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Policy Cancellation LawsExam 2026–2027 |
Comprehensive Question Practice Test with
Answers & Rationales| Free Pdf Access
1. What is the “free look period” in an insurance policy?
a) Time after renewal to cancel without penalty
b) Period after issuance when insured can cancel for full refund
c) Time before first payment when insurer can cancel
d) Period after a claim when insurer may rescind
Answer: b) Period after issuance when insured can cancel for full
refund
Rationale: Free look period (typically 10–30 days) allows
insured to review policy and cancel for full premium refund.
2. Which type of cancellation is initiated by the insurer?
a) Voluntary cancellation
b) Non-renewal
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c) Rescission
d) All of the above
Answer: d) All of the above – but strictly, non-renewal is not
cancellation. The best single answer is rescission for
misrepresentation. Most exams say: Insurer-initiated
cancellation = rescission or mid-term cancellation for cause.
3. A policyholder stops paying premiums. The policy lapses. This
is:
a) Cancellation by insurer
b) Cancellation by insured
c) Automatic termination for nonpayment
d) Rescission
Answer: c) Automatic termination for nonpayment
Rationale: Lapse is not a cancellation; it’s a termination due to
failure to pay.
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4. Under the NAIC Model Unfair Trade Practices Act, how many
days’ notice must an insurer give to cancel a personal auto policy
for nonpayment?
a) 5 days
b) 10 days
c) 20 days
d) 30 days
Answer: b) 10 days
Rationale: NAIC model: 10 days for nonpayment; 30 days for
other reasons.
5. Which law prohibits retroactive cancellation except for fraud?
a) McCarran-Ferguson Act
b) Uniform Policy Cancellation Act
c) State insurance codes
d) Fair Credit Reporting Act
Policy Cancellation LawsExam 2026–2027 |
Comprehensive Question Practice Test with
Answers & Rationales| Free Pdf Access
1. What is the “free look period” in an insurance policy?
a) Time after renewal to cancel without penalty
b) Period after issuance when insured can cancel for full refund
c) Time before first payment when insurer can cancel
d) Period after a claim when insurer may rescind
Answer: b) Period after issuance when insured can cancel for full
refund
Rationale: Free look period (typically 10–30 days) allows
insured to review policy and cancel for full premium refund.
2. Which type of cancellation is initiated by the insurer?
a) Voluntary cancellation
b) Non-renewal
,Page 2 of 23
c) Rescission
d) All of the above
Answer: d) All of the above – but strictly, non-renewal is not
cancellation. The best single answer is rescission for
misrepresentation. Most exams say: Insurer-initiated
cancellation = rescission or mid-term cancellation for cause.
3. A policyholder stops paying premiums. The policy lapses. This
is:
a) Cancellation by insurer
b) Cancellation by insured
c) Automatic termination for nonpayment
d) Rescission
Answer: c) Automatic termination for nonpayment
Rationale: Lapse is not a cancellation; it’s a termination due to
failure to pay.
, Page 3 of 23
4. Under the NAIC Model Unfair Trade Practices Act, how many
days’ notice must an insurer give to cancel a personal auto policy
for nonpayment?
a) 5 days
b) 10 days
c) 20 days
d) 30 days
Answer: b) 10 days
Rationale: NAIC model: 10 days for nonpayment; 30 days for
other reasons.
5. Which law prohibits retroactive cancellation except for fraud?
a) McCarran-Ferguson Act
b) Uniform Policy Cancellation Act
c) State insurance codes
d) Fair Credit Reporting Act
