17 Free North Carolina P&C Practice Questions: North Carolina Insurance Law Common to Both Exams (2026)
How to Use This North Carolina Insurance Law Common to Both Exams Set
Section IV of each outline is North Carolina statutes and regulations: 13 scored items on the Property exam and 15 on the Casualty exam. This chapter covers the part that is shared by both exams.
The shared law includes the insurance contract in G.S. 58-1-10, the Commissioner's powers (Article 2), general regulations (Article 3), licensing in Article 33, the Insurance Information and Privacy Protection Act in Article 39, unauthorized insurers in Article 28, Unfair Trade Practices in Article 63, G.S. 14-100 on false pretenses, and the Consumer Services Division rules.
These 17 questions come from LanePrep's North Carolina P&C quiz bank. The same Commissioner-authority pattern appears in several scenarios, because it is a pattern the exam keeps returning to.
Practice Questions 1-6: Commissioner Authority and Enforcement
Who enforces what, and what the Commissioner can do without a hearing. The recurring lesson: corrective orders and penalties are possible, and revocation needs notice and a hearing.
Question 1 (Chapter 6)
An unlicensed adjuster in North Carolina is hired by a property insurer to investigate a fire claim. The adjuster issues a reservation of rights letter to the insured, delaying the claim payment for 45 days. The insured files a complaint with the NCDOI, alleging the adjuster’s actions violated G.S. 58-33-80. Which of the following statements is true regarding the adjuster's status?
- A) The adjuster must be licensed under G.S. 58-33-80 regardless of the type of insurer that employs them; operating without a license is itself a violation.
- B) The adjuster is exempt from licensing because the employer is a surplus lines insurer.
- C) Adjusters are not regulated by the NCDOI because surplus lines business falls under federal law.
- D) Only the insurer, never the adjuster personally, can face any consequence for unlicensed adjusting.
Show answer & explanation
Answer: A
G.S. 58-33-80 requires adjusters to be licensed, and this requirement is not excused because the employer happens to be a surplus lines insurer; surplus lines business is still subject to North Carolina's licensing and unfair-practice laws. Option B and C are wrong because there is no such exemption. Option D is wrong because an unlicensed individual who adjusts claims is personally subject to the licensing requirement.
Question 2 (Chapter 6)
A North Carolina property insurer is found to have failed to disclose a material fact in a homeowners policy, leading to an unfair settlement of a water damage claim. The Commissioner determines this was an unfair claims practice under G.S. 58-63-20. Which of the following statements is accurate about the Commissioner's authority here?
- A) The Commissioner has no authority to act, because the statute does not provide for any enforcement.
- B) The insurer's Certificate of Authority is automatically revoked, with no hearing required.
- C) Only a court, not the Commissioner, can grant any remedy for this violation.
- D) The Commissioner may order the insurer to correct the violation and, after notice and an opportunity for a hearing, may impose a civil penalty.
Show answer & explanation
Answer: D
The Commissioner has authority to investigate violations of the general regulations and unfair-practice statutes and to order corrective action, including a civil penalty, but license or authority revocation is a due-process matter that requires notice and a hearing rather than happening automatically. Option A is wrong because the Commissioner does have enforcement authority here. Option B is wrong because revocation is not automatic. Option C is wrong because the Commissioner, not only a court, can act directly.
Question 3 (Chapter 6)
A North Carolina resident files a complaint with the Consumer Services Division (11 NCAC 4) alleging that their property insurer failed to honor a claim for wind damage after Hurricane Matthew in 2016. The insurer argues the loss was excluded under the policy’s named storm deductible. The Commissioner’s office refers the complaint to the Division of Insurance for review. Which of the following statements is accurate about the Commissioner's authority here?
- A) The Commissioner may order the insurer to correct the violation and, after notice and an opportunity for a hearing, may impose a civil penalty.
- B) The Commissioner has no authority to act, because the statute does not provide for any enforcement.
- C) The insurer's Certificate of Authority is automatically revoked, with no hearing required.
- D) Only a court, not the Commissioner, can grant any remedy for this violation.
Show answer & explanation
Answer: A
The Commissioner has authority to investigate violations of the general regulations and unfair-practice statutes and to order corrective action, including a civil penalty, but license or authority revocation is a due-process matter that requires notice and a hearing rather than happening automatically. Option B is wrong because the Commissioner does have enforcement authority here. Option C is wrong because revocation is not automatic. Option D is wrong because the Commissioner, not only a court, can act directly.
Question 4 (Chapter 6)
A North Carolina casualty insurer is found to have unlawfully discriminated against a policyholder by denying coverage based on the applicant’s zip code, which is a protected class under the Department's rules. The Commissioner of Insurance investigates and determines this violates G.S. 58-2-162. Which of the following corrective actions is the Commissioner authorized to take?
- A) The Commissioner may order the insurer to revise its underwriting practices and provide appropriate relief to the affected policyholder, and may impose further sanctions after notice and a hearing.
- B) The Commissioner has no authority to address an insurer's underwriting decisions.
- C) The insurer's Certificate of Authority is automatically revoked, with no hearing required.
- D) Only a private lawsuit by the policyholder, not the Commissioner, can address this.
Show answer & explanation
Answer: A
The Commissioner's general regulatory authority extends to correcting unfair discrimination in underwriting, which can include ordering changes to underwriting practices and relief for the affected policyholder, with further sanctions available after notice and a hearing. Option B is wrong because the Commissioner does have this authority. Option C is wrong because revocation is not automatic. Option D is wrong because the Commissioner can act directly, in addition to any private remedy the policyholder might separately pursue.
Question 5 (Chapter 6)
The North Carolina Commissioner of Insurance conducts a financial examination of a domestic property insurance company in Charlotte to ensure its solvency. According to G.S. 58-2-160, who is responsible for the expenses incurred during this examination?
- A) The North Carolina Department of Insurance (NCDOI) general fund
- B) The insurance company being examined
- C) The North Carolina Post Assessment Insurance Guaranty Association
- D) The National Association of Insurance Commissioners (NAIC)
Show answer & explanation
Answer: B
Under G.S. 58-2-160, the expenses of an examination of any insurance company are to be paid by the company examined. This includes the compensation and expenses of the Commissioner's appointed examiners.
Question 6 (Chapter 6)
A North Carolina Property & Casualty agent, licensed under G.S. 58-33-5, is found to have knowingly misrepresented a homeowner's policy to a client, leading the client to believe they had flood coverage when they only had wind/hail. The client suffers a flood loss and files a complaint with the NCDOI. What is the primary violation committed by the agent?
- A) Misrepresentation, an unfair trade practice under Article 63
- B) Unfair discrimination
- C) Defamation under G.S. 14-100
- D) Rebating under G.S. 58-33-85
Show answer & explanation
Answer: A
Misrepresenting the scope of coverage to a client is a form of misrepresentation, one of the unfair trade practices addressed by Article 63. Option B refers to discrimination, a different kind of violation. Option C (defamation) and C (rebating, which involves illegal inducements) do not describe what happened here.
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Practice Questions 7-12: Penalties, Rebating, Convictions and Terminated Agents
Licensing and conduct rules for the producer, including referral fees, reportable convictions and what happens after an agent leaves an agency.
Question 7 (Chapter 6)
A North Carolina insurer is found to have unlawfully canceled a homeowners policy without providing the notice required under G.S. 58-63-20. The insured files a complaint, and the Commissioner determines the cancellation was unfair. Which of the following statements is accurate about the Commissioner's authority here?
- A) The Commissioner may order the insurer to correct the violation and, after notice and an opportunity for a hearing, may impose a civil penalty.
- B) The Commissioner has no authority to act, because the statute does not provide for any enforcement.
- C) The insurer's Certificate of Authority is automatically revoked, with no hearing required.
- D) Only a court, not the Commissioner, can grant any remedy for this violation.
Show answer & explanation
Answer: A
The Commissioner has authority to investigate violations of the general regulations and unfair-practice statutes and to order corrective action, including a civil penalty, but license or authority revocation is a due-process matter that requires notice and a hearing rather than happening automatically. Option B is wrong because the Commissioner does have enforcement authority here. Option C is wrong because revocation is not automatic. Option D is wrong because the Commissioner, not only a court, can act directly.
Question 8 (Chapter 6)
During a sales meeting for a commercial auto policy, an agent offers the business owner shares of the insurance company's stock as an incentive to sign the contract. This practice is prohibited under G.S. 58-63-15 as:
- A) Defamation
- B) Stock operations and advisory board contracts
- C) Boycott and coercion
- D) Misrepresentation
Show answer & explanation
Answer: B
G.S. 58-63-15(6) prohibits 'Stock Operations and Advisory Board Contracts,' which involves promising returns or profits as an inducement to insurance, such as offering capital stock or special contracts.
Question 9 (Chapter 6)
An agent knowingly assists an unauthorized insurer in selling a commercial property policy to a North Carolina business. If the unauthorized insurer fails to pay a valid claim, what is the agent's personal liability under G.S. 58-28-45?
- A) The agent is only liable for the return of the premium
- B) The agent is personally liable for the full amount of any claim or loss within the provisions of the policy
- C) The agent has no personal liability if they disclosed the insurer's status
- D) The agent is liable for a maximum of $10,000
Show answer & explanation
Answer: B
G.S. 58-28-45 states that any person who assists an unauthorized insurer is strictly and personally liable for the full amount of any claim or loss covered by the policy if the unauthorized insurer fails to pay.
Question 10 (Chapter 6)
A North Carolina casualty insurer is investigated by the NCDOI for unfair discrimination under G.S. 58-2-162. The insurer is found to have denied coverage to a commercial auto policyholder in Durham based solely on the policyholder’s zip code, which the insurer claimed correlated with higher claim frequencies. The Commissioner determines this violates the Department's rules (Unfair Discrimination). Which of the following corrective actions is the Commissioner authorized to take?
- A) The Commissioner has no authority to address an insurer's underwriting decisions.
- B) The insurer's Certificate of Authority is automatically revoked, with no hearing required.
- C) The Commissioner may order the insurer to revise its underwriting practices and provide appropriate relief to the affected policyholder, and may impose further sanctions after notice and a hearing.
- D) Only a private lawsuit by the policyholder, not the Commissioner, can address this.
Show answer & explanation
Answer: C
The Commissioner's general regulatory authority extends to correcting unfair discrimination in underwriting, which can include ordering changes to underwriting practices and relief for the affected policyholder, with further sanctions available after notice and a hearing. Option A is wrong because the Commissioner does have this authority. Option B is wrong because revocation is not automatic. Option D is wrong because the Commissioner can act directly, in addition to any private remedy the policyholder might separately pursue.
Question 11 (Chapter 6)
An unauthorized insurer, operating without a Certificate of Authority, sells a North Carolina homeowners policy through an unlicensed agent. The policyholder files a claim after a house fire, but the insurer denies coverage, citing lack of licensure. Which of the following statements is true regarding the policy's validity?
- A) The policy is void and unenforceable, because contracts issued by unauthorized insurers are not recognized under Article 28.
- B) The policy is valid, and the North Carolina Insurance Guaranty Association must pay the claim in the insurer's place.
- C) The policy is valid, but the insurer's license may be suspended going forward.
- D) The policy is voidable only at the insurer's option, not the policyholder's.
Show answer & explanation
Answer: A
Article 28 treats contracts issued by unauthorized insurers as void and unenforceable, which is why the Guaranty Association (which protects policyholders of authorized, licensed insurers) does not step in for an unauthorized insurer's contracts. Option B is wrong because the Guaranty Association does not cover unauthorized insurers. Option C describes a separate licensing consequence, not a remedy for the policyholder. Option D mischaracterizes the void contract as merely voidable.
Question 12 (Chapter 6)
A North Carolina homeowner receives a notice of non-renewal from their property insurer, citing multiple claims in the past year. The insurer fails to provide the required 30-day notice under G.S. 58-63-20. The homeowner files a complaint with the NCDOI, and the Commissioner rules in the homeowner’s favor. Which of the following statements is accurate about the Commissioner's authority here?
- A) The Commissioner has no authority to act, because the statute does not provide for any enforcement.
- B) The insurer's Certificate of Authority is automatically revoked, with no hearing required.
- C) Only a court, not the Commissioner, can grant any remedy for this violation.
- D) The Commissioner may order the insurer to correct the violation and, after notice and an opportunity for a hearing, may impose a civil penalty.
Show answer & explanation
Answer: D
The Commissioner has authority to investigate violations of the general regulations and unfair-practice statutes and to order corrective action, including a civil penalty, but license or authority revocation is a due-process matter that requires notice and a hearing rather than happening automatically. Option A is wrong because the Commissioner does have enforcement authority here. Option B is wrong because revocation is not automatic. Option C is wrong because the Commissioner, not only a court, can act directly.
Practice Questions 13-17: Privacy, False Pretenses, Claims Handling and Unauthorized Insurers
Privacy, criminal false pretenses, claims explanations and the legal position of a contract with an unauthorized insurer.
Question 13 (Chapter 6)
A North Carolina casualty agent is terminated by their agency but continues to sell policies under the agency’s name for 30 days after termination. The agent does not notify the NCDOI of their termination. Which of the following statements is correct regarding the agent's licensing status?
- A) The agent loses authority to act for the agency upon termination, and continuing to bind coverage or use the agency's name may subject the agent to discipline by the Commissioner after notice and a hearing.
- B) The agent may continue binding coverage indefinitely, as long as the premiums are eventually remitted to the agency.
- C) Only the agency, never the individual agent, can be disciplined for this conduct.
- D) The agent's license is automatically revoked, with no hearing required.
Show answer & explanation
Answer: A
An agent who continues to bind coverage or represent an affiliation with an agency after termination is acting without authority, which the Commissioner may address through disciplinary proceedings after notice and a hearing. Option B is wrong because continuing to bind coverage after termination is not permitted. Option C is wrong because the individual agent, not only the agency, can be disciplined. Option D is wrong because license discipline is not automatic; it requires due process.
Question 14 (Chapter 6)
An agent licensed in South Carolina wants to obtain a non-resident license in North Carolina. Under G.S. 58-33-32, which of the following conditions must be met for the Commissioner to waive the North Carolina examination requirement?
- A) The agent must have at least 10 years of experience
- B) The agent's home state must award non-resident licenses to North Carolina residents on the same basis (reciprocity)
- C) The agent must be appointed by a North Carolina domestic insurer
- D) The agent must pay a double application fee
Show answer & explanation
Answer: B
G.S. 58-33-32 provides for reciprocity. The Commissioner may waive the examination for a non-resident applicant if the applicant's home state grants non-resident licenses to North Carolina residents on the same basis.
Question 15 (Chapter 6)
A commercial property insurer in Charlotte is found to be charging different rates to two different businesses that present substantially the same risk and hazard. This is a violation of G.S. 58-3-120, which prohibits:
- A) Rebating
- B) Unfair discrimination
- C) Redlining
- D) Illegal inducement
Show answer & explanation
Answer: B
G.S. 58-3-120 prohibits insurers from making or permitting any unfair discrimination between individuals or risks of essentially the same hazard and having substantially the same degree of protection.
Question 16 (Chapter 6)
A North Carolina casualty insurer is found to have unlawfully denied a commercial general liability claim by failing to provide a written explanation within the time required as required by G.S. 58-63-20. The Commissioner determines this was an unfair claims practice. under the Department's rules, what corrective action must the insurer take first to resolve the violation?
- A) Provide the required written explanation to the claimant
- B) Pay the claim in full immediately
- C) Submit a corrective action plan to the NCDOI
- D) Retrain all claims adjusters on timing requirements
Show answer & explanation
Answer: A
under the Department's rules, when an insurer violates a claims handling requirement such as the 15-business-day explanation rule under G.S. 58-63-20, the first corrective action is to provide the missing explanation to the claimant. Options B, C, and D are incorrect: payment may follow but is not the first step, and a corrective action plan or retraining may be required later but is not the initial, immediate step.
Question 17 (Chapter 6)
A North Carolina insurer is found to be transacting insurance in the state without a Certificate of Authority. The Commissioner issues an order to cease and desist. What is the legal status of an insurance contract the unauthorized insurer made with a North Carolina resident?
- A) The contract is voidable at the option of the insured.
- B) The contract is void and unenforceable as against public policy.
- C) The contract is valid only if the insured was unaware of the lack of authority.
- D) The contract is valid and enforceable against the insurer.
Show answer & explanation
Answer: D
The law penalizes the unauthorized insurer, not the member of the public who bought from it. Contracts issued by an unauthorized insurer remain enforceable against the insurer, which cannot use its own lack of authority as a defense to a claim, and the Commissioner pursues the insurer with cease-and-desist orders and penalties. A and B would punish the insured. C invents a knowledge test.
The Mistakes That Cost Marks
Choosing automatic revocation. The pattern is notice and an opportunity for a hearing, then discipline.
Thinking disclosure cures a documentation duty. Telling the client about a referral fee does not replace the agency's own records.
Believing the Commissioner has no direct power. The Commissioner can order corrective action, not only courts.
Limiting reportable conduct to in-state events. A conviction elsewhere can still matter for a North Carolina license.
Punishing the consumer. A contract made by an unauthorized insurer is enforceable against the insurer.
Your Next Step
Pick the chapter where you missed the most questions and go back to its audio lesson, then retest. For the full list of sets, see the free North Carolina P&C practice question hub. To see how the audio lessons and quizzes work, try the course preview.
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