Personal Lines Final Exam: 50 Questions with 100%
Correct Answers (2026/2027 Edition)
SECTION 1: PERSONAL AUTOMOBILE INSURANCE
Question 1.
An insured carries split liability limits of $100,000/$300,000/$50,000. The insured is at
fault in an accident that injures three occupants of another vehicle. The first occupant
suffers $120,000 in bodily injury damages, the second suffers $80,000, and the third
suffers $60,000. Assuming all claims are valid and within the policy period, how much
will the insurer pay in total for bodily injury under Part A—Liability Coverage?
A. $300,000, because the per-accident limit is the maximum regardless of the number
of injured parties
B. $260,000, by paying the full demanded amount for each claimant up to the aggregate
limit
C. $240,000, applying the per-person limit to the first claimant and paying the full
amounts to the other two
D. $100,000, because the per-person limit caps the total payment for any single accident
Correct Answer: C. $240,000, applying the per-person limit to the first claimant and
paying the full amounts to the other two
Rationale: Split liability limits of $100,000/$300,000 mean the insurer will pay no more
than $100,000 for bodily injury to any one person in a single accident, and no more than
$300,000 total for all bodily injury arising from one accident. The first claimant's
$120,000 demand is capped at $100,000. The second ($80,000) and third ($60,000) are
each below the per-person cap. The total paid is $100,000 + $80,000 + $60,000 =
$240,000, which is within the $300,000 per-accident aggregate. Option A is incorrect
because the per-person limit must be applied to each individual claimant. Option B is
,incorrect because it ignores the per-person cap entirely. Option D is incorrect because it
misapplies the per-person limit as a per-accident limit.
Question 2.
A driver in a pure no-fault state is injured in a collision and incurs $18,000 in medical
expenses. The driver carries $10,000 in Personal Injury Protection (PIP) coverage. The
at-fault driver carries bodily injury liability limits of $50,000/$100,000. The injured driver
did not sustain a permanent injury, significant disfigurement, or disability. What is the
most accurate outcome regarding recovery of the excess medical expenses?
A. The injured driver may immediately sue the at-fault driver for the $8,000 in excess
medical expenses because liability coverage exists
B. The injured driver is limited to the $10,000 PIP benefit and cannot sue for
non-economic damages unless the statutory tort threshold is met
C. The at-fault driver's bodily injury policy will pay the $8,000 excess automatically
because PIP is primary
D. The injured driver must first exhaust their health insurance before PIP applies to the
remaining medical bills
Correct Answer: B. The injured driver is limited to the $10,000 PIP benefit and cannot
sue for non-economic damages unless the statutory tort threshold is met
Rationale: In pure no-fault jurisdictions, PIP is the first-party, no-fault coverage that
provides benefits regardless of negligence, and the right to sue the at-fault driver for
bodily injury is restricted by a statutory tort threshold (e.g., serious injury, permanent
disability, or significant disfigurement). Because the injured driver did not meet this
threshold, they cannot sue for the excess medical expenses or non-economic damages.
Option A is incorrect because the ability to sue is not automatic and is limited by the
no-fault threshold. Option C is incorrect because the at-fault driver's BI coverage does
not pay unless the tort threshold is satisfied or the state is an add-on no-fault state.
,Option D is incorrect because PIP is primary over health insurance for auto-related
injuries in most no-fault systems.
Question 3.
An insured is driving on a rural highway when a deer suddenly enters the roadway. The
insured swerves to avoid the deer, loses control, and strikes a guardrail. The vehicle
sustains $6,500 in damage. The insured carries both collision and other-than-collision
(comprehensive) coverage, each with a $500 deductible. Under the standard Personal
Auto Policy (PAP), which coverage will apply, and what is the insured's out-of-pocket
cost?
A. Comprehensive coverage applies because the proximate cause was the deer; the
insured pays $500
B. Collision coverage applies because the vehicle collided with the guardrail; the insured
pays $500
C. Collision coverage applies, but because the insured was avoiding an animal, the
deductible is waived
D. Comprehensive coverage applies, and because the deer was not actually struck, the
loss is treated as a collision loss subject to a $1,000 deductible
Correct Answer: B. Collision coverage applies because the vehicle collided with the
guardrail; the insured pays $500
Rationale: Under the ISO PAP, collision coverage applies to losses caused by the upset
of the vehicle or its collision with another object or vehicle. Although the deer initiated
the chain of events, the actual damage resulted from the collision with the guardrail.
Therefore, the loss is a collision loss, and the collision deductible applies. Option A is
incorrect because comprehensive (other-than-collision) coverage would apply only if the
vehicle had actually struck the deer or if the loss was caused by an enumerated
comprehensive peril (e.g., falling object, fire, theft). Option C is incorrect because the
PAP does not waive deductibles for accident avoidance. Option D is incorrect because
, the loss is not transformed into a comprehensive loss based on near-miss
circumstances.
Question 4.
An insured carries underinsured motorist (UIM) coverage with limits of $100,000 per
person/$300,000 per accident. The insured is injured by a driver who carries
state-minimum liability limits of $25,000/$50,000. The insured's bodily injury damages
are established at $80,000, and the insured collects the full $25,000 from the at-fault
driver's liability insurer. Assuming the standard ISO UIM "difference-in-damages"
approach applies, how much will the insured's UIM coverage pay?
A. $100,000, because the UIM per-person limit is available once the at-fault driver's
limits are exhausted
B. $25,000, representing the difference between the UIM limit and the at-fault driver's
limit
C. $55,000, representing the difference between the insured's actual damages and the
amount recovered from the at-fault driver
D. $0, because UIM coverage only applies when the at-fault driver carries no insurance
at all
Correct Answer: C. $55,000, representing the difference between the insured's actual
damages and the amount recovered from the at-fault driver
Rationale: Standard ISO UIM coverage is designed to pay the difference between the
insured's actual bodily injury damages and the amount actually recovered from the
at-fault driver's liability insurance, up to the UIM policy limit. Here, $80,000 (actual
damages) minus $25,000 (recovered) equals $55,000, which is below the $100,000 UIM
per-person limit. Option A is incorrect because the UIM limit is not automatically paid;
the payment is based on the damages gap. Option B describes a "difference-in-limits"
approach used in some states, but the standard ISO form follows the
Correct Answers (2026/2027 Edition)
SECTION 1: PERSONAL AUTOMOBILE INSURANCE
Question 1.
An insured carries split liability limits of $100,000/$300,000/$50,000. The insured is at
fault in an accident that injures three occupants of another vehicle. The first occupant
suffers $120,000 in bodily injury damages, the second suffers $80,000, and the third
suffers $60,000. Assuming all claims are valid and within the policy period, how much
will the insurer pay in total for bodily injury under Part A—Liability Coverage?
A. $300,000, because the per-accident limit is the maximum regardless of the number
of injured parties
B. $260,000, by paying the full demanded amount for each claimant up to the aggregate
limit
C. $240,000, applying the per-person limit to the first claimant and paying the full
amounts to the other two
D. $100,000, because the per-person limit caps the total payment for any single accident
Correct Answer: C. $240,000, applying the per-person limit to the first claimant and
paying the full amounts to the other two
Rationale: Split liability limits of $100,000/$300,000 mean the insurer will pay no more
than $100,000 for bodily injury to any one person in a single accident, and no more than
$300,000 total for all bodily injury arising from one accident. The first claimant's
$120,000 demand is capped at $100,000. The second ($80,000) and third ($60,000) are
each below the per-person cap. The total paid is $100,000 + $80,000 + $60,000 =
$240,000, which is within the $300,000 per-accident aggregate. Option A is incorrect
because the per-person limit must be applied to each individual claimant. Option B is
,incorrect because it ignores the per-person cap entirely. Option D is incorrect because it
misapplies the per-person limit as a per-accident limit.
Question 2.
A driver in a pure no-fault state is injured in a collision and incurs $18,000 in medical
expenses. The driver carries $10,000 in Personal Injury Protection (PIP) coverage. The
at-fault driver carries bodily injury liability limits of $50,000/$100,000. The injured driver
did not sustain a permanent injury, significant disfigurement, or disability. What is the
most accurate outcome regarding recovery of the excess medical expenses?
A. The injured driver may immediately sue the at-fault driver for the $8,000 in excess
medical expenses because liability coverage exists
B. The injured driver is limited to the $10,000 PIP benefit and cannot sue for
non-economic damages unless the statutory tort threshold is met
C. The at-fault driver's bodily injury policy will pay the $8,000 excess automatically
because PIP is primary
D. The injured driver must first exhaust their health insurance before PIP applies to the
remaining medical bills
Correct Answer: B. The injured driver is limited to the $10,000 PIP benefit and cannot
sue for non-economic damages unless the statutory tort threshold is met
Rationale: In pure no-fault jurisdictions, PIP is the first-party, no-fault coverage that
provides benefits regardless of negligence, and the right to sue the at-fault driver for
bodily injury is restricted by a statutory tort threshold (e.g., serious injury, permanent
disability, or significant disfigurement). Because the injured driver did not meet this
threshold, they cannot sue for the excess medical expenses or non-economic damages.
Option A is incorrect because the ability to sue is not automatic and is limited by the
no-fault threshold. Option C is incorrect because the at-fault driver's BI coverage does
not pay unless the tort threshold is satisfied or the state is an add-on no-fault state.
,Option D is incorrect because PIP is primary over health insurance for auto-related
injuries in most no-fault systems.
Question 3.
An insured is driving on a rural highway when a deer suddenly enters the roadway. The
insured swerves to avoid the deer, loses control, and strikes a guardrail. The vehicle
sustains $6,500 in damage. The insured carries both collision and other-than-collision
(comprehensive) coverage, each with a $500 deductible. Under the standard Personal
Auto Policy (PAP), which coverage will apply, and what is the insured's out-of-pocket
cost?
A. Comprehensive coverage applies because the proximate cause was the deer; the
insured pays $500
B. Collision coverage applies because the vehicle collided with the guardrail; the insured
pays $500
C. Collision coverage applies, but because the insured was avoiding an animal, the
deductible is waived
D. Comprehensive coverage applies, and because the deer was not actually struck, the
loss is treated as a collision loss subject to a $1,000 deductible
Correct Answer: B. Collision coverage applies because the vehicle collided with the
guardrail; the insured pays $500
Rationale: Under the ISO PAP, collision coverage applies to losses caused by the upset
of the vehicle or its collision with another object or vehicle. Although the deer initiated
the chain of events, the actual damage resulted from the collision with the guardrail.
Therefore, the loss is a collision loss, and the collision deductible applies. Option A is
incorrect because comprehensive (other-than-collision) coverage would apply only if the
vehicle had actually struck the deer or if the loss was caused by an enumerated
comprehensive peril (e.g., falling object, fire, theft). Option C is incorrect because the
PAP does not waive deductibles for accident avoidance. Option D is incorrect because
, the loss is not transformed into a comprehensive loss based on near-miss
circumstances.
Question 4.
An insured carries underinsured motorist (UIM) coverage with limits of $100,000 per
person/$300,000 per accident. The insured is injured by a driver who carries
state-minimum liability limits of $25,000/$50,000. The insured's bodily injury damages
are established at $80,000, and the insured collects the full $25,000 from the at-fault
driver's liability insurer. Assuming the standard ISO UIM "difference-in-damages"
approach applies, how much will the insured's UIM coverage pay?
A. $100,000, because the UIM per-person limit is available once the at-fault driver's
limits are exhausted
B. $25,000, representing the difference between the UIM limit and the at-fault driver's
limit
C. $55,000, representing the difference between the insured's actual damages and the
amount recovered from the at-fault driver
D. $0, because UIM coverage only applies when the at-fault driver carries no insurance
at all
Correct Answer: C. $55,000, representing the difference between the insured's actual
damages and the amount recovered from the at-fault driver
Rationale: Standard ISO UIM coverage is designed to pay the difference between the
insured's actual bodily injury damages and the amount actually recovered from the
at-fault driver's liability insurance, up to the UIM policy limit. Here, $80,000 (actual
damages) minus $25,000 (recovered) equals $55,000, which is below the $100,000 UIM
per-person limit. Option A is incorrect because the UIM limit is not automatically paid;
the payment is based on the damages gap. Option B describes a "difference-in-limits"
approach used in some states, but the standard ISO form follows the
