North Carolina: Financial responsibility & insurance Practice Test
Required liability insurance, proof of insurance and insurance lapses.
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Questions are original and based on the official manual "North Carolina Driver Handbook" (Revised May 2025), North Carolina Division of Motor Vehicles (NCDMV).
All 26 questions in this practice test
Take the test above first, then use this list to study. Tap “Show answer” to see the correct answer and explanation.
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What proof of insurance is required when applying for a driver license?
- Proof of vehicle liability insurance
- Proof of collision coverage only
- Proof of health insurance
- Proof of life insurance
Show answer
Correct answer: Proof of vehicle liability insurance
The manual says you need proof of vehicle liability insurance when applying for a driver license.
Source: North Carolina Driver Handbook (Revised May 2025), page 15 · Open this page in the manual (Manual page 15)
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The proof of liability insurance for a driver license must come from what kind of insurance carrier?
- Any insurance carrier licensed in the United States
- A carrier approved by the applicant's employer
- A North Carolina-licensed insurance carrier
- A carrier chosen by the DMV office
Show answer
Correct answer: A North Carolina-licensed insurance carrier
Proof of liability insurance coverage must be from a North Carolina-licensed insurance carrier.
Source: North Carolina Driver Handbook (Revised May 2025), page 22 · Open this page in the manual (Manual page 22)
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What must the proof of insurance reflect when you are obtaining a driver license?
- Your name
- Your Social Security number
- Your driver license number
- Your date of birth
Show answer
Correct answer: Your name
The manual states that the proof of insurance must reflect your name.
Source: North Carolina Driver Handbook (Revised May 2025), page 22 · Open this page in the manual (Manual page 22)
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Which form should you obtain from your insurance agent before your visit to the driver license office if you must show proof of financial responsibility?
- Form DL-101
- Form DL-123A
- Form I-551
- Form DL-123
Show answer
Correct answer: Form DL-123
The manual advises obtaining Form DL-123 from your insurance agent in advance of your visit.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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Which applicant must provide printed proof of automobile liability insurance to obtain a driver license?
- One awarded a Limited Driving Privilege by the court
- One renewing a license that has not yet expired
- One applying for a North Carolina identification card
- One adding a motorcycle endorsement to a license
Show answer
Correct answer: One awarded a Limited Driving Privilege by the court
Applicants awarded a Limited Driving Privilege by the court must provide proof of liability insurance.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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Printed proof of liability insurance is required for applicants whose licenses are being
- renewed by mail
- replaced after being lost
- upgraded with a motorcycle endorsement
- restored after revocation or suspension
Show answer
Correct answer: restored after revocation or suspension
The manual lists licenses being restored after revocation or suspension among those needing proof of liability insurance.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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Applicants for an original license must show printed proof of liability insurance. Which applicants are included in this group?
- Those replacing a lost license
- Those transferring a license from out of state
- Those renewing a license before it expires
- Those changing their address on a license
Show answer
Correct answer: Those transferring a license from out of state
The requirement applies to applicants for an original license, including transfers from out of state.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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For how long from the date of issuance are Form DL-123, binders and certificates valid?
- 30 days
- 10 days
- 60 days
- 90 days
Show answer
Correct answer: 30 days
The manual says Form DL-123, binders and certificates are valid only for 30 days from the date of issuance.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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Which form is the certification of exemption signed at the driver license office by applicants who do not own currently registered motor vehicles?
- Form DL-123
- Form DL-101
- Form DL-123A
- Form I-551
Show answer
Correct answer: Form DL-123A
The certification of exemption is Form DL-123A, signed at the driver license office.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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What restriction does the liability insurance exemption place on the driver?
- Daylight Driving Only
- Fleet Vehicles Only
- Employer Vehicles Only
- Local Roads Only
Show answer
Correct answer: Fleet Vehicles Only
The exemption restricts the driver to the operation of Fleet Vehicles Only.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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Besides paying a duplicate fee, what must a driver present to remove the “Fleet Vehicles Only” restriction?
- A signed DL-123A form
- A court order
- A physician's vision statement
- Proof of financial responsibility
Show answer
Correct answer: Proof of financial responsibility
To remove the restriction the driver must pay a duplicate fee and present proof of financial responsibility.
Source: North Carolina Driver Handbook (Revised May 2025), page 23 · Open this page in the manual (Manual page 23)
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In certain cases, what does North Carolina law require of a driver involved in a reportable crash, besides the report to law enforcement?
- Pay for the other driver's repairs immediately
- Provide proof of financial responsibility on DMV forms
- Turn in the license plate to the officer at the scene
- Take a new road test within 30 days
Show answer
Correct answer: Provide proof of financial responsibility on DMV forms
The manual says the driver may have to provide proof of liability insurance on DMV forms that must be filed with DMV.
Source: North Carolina Driver Handbook (Revised May 2025), page 78 · Open this page in the manual (Manual page 78)
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What must the owner certify before a motor vehicle can be licensed in North Carolina?
- That the vehicle is covered by collision and comprehensive insurance
- That the vehicle is covered by liability insurance
- That the vehicle's previous owner had continuous insurance
- That the vehicle was purchased from a licensed dealer
Show answer
Correct answer: That the vehicle is covered by liability insurance
North Carolina law requires the owner to certify that the vehicle is covered by liability insurance before it can be licensed.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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Which of these is one form the required liability coverage can take?
- A savings account statement from a local bank
- A letter of guarantee from the vehicle's lienholder
- A deposit held by the county tax office
- Cash or bond deposited with the State Treasurer
Show answer
Correct answer: Cash or bond deposited with the State Treasurer
Coverage can be a policy from a licensed company, cash or bond deposited with the State Treasurer, or a certificate of self-insurance for fleets.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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A certificate of self-insurance is available for fleets of how many vehicles?
- 25 or more vehicles
- 10 or more vehicles
- 50 or more vehicles
- 100 or more vehicles
Show answer
Correct answer: 25 or more vehicles
The manual says self-insurance certificates are for fleets of 25 or more vehicles.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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What is the minimum liability insurance required for injuries to any one person in a crash?
- $15,000
- $25,000
- $30,000
- $60,000
Show answer
Correct answer: $30,000
The minimum is $30,000 for injuries to any one person in a crash.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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What is the minimum liability insurance required for all personal injuries in a crash?
- $30,000
- $60,000
- $50,000
- $100,000
Show answer
Correct answer: $60,000
The minimum is $60,000 for all personal injuries in a crash.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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What is the minimum liability insurance required for all property damage in a crash?
- $10,000
- $30,000
- $50,000
- $25,000
Show answer
Correct answer: $25,000
The minimum is $25,000 for all property damage in a crash.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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What is the minimum liability insurance required for a commercial motor vehicle?
- $750,000
- $100,000
- $500,000
- $1,000,000
Show answer
Correct answer: $750,000
The minimum for a commercial motor vehicle is $750,000.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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If the DMV is notified that an owner is operating a vehicle without proper liability insurance, for how long could the license plate be revoked unless proof of continuous coverage is provided?
- 10 days
- 60 days
- 30 days
- 90 days
Show answer
Correct answer: 30 days
The plate could be revoked for 30 days unless proof of continuous insurance coverage is provided.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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For how long must the owner of a registered vehicle maintain continuous liability insurance?
- Only while the vehicle is being driven on public roads
- As long as the vehicle has a valid license plate
- Only during the first year of registration
- Until the vehicle title is transferred to a lienholder
Show answer
Correct answer: As long as the vehicle has a valid license plate
North Carolina law requires continuous liability insurance as long as the vehicle has a valid license plate.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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For what period do liability insurance policies remain in effect?
- Three months
- One year
- 30 days
- Six months
Show answer
Correct answer: Six months
Policies take effect at 12:01 a.m. on the date of issuance and remain in effect for six months.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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At what time on the date of issuance do liability insurance policies take effect?
- 12:01 a.m.
- 12:00 noon
- 5:00 p.m.
- 9:00 a.m.
Show answer
Correct answer: 12:01 a.m.
Policies are effective at 12:01 a.m. on the date of issuance.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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How does North Carolina treat a grace period on a liability insurance policy?
- It allows a 10-day grace period after the policy expires
- It allows a 30-day grace period if the owner is renewing
- It does not honor a grace period
- It allows a grace period only for commercial vehicles
Show answer
Correct answer: It does not honor a grace period
The manual says North Carolina does not honor a grace period.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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According to the manual, a grace period for liability insurance is an agreement between which parties only?
- The insured and the DMV
- The insured and the insurance company
- The insurance company and the State Treasurer
- The vehicle owner and the county tax office
Show answer
Correct answer: The insured and the insurance company
A grace period is an agreement between the Insured and the insurance company only.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)
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To avoid a fine or penalty, when should a vehicle's valid license plate be surrendered?
- Before the liability insurance is terminated or cancelled
- After the liability insurance has been terminated or cancelled
- Only when the vehicle is sold or the title is transferred
- At the next registration renewal or inspection
Show answer
Correct answer: Before the liability insurance is terminated or cancelled
To avoid a fine or penalty, the plate should be surrendered prior to termination or cancellation of liability insurance.
Source: North Carolina Driver Handbook (Revised May 2025), page 99 · Open this page in the manual (Manual page 99)