Arkansas Property and Casualty Insurance Practice Exam Free 2026

• A. Retirement benefits insurance
• B. Coverage for employees injured on the job, regardless of fault
• C. Coverage paying employees extra wages
• D. Unemployment insurance

Correct answer: B. Coverage for employees injured on the job, regardless of fault

Explanation: Workers compensation insurance provides benefits to employees who are injured or become ill as a result of their job. It covers medical expenses, lost wages, and rehabilitation costs regardless of fault.

• A. Only for large corporations
• B. No, it's always optional
• C. Only for dangerous jobs
• D. Yes, it's mandatory in most states for employers with employees

Correct answer: D. Yes, it's mandatory in most states for employers with employees

Explanation: Workers compensation insurance is mandatory in most states for businesses with employees. Requirements vary by state regarding exemptions, coverage limits, and employer size thresholds.

• A. Repair the damage immediately
• B. Promptly notify the insurance company of the loss
• C. Calculate the claim amount
• D. Call a lawyer

Correct answer: B. Promptly notify the insurance company of the loss

Explanation: The insured's first duty after a loss is to promptly notify the insurance company. Delay in notification can potentially affect the claim if it prejudices the insurer's ability to investigate.

• A. Evidence that coverage was purchased
• B. A loss ratio calculation
• C. A formal sworn statement from the insured documenting the loss
• D. Proof that the loss was accidental

Correct answer: C. A formal sworn statement from the insured documenting the loss

Explanation: A proof of loss is a formal, sworn statement submitted by the insured to the insurance company documenting the facts of the loss, the amount claimed, and other relevant information.

• A. To adjust premium rates
• B. To sell additional coverage
• C. To investigate claims and determine the amount the insurer should pay
• D. To deny all claims

Correct answer: C. To investigate claims and determine the amount the insurer should pay

Explanation: A claims adjuster investigates insurance claims to determine coverage, evaluate the extent of damage or loss, and recommend appropriate claim payment amounts based on policy terms.

• A. Recovering stolen property
• B. Salvaging a denied claim
• C. Damaged property retained by the insurer after paying a total loss claim
• D. Saving the policy from cancellation

Correct answer: C. Damaged property retained by the insurer after paying a total loss claim

Explanation: Salvage refers to damaged property that the insurer takes possession of after paying a total loss claim. The insurer may sell the salvage to recover some of the claim payment.

• A. Transferring the policy to another person
• B. Reducing the claim amount
• C. Substituting one policy for another
• D. The insurer's right to pursue recovery from the party responsible for the loss

Correct answer: D. The insurer's right to pursue recovery from the party responsible for the loss

Explanation: Subrogation is the insurer's right, after paying a claim, to pursue recovery of the payment from the third party who caused the loss. This prevents the insured from collecting twice.

• A. Disagreeing with a claim decision
• B. Filing a legitimate claim
• C. Changing insurers frequently
• D. Intentional deception to obtain insurance benefits illegally

Correct answer: D. Intentional deception to obtain insurance benefits illegally

Explanation: Insurance fraud is intentional deception committed by an applicant, policyholder, or claimant for the purpose of obtaining insurance benefits to which they are not entitled.

• A. Electrical fire damage
• B. The intentional and malicious burning of property
• C. Smoke damage without fire
• D. Accidental fire damage

Correct answer: B. The intentional and malicious burning of property

Explanation: Arson is the intentional and malicious burning of property. Insurance claims for fire losses caused by arson committed by the insured are denied and can result in criminal prosecution.

• A. Defending against premium increases
• B. The insurer's obligation to provide legal defense for covered claims
• C. A requirement to hire a defense attorney
• D. The insured's duty to defend the insurer

Correct answer: B. The insurer's obligation to provide legal defense for covered claims

Explanation: The duty to defend is the insurer's obligation to provide legal defense for the insured against covered claims, even if the claims are groundless. This is separate from the duty to pay damages.

• A. Switching insurance companies
• B. Disagreeing with policy terms
• C. An insurer's unreasonable denial or delay of legitimate claims
• D. Purchasing insurance you don't need

Correct answer: C. An insurer's unreasonable denial or delay of legitimate claims

Explanation: Bad faith occurs when an insurer unreasonably denies or delays payment of legitimate claims, fails to investigate properly, or otherwise acts unfairly toward the insured. It can result in significant penalties.

• A. Insurance for construction workers
• B. Coverage for construction defects
• C. Insurance for real estate developers
• D. Coverage for buildings under construction against damage or loss

Correct answer: D. Coverage for buildings under construction against damage or loss

Explanation: Builders risk insurance (course of construction insurance) covers buildings under construction against physical damage or loss from covered perils like fire, vandalism, or weather.

No. This is an independent study resource. Use it with the official Arkansas regulator and exam-vendor resources before scheduling or testing.

Arkansas Insurance Department is the regulator/source authority referenced for this page. Always verify current licensing rules directly with official sources.

The current vendor/source note used on this page is: Arkansas licensing resources reference PSI testing materials and NIPR notes that resident applicants receive Authorization to Test from PSI after background check and application clearance.

Review property insurance, casualty insurance, liability, auto, homeowners, commercial lines, policy provisions, claims basics, producer duties, state law, and unfair trade practices plus the Arkansas-specific law and regulation sections in the official candidate handbook or content outline.

No. It can help you review concepts and identify weak areas, but it cannot guarantee exam results, licensing eligibility, or licensing approval.