State RegulationsNC specificDifficulty 1/5
Under the North Carolina insurance code, which of the following best describes a contract of insurance?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Article 1 of Chapter 58 (G.S. 58-1-10), insurance is a contract in which one party (the insurer) undertakes to indemnify another against loss or to pay a specified sum upon the occurrence of a contingent, uncertain event, in exchange for a premium. This definition drives every downstream rule the NCDOI enforces: only the insurer is the contracting party, and the obligation is triggered by contingent events rather than guaranteed outcomes.
Why the other options are wrong
- B) No insurance contract guarantees against every possible loss; coverage is limited to the perils, amounts, and conditions stated in the policy.
- C) The insurer, not the producer, is the party to the contract; a producer sells and services the policy but never personally promises to pay claims.
- D) An insurance contract is a binding bilateral exchange for premium, not a discretionary gift that the insurer may choose to honor or ignore.
Memory hook
Insurer promises, contingent event triggers, premium buys it - that is an insurance contract.