NORTH CAROLINA PEARSON VUE ALL
LINES ADJUSTER PRACTICE EXAM
QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES
2025
1. Which of the following would be considered a direct loss?
A. Loss of rental income
B. Fire damage to a building
C. Extra expenses incurred due to loss
D. Decreased property value after repairs
A direct loss is physical damage to property. Fire damage is direct;
the others are indirect losses.
2. Under the Standard Fire Policy, which peril is not covered?
A. Fire
B. Lightning
, C. Earthquake
D. Removal of property to prevent loss
The standard fire policy only covers fire, lightning, and removal.
Earthquake is excluded unless added by endorsement.
3. An insurance company licensed in North Carolina and headquartered
in another state is considered a:
A. Foreign insurer
B. Domestic insurer
C. Authorized insurer
D. Alien insurer
An authorized insurer is one that has a certificate of authority in the
state, regardless of where it's based.
4. Which of the following terms refers to the transfer of legal rights from
the insured to the insurer after a claim payment?
A. Arbitration
B. Contribution
C. Subrogation
D. Indemnity
Subrogation allows the insurer to recover damages from a third
party after indemnifying the insured.
5. Which section of a policy contains the promise of indemnification?
A. Conditions
B. Exclusions
, C. Insuring Agreement
D. Declarations
The insuring agreement outlines the insurer’s promise to pay and
what is covered.
6. What type of policy protects against claims made during the policy
period, regardless of when the incident occurred?
A. Occurrence
B. Claims-made
C. Retroactive
D. Discovery
Claims-made policies only cover claims reported during the policy
period. It focuses on the timing of the claim rather than the event.
7. Which of the following best defines actual cash value (ACV)?
A. Market value
B. Replacement cost
C. Replacement cost minus depreciation
D. Agreed value
ACV = Replacement Cost – Depreciation. It reflects the current value
of the item at time of loss.
8. The principle of indemnity ensures that:
A. Insured profits from a loss
B. Insured is restored to the same financial position
C. Losses are always fully paid
LINES ADJUSTER PRACTICE EXAM
QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES
2025
1. Which of the following would be considered a direct loss?
A. Loss of rental income
B. Fire damage to a building
C. Extra expenses incurred due to loss
D. Decreased property value after repairs
A direct loss is physical damage to property. Fire damage is direct;
the others are indirect losses.
2. Under the Standard Fire Policy, which peril is not covered?
A. Fire
B. Lightning
, C. Earthquake
D. Removal of property to prevent loss
The standard fire policy only covers fire, lightning, and removal.
Earthquake is excluded unless added by endorsement.
3. An insurance company licensed in North Carolina and headquartered
in another state is considered a:
A. Foreign insurer
B. Domestic insurer
C. Authorized insurer
D. Alien insurer
An authorized insurer is one that has a certificate of authority in the
state, regardless of where it's based.
4. Which of the following terms refers to the transfer of legal rights from
the insured to the insurer after a claim payment?
A. Arbitration
B. Contribution
C. Subrogation
D. Indemnity
Subrogation allows the insurer to recover damages from a third
party after indemnifying the insured.
5. Which section of a policy contains the promise of indemnification?
A. Conditions
B. Exclusions
, C. Insuring Agreement
D. Declarations
The insuring agreement outlines the insurer’s promise to pay and
what is covered.
6. What type of policy protects against claims made during the policy
period, regardless of when the incident occurred?
A. Occurrence
B. Claims-made
C. Retroactive
D. Discovery
Claims-made policies only cover claims reported during the policy
period. It focuses on the timing of the claim rather than the event.
7. Which of the following best defines actual cash value (ACV)?
A. Market value
B. Replacement cost
C. Replacement cost minus depreciation
D. Agreed value
ACV = Replacement Cost – Depreciation. It reflects the current value
of the item at time of loss.
8. The principle of indemnity ensures that:
A. Insured profits from a loss
B. Insured is restored to the same financial position
C. Losses are always fully paid
