Free Arkansas P&C Exam Flashcards

The Governor appoints the Commissioner with the advice and consent of the Senate, and the Commissioner serves at the Governor's pleasure as head of the Arkansas Insurance Department (Ark. Code 23-61-102). The office is appointed, never elected, and AID sits within the Arkansas Department of Commerce.

AID Rule 31 requires a minimum of 20 hours of instruction for each line of authority, so property plus casualty equals 40 hours. The coursework must be finished no more than two years before the licensing exam, and PSI requires proof of it at every attempt.

AID Rule 50 requires 24 hours of Commissioner-approved CE biennially, on or before the licensee's birthday, including at least 3 hours of ethics each two-year renewal cycle. Excess hours carry forward only to the next biennial period, then expire.

Individual covered claims are limited to $300,000, and workers' compensation claims are excluded from that cap (Ark. Code 23-90-103). The association pays claims of insolvent member insurers; it never increases a policy limit that is lower than the loss.

$25,000 for bodily injury or death of one person, $50,000 when two or more people are injured in one accident, and $25,000 for damage to the property of others (Ark. Code 27-22-104). Operating a vehicle without that coverage or approved self-insurance is unlawful, which is why 25/50/25 is the number to memorize.

Only in writing. Uninsured motorist bodily injury must be included in an auto liability policy unless a named insured rejects it in writing, and that rejection continues until withdrawn in writing (Ark. Code 23-89-403). Underinsured motorist coverage must be offered with the same written-rejection option (Ark. Code 23-89-209).

On a total loss of insured real property caused by fire or a natural disaster other than a flood or an earthquake, the policy becomes a liquidated demand: the insurer pays the full amount stated in the policy or the amount on which premium was charged, not a depreciated value (Ark. Code 23-88-101). It does not reach personal property or detached and appurtenant structures, and a commercial amount is reduced by the deductible or retention.

The applicant must reject earthquake coverage in writing on the application or an addendum to it (Ark. Code 23-102-114). Insurers must also notify existing homeowner, farmowner, and fire and allied lines policyholders who lack full earthquake coverage at least three times over a four-year interval; commercial policies and crop hail are excluded.

Only pure risk, where the outcome is loss or no loss, is insurable. Speculative risk carries a chance of gain, so gambling and business ventures are excluded. Insurers also want the exposure to be definite, measurable, accidental, and part of a large group of similar units.

A physical hazard is a tangible condition that increases loss potential, such as icy steps, while a moral hazard is dishonest character that invites loss, such as arson for profit. A morale hazard is carelessness because insurance exists, such as leaving keys in a car. All three raise the chance or size of a loss but are never the peril that causes it.

A named-perils form pays only for losses caused by perils listed in the policy, and the insured must show the loss came from a listed peril. An open-perils or special form covers direct physical loss except what is excluded, so the insurer must prove an exclusion applies. That shift is why special forms cost more.

At the time of loss, because property insurance indemnifies an actual financial stake in the property. Life insurance is the opposite: interest must exist at inception. Without insurable interest the contract is an unenforceable wager, and recovery is capped at the insured's actual interest.

Offer, acceptance, consideration, and competent parties acting for a legal purpose. The application is normally the offer, the insurer's issuance of the policy is the acceptance, and consideration is the premium plus the statements made in the application.

Express authority is granted in writing by the agency contract; implied authority is whatever is reasonably necessary to carry out express powers; apparent authority arises when the insurer's own conduct leads a client to believe authority exists. An insurer can be bound by apparent authority even when the producer exceeded actual authority.

Adhesion means the insurer drafts it and the insured takes it as written, so ambiguity is construed against the insurer, and aleatory means the values exchanged are unequal and depend on chance. Unilateral means only the insurer makes a legally enforceable promise, and conditional means the insurer pays only when the insured satisfies the policy conditions.

A representation is a statement believed to be true; a warranty is guaranteed true and becomes part of the contract; concealment is deliberate silence about a material fact; misrepresentation is a false material statement. Material concealment or misrepresentation lets the insurer rescind the policy or deny the claim.

Declarations (who, what, limits, policy period), the insuring agreement (the promise to pay), conditions (duties of both parties), exclusions (what is not covered), plus definitions and endorsements. An endorsement amends the base form and controls when its wording conflicts with the form.

Give prompt notice, protect the property from further damage, cooperate and produce records, submit a signed and sworn proof of loss within the time stated, and allow inspection and examination under oath. These are policy conditions, so failing them can defeat an otherwise covered claim.

Pro rata makes each insurer pay in proportion to its limit compared with the total insurance in force. Contribution by equal shares makes each insurer pay equal amounts until its limit or the loss is exhausted. Both methods stop the insured from collecting more than the actual loss.

Split limits state separate maximums in a fixed order — bodily injury per person, bodily injury per accident, then property damage — so a 100/300/50 policy pays at most $100,000 to any one injured person. A combined single limit is one amount available for all bodily injury and property damage in an occurrence, which helps when one claimant's injuries consume most of the recovery.

The insurer succeeds to the insured's legal right to recover from the at-fault party, which prevents double recovery and keeps the cost with the negligent party. An insured who signs a release or otherwise impairs that right before payment can lose coverage for the claim.

Actual cash value is replacement cost minus depreciation, so the insured absorbs wear and tear. Replacement cost pays to repair or replace with like kind and quality without deducting depreciation, and it is typically paid only after the repair or replacement is actually made.

Payment = (insurance carried / insurance required) x loss, minus the deductible, and never more than the limit. The penalty applies whenever the insured carries less than the required percentage of the property's value, and it reduces every partial loss, not just large ones.

Functional replacement cost pays to rebuild with modern, less costly materials that serve the same function, which fits older or ornate buildings. Agreed value suspends the coinsurance condition because the insurer and insured agree in advance on the amount of insurance carried.

Coverage A Dwelling, B Other Structures, C Personal Property, D Fair Rental Value, and E Additional Living Expense. Unlike a homeowners policy, the dwelling form contains no built-in liability, so personal liability and medical payments must be added by the personal liability supplement or an endorsement.

HO-2 broad form is named perils on both the dwelling and personal property. HO-3 special form is open perils on the dwelling and other structures but named perils on personal property. HO-5 comprehensive form is open perils on both, so the insurer must prove an exclusion to deny a contents claim.

HO-4 is the contents broad form for tenants, HO-6 is the unit-owners form for condominium owners and adds limited building-items coverage, and HO-8 is the modified form for older homes whose replacement cost far exceeds market value, settling losses on a repair-cost basis.

Section I is property: Coverage A Dwelling, B Other Structures, C Personal Property, and D Loss of Use. Section II is liability: Coverage E Personal Liability and Coverage F Medical Payments to Others. Coverage F pays regardless of fault, while Coverage E requires legal liability.

Bodily injury or property damage expected or intended by an insured, business pursuits, professional services, and injury to an employee covered by workers' compensation, among others. Home businesses and home day care therefore need an endorsement or a separate commercial policy.

Homeowners forms place special sublimits on categories such as jewelry, furs, silverware, firearms, and money. Scheduling lists each item with an agreed amount, provides open-perils coverage that includes mysterious disappearance, and normally applies no deductible.

Amounts paid in addition to the limit of liability: up to $250 for bail bonds, premiums on appeal bonds and bonds to release attachments, interest accruing after a judgment, up to $200 a day for lost earnings when the insurer requests the insured's attendance, and other expenses incurred at the insurer's request. Defense costs are also paid beyond the limit, but under the insuring agreement rather than this list.

Medical payments covers reasonable medical and funeral expenses for the insured and passengers regardless of fault, within a limited period after the accident. Uninsured motorist pays the damages the insured is legally entitled to recover from an at-fault uninsured driver, which can include pain and suffering.

Collision is upset of the covered auto or impact with another vehicle or object. Other than collision covers fire, theft, glass breakage, hail, flood, vandalism, and animal strikes. Each is purchased separately with its own deductible, and neither pays for mechanical breakdown or normal wear.

It removes the exclusion for vehicles furnished or available for the regular use of an insured, such as a company car or a car used in delivery work. Without the endorsement, the PAP will not respond to liability arising out of a regularly available non-owned auto.

Hired autos are vehicles the named insured leases, hires, rents, or borrows. Non-owned autos are vehicles owned by employees or partners and used in the business. Both are liability concepts, so physical damage on those vehicles must be arranged separately.

It adds the lessor of a leased auto as an additional insured for liability and as loss payee for physical damage, satisfying the lease contract. The lessee remains the named insured, but the leasing company gains direct protection and payment rights.

Building; Your Business Personal Property; and Personal Property of Others in the insured's care, custody, or control. Coverage extensions add limited amounts for items such as newly acquired property, outdoor property, and personal effects.

Business income replaces net profit plus continuing normal operating expenses lost during the period of restoration after covered direct physical damage. Extra expense pays the added costs of continuing operations, which is the priority for a business that cannot afford to close at all.

It insures a building under construction, including foundations, materials, and supplies intended to become part of the structure. Coverage typically ends when the building is accepted by the owner, fully occupied, or the policy is cancelled, so a permanent property policy must take over at completion.

Ocean marine covers hull, cargo, freight, and protection and indemnity liability for waterborne exposures. Inland marine grew out of it to cover property in transit over land, mobile equipment, bailee exposures, and instrumentalities of transportation such as bridges, tunnels, and pipelines.

A legal duty owed, a breach of that duty, proximate cause linking the breach to the harm, and actual damages. Missing any element defeats the claim, and defenses such as comparative fault, assumption of risk, or the statute of limitations can also bar recovery.

Coverage A is bodily injury and property damage liability; Coverage B is personal and advertising injury such as libel, slander, false arrest, wrongful eviction, and advertising copyright infringement; Coverage C is medical payments, paid without regard to fault. Each has its own limit inside the policy.

An occurrence form covers injury that takes place during the policy period no matter when the claim arrives. A claims-made form covers claims first made during the policy period for injury occurring on or after the retroactive date. Advancing or deleting the retroactive date wipes out coverage for earlier work.

A BOP is a prepackaged policy for eligible small and mid-size businesses that bundles property and liability with built-in features such as business income. A CPP is assembled from separate coverage parts and is used when the account is too large, too hazardous, or too specialized to qualify for a BOP.

The statute makes workers' compensation an injured worker's only recourse against the employer: a negligence lawsuit is barred, and in its place the worker collects scheduled benefits automatically, with no need to prove the employer did anything wrong. The bargain shields employers from unpredictable jury verdicts while guaranteeing workers payment.

Part One pays the benefits required by the state's workers' compensation statute and carries no dollar limit. Part Two, Employers Liability, responds to suits that fall outside the statute, such as third-party-over actions or consequential injury claims by a family member, and it carries stated limits.

The principal must perform, the obligee is owed the performance, and the surety guarantees it. A surety expects no loss and prices the bond as a service fee, and after paying a claim it has the right to seek reimbursement from the principal.

The umbrella sits above required underlying policies and pays after those limits are exhausted. When a loss is covered by the umbrella but not by any underlying policy, the insured must first pay the self-insured retention before the umbrella responds.

Anyone convicted of a felony involving dishonesty or breach of trust may not willfully engage in the business of insurance affecting interstate commerce without written consent from a state insurance regulator. Violations carry fines and up to 5 years imprisonment, and 18 U.S.C. 1034 lets the U.S. Attorney General seek civil penalties and injunctions.

A National Flood Insurance Program policy on a single-family residence caps building coverage at $250,000 and contents at $100,000, and coverage normally begins 30 days after purchase. The waiting period is waived when the policy is bought in connection with making, increasing, extending, or renewing a mortgage loan.