 25/50/25
B. 30/60/25
C. 50/100/25
D. 100/300/100
CORRECT ANSWER: B. 30/60/25
, Rationale: NC minimum liability limits are $30,000 bodily injury per person, $60,000 per
accident, and $25,000 property damage (30/60/25).
10: What is "duty of good faith and fair dealing"?
A. The insured's duty to pay premiums
B. The insurer's duty to handle claims fairly and honestly
C. The adjuster's duty to maximize profits
D. The state's duty to set rates
CORRECT ANSWER: B. The insurer's duty to handle claims fairly and honestly
Rationale: Insurers have an implied covenant to deal fairly and in good faith with insureds,
including reasonable claim investigation and settlement.
11: Which homeowners coverage covers personal property?
A. Coverage A
B. Coverage B
C. Coverage C
D. Coverage E
CORRECT ANSWER: C. Coverage C
Rationale: Coverage C covers personal property (contents) worldwide, subject to policy limits
and exclusions.
12: Under NC law, how long is an adjuster license valid before renewal?
A. 1 year
B. 2 years
C. 3 years
D. 5 years
CORRECT ANSWER: B. 2 years
Rationale: NC adjuster licenses expire every 2 years and require continuing education for
renewal.
13: What is "reservation of rights" in claims handling?
A. The insured reserves the right to sue
B. The insurer reserves policy defenses while investigating/settling
C. The adjuster reserves the right to deny
D. The state reserves regulatory authority
PRACTICE EXAM QUESTIONS AND CORRECT ANSWERS
Question 1 An adjuster is explaining the concept of indemnity to a claimant. Which statement
best describes indemnity?
A) The insured is restored to the same financial position they were in before the loss
B) The insured receives more than the actual cash value of the loss
C) The insurer pays only the replacement cost regardless of policy limits
D) The insured must prove negligence before any payment is made
Correct Answer: A Rationale: Indemnity means the insured is placed in the same financial
condition they were in prior to the loss (no better, no worse). B and C violate the principle of
indemnity; D confuses liability with property coverage.
Question 2 Which of the following is an example of an insurable interest?
A) A neighbor insuring another neighbor’s house
B) A mortgagee insuring the mortgaged property
C) A stranger insuring a celebrity’s life
D) An ex-spouse insuring their former spouse’s car after divorce
Correct Answer: B Rationale: A mortgagee has a financial interest in the property (the loan). A,
C, and D lack a financial or legal relationship at the time of loss.
1: Under NC law, who regulates insurance licensing and market conduct?
A. NC Department of Revenue
B. NC Department of Insurance (NCDOI)
C. NC Secretary of State
D. NC General Assembly
CORRECT ANSWER: B. NC Department of Insurance (NCDOI)
Rationale: The NCDOI, led by the Commissioner of Insurance, regulates licensing, market
conduct, rates, and consumer protection for insurance in North Carolina.
2: What is the primary purpose of an insurance adjuster?
,A. To sell insurance policies
B. To investigate, evaluate, and settle insurance claims
C. To underwrite new business
D. To defend lawsuits
CORRECT ANSWER: B. To investigate, evaluate, and settle insurance claims
Rationale: Adjusters represent insurers or insureds in investigating losses, determining coverage,
evaluating damages, and negotiating settlements.
3: Which NC statute governs unfair trade practices in insurance?
A. NC Gen. Stat. Chapter 58, Article 63
B. NC Gen. Stat. Chapter 20
C. NC Gen. Stat. Chapter 14
D. NC Gen. Stat. Chapter 95
CORRECT ANSWER: A. NC Gen. Stat. Chapter 58, Article 63
Rationale: Article 63 of Chapter 58 contains NC's Unfair Claims Settlement Practices Act,
prohibiting deceptive or unfair claims handling.
4: What is "actual cash value" (ACV) in property claims?
A. Replacement cost without depreciation
B. Replacement cost minus depreciation
C. Market value of the property
D. Agreed value in the policy
CORRECT ANSWER: B. Replacement cost minus depreciation
Rationale: ACV typically equals replacement cost at the time of loss, minus depreciation for age,
wear, and obsolescence.
5: Which coverage in a standard homeowners policy covers the dwelling structure?
A. Coverage A
B. Coverage B
C. Coverage C
D. Coverage D
CORRECT ANSWER: A. Coverage A
Rationale: Coverage A (Dwelling) covers the main residence structure; Coverage B is other
structures; C is personal property; D is loss of use.
,6: Under NC law, what is required for an adjuster license?
A. High school diploma only
B. Pre-licensing education, exam, and background check
C. College degree in insurance
D. No requirements
CORRECT ANSWER: B. Pre-licensing education, exam, and background check
Rationale: NC requires adjusters to complete approved pre-licensing education, pass the state
exam, and undergo a criminal background check.
7: What is "subrogation" in insurance claims?
A. The insured's right to appeal a denial
B. The insurer's right to pursue recovery from a responsible third party
C. The adjuster's right to deny claims
D. The state's right to regulate rates
CORRECT ANSWER: B. The insurer's right to pursue recovery from a responsible third party
Rationale: Subrogation allows an insurer who paid a claim to step into the insured's shoes and
seek reimbursement from the party legally responsible for the loss.
8: Which auto insurance coverage pays for damage to the insured's vehicle from non-collision
perils?
A. Liability
B. Collision
C. Comprehensive
D. Medical Payments
CORRECT ANSWER: C. Comprehensive
Rationale: Comprehensive (Other Than Collision) covers damage from theft, fire, vandalism,
weather, animals, etc., excluding collision with another vehicle or object.
9: Under NC law, what is the minimum liability limit for auto insurance?
A. 25/50/25
B. 30/60/25
C. 50/100/25
D. 100/300/100
CORRECT ANSWER: B. 30/60/25
, Rationale: NC minimum liability limits are $30,000 bodily injury per person, $60,000 per
accident, and $25,000 property damage (30/60/25).
10: What is "duty of good faith and fair dealing"?
A. The insured's duty to pay premiums
B. The insurer's duty to handle claims fairly and honestly
C. The adjuster's duty to maximize profits
D. The state's duty to set rates
CORRECT ANSWER: B. The insurer's duty to handle claims fairly and honestly
Rationale: Insurers have an implied covenant to deal fairly and in good faith with insureds,
including reasonable claim investigation and settlement.
11: Which homeowners coverage covers personal property?
A. Coverage A
B. Coverage B
C. Coverage C
D. Coverage E
CORRECT ANSWER: C. Coverage C
Rationale: Coverage C covers personal property (contents) worldwide, subject to policy limits
and exclusions.
12: Under NC law, how long is an adjuster license valid before renewal?
A. 1 year
B. 2 years
C. 3 years
D. 5 years
CORRECT ANSWER: B. 2 years
Rationale: NC adjuster licenses expire every 2 years and require continuing education for
renewal.
13: What is "reservation of rights" in claims handling?
A. The insured reserves the right to sue
B. The insurer reserves policy defenses while investigating/settling
C. The adjuster reserves the right to deny
D. The state reserves regulatory authority
