Arkansas Life Insurance Practice Exam Free - 2026

• A. $100,000
• B. $450,000
• C. $500,000
• D. $300,000

Correct answer: D. $300,000

Explanation: The Arkansas Life and Health Insurance Guaranty Association's liability is capped at $300,000 in life insurance death benefits (and $300,000 in net cash surrender or withdrawal values) per insured life, with a $300,000 aggregate per life except that health benefit plan coverage may reach $500,000. $450,000 exceeds the cap, $500,000 is the health benefit plan limit, and $100,000 is not an Arkansas figure. See Ark. Code Ann. § 23-96-114.

• A. At least 24 hours of approved continuing education, including at least 3 hours of ethics
• B. At least 20 hours annually, including 2 hours of ethics
• C. At least 30 hours every three years, with no ethics requirement
• D. At least 16 hours each year, including 1 hour of ethics

Correct answer: A. At least 24 hours of approved continuing education, including at least 3 hours of ethics

Explanation: Arkansas Insurance Department Rule 50, promulgated under the continuing-education statute, requires non-exempt resident producers to complete a minimum of 24 hours of Commissioner-approved continuing education, including at least 3 hours of ethics, in each two-year license renewal cycle, with renewal falling biennially on the producer's birthday. The 20-hour figure is the prelicensing minimum per line, not CE, and the annual and three-year options misstate the cycle. See AID Rule 50 (054.00.15 Ark. Code R. 012) and Ark. Code Ann. § 23-64-301.

• A. Within 30 days after the contract is executed
• B. Within 10 days after the first application is submitted
• C. Within 15 days after the agency contract is executed or the first application is submitted
• D. Within 60 days after the contract is executed

Correct answer: C. Within 15 days after the agency contract is executed or the first application is submitted

Explanation: Arkansas requires an appointing insurer to file a notice of appointment, in a format approved by the Commissioner, within 15 days after the date the agency contract is executed or the first insurance application is submitted; the Commissioner then verifies eligibility within 30 days. Thirty days is the period for notifying the Commissioner of an appointment termination, not for filing an appointment, and 10 and 60 days are not statutory periods. See Ark. Code Ann. § 23-64-514.

• A. A 90-day temporary license, provided she first passes the examination
• B. A temporary producer license for a period not to exceed 180 days, without requiring an examination
• C. A 12-month temporary license with full authority to solicit new business
• D. Nothing; Arkansas does not issue temporary producer licenses

Correct answer: B. A temporary producer license for a period not to exceed 180 days, without requiring an examination

Explanation: Arkansas authorizes the Commissioner to issue a temporary insurance producer license for a period not to exceed 180 days without examination when necessary to service an insurance business, including to the surviving spouse or personal representative of a deceased or disabled producer; the Commissioner may limit the licensee's authority and require sponsorship. The 90-day-with-exam and 12-month options misstate the term and exam rule, and Arkansas does provide temporary licenses. See Ark. Code Ann. § 23-64-511.

• A. Taxed as capital gains on the amount above premiums paid
• B. Tax-free as long as the policy remains in force
• C. Taxed as ordinary income on the full amount withdrawn
• D. Tax-free up to basis (premiums paid), taxable above that

Correct answer: D. Tax-free up to basis (premiums paid), taxable above that

Explanation: Cash value withdrawals are taxed on a FIFO (First-In, First-Out) basis. Withdrawals up to the total premiums paid (basis) are tax-free. Amounts exceeding basis are taxed as ordinary income.

• A. A life policy that fails the 7-pay test and loses certain tax advantages
• B. A life policy that has been reinstated after lapse under modified terms
• C. A life policy whose death benefit is reduced for a misstatement of age
• D. A life policy that passes the 7-pay test and keeps its tax advantages

Correct answer: A. A life policy that fails the 7-pay test and loses certain tax advantages

Explanation: A MEC is a life insurance policy that has been funded too quickly (fails the 7-pay test) and loses some tax advantages. Withdrawals and loans from MECs may be subject to ordinary income tax and a 10% penalty if taken before age 59½.

• A. Yes, they are a deductible medical expense if the taxpayer itemizes
• B. No, personal life insurance premiums are generally not tax-deductible
• C. Yes, but only the portion of the premium that goes toward cash value
• D. No, unless the policy is a term policy with no cash value component

Correct answer: B. No, personal life insurance premiums are generally not tax-deductible

Explanation: Premiums on personal life insurance are not deductible, because the death benefit is received income-tax free. Employer-paid group term life premiums are fully deductible to the employer as a business expense. Separately, only the cost of the first $50,000 of that group coverage is excluded from the employee's income; the cost of coverage above $50,000 is imputed to the employee as taxable wages.

• A. A contract that pays a lump-sum death benefit to a named beneficiary
• B. A bank deposit account that earns a guaranteed interest rate for a set term
• C. A contract that provides periodic income payments, often for retirement
• D. A short-term loan secured by the cash value of a permanent life policy

Correct answer: C. A contract that provides periodic income payments, often for retirement

Explanation: An annuity is a contract between an individual and an insurance company where the individual pays premiums and the insurer provides periodic income payments, typically for retirement.

• A. An annuity whose payments rise and fall with the performance of sub-accounts
• B. An annuity that must be held for a fixed period before it can be annuitized
• C. An annuity that pays a fixed amount only for a fixed number of years
• D. An annuity with guaranteed minimum interest rates and fixed payments

Correct answer: D. An annuity with guaranteed minimum interest rates and fixed payments

Explanation: A fixed annuity provides a guaranteed minimum interest rate during the accumulation phase and fixed periodic payments during the payout phase. The insurance company bears the investment risk.

• A. An annuity where payments vary based on investment performance
• B. An annuity where payments vary based on the insurer's declared interest rate
• C. An annuity where the owner may vary the timing and amount of premium payments
• D. An annuity where the insurer guarantees a minimum return and bears the risk

Correct answer: A. An annuity where payments vary based on investment performance

Explanation: A variable annuity allows the owner to invest in sub-accounts (similar to mutual funds). The accumulation value and income payments vary based on investment performance. The owner bears the investment risk.

• A. When the insurer recalculates payments each year based on returns
• B. When premiums are paid and the value grows before payout begins
• C. When the annuitant receives periodic income payments from the contract
• D. When the contract's value is paid to the beneficiary at the annuitant's death

Correct answer: B. When premiums are paid and the value grows before payout begins

Explanation: The accumulation period (also called pay-in period) is when the annuity owner pays premiums and the account value grows through interest or investment returns before income payments begin.

• A. When the beneficiary receives the remaining value at the annuitant's death
• B. When the owner is paying premiums and the value is growing tax-deferred
• C. When the annuity contract converts to periodic income payments
• D. When the owner surrenders the contract for its cash value less charges

Correct answer: C. When the annuity contract converts to periodic income payments

Explanation: Annuitization is when the accumulated value is converted into periodic income payments. Once annuitized, the contract typically cannot be reversed or surrendered for cash value.