Arkansas Property & Casualty Insurance Practice Exam Free - 2026

• A. At least 30 days before the expiration of the policy's existing term
• B. At least 20 days before expiration
• C. At least 60 days before expiration
• D. At least 10 days before expiration

Correct answer: A. At least 30 days before the expiration of the policy's existing term

Explanation: Arkansas requires the insurer to give the insured written notice of nonrenewal or an offer of renewal at least 30 days before expiration of the policy's existing term, stating the new premium and any changes in deductibles or provisions, with notice to the producer as well; grounds for nonrenewal must be supplied on written request made at least 15 days before nonrenewal takes effect. Sixty days is the notice period the statute reserves for commercial policies under a separate section, and 20 and 10 days are cancellation-notice periods, not nonrenewal periods. See Ark. Code Ann. § 23-89-305.

• A. Yes; an insurer may cancel mid-term for any underwriting reason with proper notice
• B. No; after a policy has been in effect 60 days, cancellation is permitted only for nonpayment of premium, specified driving convictions (such as DWI or three moving violations in the policy period), suspension or revocation of a license or registration, fraud or material misrepresentation, or nonpayment of membership dues
• C. Yes, provided the insurer gives 45 days' notice
• D. Yes, but only if the accident occurred within the first 90 days of the policy

Correct answer: B. No; after a policy has been in effect 60 days, cancellation is permitted only for nonpayment of premium, specified driving convictions (such as DWI or three moving violations in the policy period), suspension or revocation of a license or registration, fraud or material misrepresentation, or nonpayment of membership dues

Explanation: Arkansas limits mid-term cancellation of a personal auto policy that has been in effect at least 60 days (or is a renewal) to enumerated grounds: nonpayment of premium; conviction of specified offenses including driving while intoxicated or three separate traffic violations during the policy period; suspension or revocation of the driver's license or registration; fraud or material misrepresentation; and nonpayment of membership dues where applicable. A single at-fault accident is not a listed ground, so the 'any underwriting reason', 45-day-notice, and 90-day answers are wrong. See Ark. Code Ann. § 23-89-303.

• A. $210,000, the actual cash value
• B. The depreciated value as determined by an independent appraiser
• C. The replacement cost as rebuilt
• D. $250,000, the full amount stated in the policy

Correct answer: D. $250,000, the full amount stated in the policy

Explanation: Arkansas's valued policy law provides that in case of a total loss by fire or natural disaster (other than flood or earthquake) the property policy is a liquidated demand for the full amount stated in the policy or on which premium was charged; for commercial policies the amount is reduced by the deductible. The law does not apply where the loss is caused by the insured's criminal act or fraud, where two or more policies insure the same property, to builder's risk or blanket policies, or to personal property and detached structures. Actual cash value, appraised depreciation, and replacement cost are therefore not the measure for a total fire loss on the dwelling. See Ark. Code Ann. § 23-88-101.

• A. Up to $300,000 on the individual claim, plus 100% of unearned premium up to $25,000 per policy
• B. Up to $100,000 on the claim, plus unearned premium up to $10,000
• C. Up to $500,000 on the claim, plus unearned premium up to $25,000
• D. The full $400,000 claim and the full $30,000 unearned premium

Correct answer: A. Up to $300,000 on the individual claim, plus 100% of unearned premium up to $25,000 per policy

Explanation: Arkansas defines a covered claim as an unpaid claim within the coverage of a policy of an insolvent insurer where the claimant or insured resides in Arkansas or the property is located there; individual covered claims (other than workers' compensation) are limited to $300,000, and the association also covers 100% of unearned premium up to $25,000 per policy. Claims of persons with net worth over $50,000,000 and punitive damages are excluded. The $100,000/$10,000 and $500,000 figures are wrong, and the association does not pay the full claim above the cap. See Ark. Code Ann. § 23-90-103.

• A. Coverage for employees injured on the job, regardless of fault
• B. Coverage for employees injured on the job when the employer is proven negligent
• C. Coverage for employers sued by employees for wrongful termination
• D. Coverage for lost wages when an employee is laid off or furloughed

Correct answer: A. 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. No, it's optional in every state unless the employer elects coverage
• B. Yes, it's mandatory in most states for employers with employees
• C. Yes, it's required in every state for employers with 50 or more employees
• D. Yes, it's required by federal law for every employer nationwide

Correct answer: B. 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. File a sworn proof of loss before any other action
• B. Obtain repair estimates from at least two contractors
• C. Promptly notify the insurance company of the loss
• D. Begin permanent repairs to restore the property

Correct answer: C. 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. A report prepared by the adjuster estimating the amount of damage
• B. A written notice from the insurer acknowledging that a claim was filed
• C. A police or fire department report confirming the loss occurred
• D. A formal sworn statement from the insured documenting the loss

Correct answer: D. 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 investigate claims and determine the amount the insurer should pay
• B. To adjust premiums and coverage limits at each policy renewal
• C. To decide whether an applicant meets the insurer's underwriting standards
• D. To approve or deny claims on behalf of the state insurance department

Correct answer: A. 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. Damaged property the insured is required to keep and repair at their own expense after a partial claim payment
• B. Damaged property the insurer takes over after paying a loss, which it may sell to reduce the net cost
• C. The insurer's right to recover its claim payment from the third party who caused the loss
• D. The amount by which a claim payment is reduced for depreciation on damaged property

Correct answer: B. Damaged property the insurer takes over after paying a loss, which it may sell to reduce the net cost

Explanation: Salvage is damaged property the insurer takes over after paying a claim, and it may then sell to reduce the net cost of the loss. It is not limited to total losses; property forms let the insurer take all or part of damaged property at an agreed or appraised value. Salvage concerns the property itself, whereas subrogation concerns recovering money from the party responsible for the loss.

• A. The insured's right to sue the insurer for an unreasonable claim denial
• B. The insurer's right to take over damaged property after paying a total loss
• C. The insurer's right to pursue recovery from the party responsible for the loss
• D. The insurer's right to cancel the policy after paying a large claim

Correct answer: C. 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. Unintentional misstatement of a material fact on an application
• B. Failure to disclose a fact the applicant did not know was material
• C. Purchasing coverage from several insurers on the same property
• 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.