AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
**Question 1.** Which of the following best defines a pure risk?
A) It involves the possibility of gain or loss.
B) It is always insurable.
C) It can result only in loss or no loss.
D) It is primarily financial in nature.
**Answer:** C
**Explanation:** Pure risk involves situations where only loss or no loss can occur; there is no
chance of profit, distinguishing it from speculative risk.
**Question 2.** The principle of *utmost good faith* requires the insured to:
A) Pay premiums on time.
B) Disclose all material facts to the insurer.
C) Maintain the insured property.
D) Hire a qualified adjuster.
**Answer:** B
**Explanation:** Utmost good faith (uberrimae fidei) obligates both parties, especially the
insured, to disclose all material information that could affect the insurer’s decision to cover the
risk.
**Question 3.** Which legal concept prevents an insured from receiving a second payment for
the same loss from two different insurers?
A) Subrogation
B) Contribution
C) Indemnity
D) Waiver
**Answer:** B
, AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
**Explanation:** Contribution requires each insurer to share the loss proportionally, avoiding
double recovery by the insured.
**Question 4.** In a contract of insurance, *consideration* is:
A) The promise to pay a premium.
B) The insurer’s duty to defend.
C) The legal capacity of parties.
D) The policy’s coverage limits.
**Answer:** A
**Explanation:** Consideration is the exchange of value; in insurance, the insured’s promise to
pay premiums is consideration for the insurer’s promise to indemnify.
**Question 5.** A personal lines agent’s fiduciary duty primarily means:
A) The agent must maximize commissions.
B) The agent must act in the best interest of the client.
C) The agent can share client information with third parties.
D) The agent can bind coverage without carrier approval.
**Answer:** B
**Explanation:** Fiduciary duty requires agents to place the client’s interests above their own,
ensuring trust and ethical conduct.
**Question 6.** Which ISO homeowners policy form provides “all‑risk” coverage for the
dwelling?
A) HO‑2
B) HO‑3
C) HO‑4
, AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
D) HO‑5
**Answer:** D
**Explanation:** HO‑5 is an open‑perils (all‑risk) policy for both the dwelling and personal
property, offering broader coverage than HO‑3.
**Question 7.** Coverage B on a standard HO‑3 policy protects:
A) The dwelling itself.
B) Personal belongings inside the home.
C) Other structures on the property.
D) Loss of use of the home.
**Answer:** C
**Explanation:** Coverage B covers detached structures such as garages, sheds, and fences.
**Question 8.** Which of the following perils is typically excluded from a standard
homeowners policy unless an endorsement is added?
A) Fire
B) Theft
C) Flood
D) Windstorm
**Answer:** C
**Explanation:** Flood is a common exclusion; separate flood insurance or an endorsement is
required for coverage.
**Question 9.** The difference between Replacement Cost Value (RCV) and Actual Cash Value
(ACV) is that RCV:
A) Depreciates the item’s value.
, AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
B Provides reimbursement based on the item’s current market price.
C) Pays the cost to replace the item with a new one of similar kind and quality.
D) Is always lower than ACV.
**Answer:** C
**Explanation:** RCV reimburses the cost to replace the damaged property new, while ACV
subtracts depreciation.
**Question 10.** In a Personal Auto Policy (PAP), the *Bodily Injury Liability* (BI) limit of
100/300/50 means:
A) $100,000 per person, $300,000 per accident, $50,000 for property damage.
B) $100,000 total per accident, $300,000 per person, $50,000 for property damage.
C) $100,000 per person, $300,000 per accident, $50,000 per accident for property damage.
D) $100,000 per accident, $300,000 per person, $50,000 total.
**Answer:** C
**Explanation:** Split limits are expressed as $100,000 bodily injury per person, $300,000 total
per accident, and $50,000 property damage per accident.
**Question 11.** Which endorsement adds coverage for the loss of use of a rental car after
your insured vehicle is in the shop?
A) Towing and Labor
B) Rental Reimbursement
C) Gap Insurance
D) Roadside Assistance
**Answer:** B
**Explanation:** Rental Reimbursement provides a daily allowance for a rental vehicle while
the insured car is being repaired.
CPLIA Exam
**Question 1.** Which of the following best defines a pure risk?
A) It involves the possibility of gain or loss.
B) It is always insurable.
C) It can result only in loss or no loss.
D) It is primarily financial in nature.
**Answer:** C
**Explanation:** Pure risk involves situations where only loss or no loss can occur; there is no
chance of profit, distinguishing it from speculative risk.
**Question 2.** The principle of *utmost good faith* requires the insured to:
A) Pay premiums on time.
B) Disclose all material facts to the insurer.
C) Maintain the insured property.
D) Hire a qualified adjuster.
**Answer:** B
**Explanation:** Utmost good faith (uberrimae fidei) obligates both parties, especially the
insured, to disclose all material information that could affect the insurer’s decision to cover the
risk.
**Question 3.** Which legal concept prevents an insured from receiving a second payment for
the same loss from two different insurers?
A) Subrogation
B) Contribution
C) Indemnity
D) Waiver
**Answer:** B
, AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
**Explanation:** Contribution requires each insurer to share the loss proportionally, avoiding
double recovery by the insured.
**Question 4.** In a contract of insurance, *consideration* is:
A) The promise to pay a premium.
B) The insurer’s duty to defend.
C) The legal capacity of parties.
D) The policy’s coverage limits.
**Answer:** A
**Explanation:** Consideration is the exchange of value; in insurance, the insured’s promise to
pay premiums is consideration for the insurer’s promise to indemnify.
**Question 5.** A personal lines agent’s fiduciary duty primarily means:
A) The agent must maximize commissions.
B) The agent must act in the best interest of the client.
C) The agent can share client information with third parties.
D) The agent can bind coverage without carrier approval.
**Answer:** B
**Explanation:** Fiduciary duty requires agents to place the client’s interests above their own,
ensuring trust and ethical conduct.
**Question 6.** Which ISO homeowners policy form provides “all‑risk” coverage for the
dwelling?
A) HO‑2
B) HO‑3
C) HO‑4
, AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
D) HO‑5
**Answer:** D
**Explanation:** HO‑5 is an open‑perils (all‑risk) policy for both the dwelling and personal
property, offering broader coverage than HO‑3.
**Question 7.** Coverage B on a standard HO‑3 policy protects:
A) The dwelling itself.
B) Personal belongings inside the home.
C) Other structures on the property.
D) Loss of use of the home.
**Answer:** C
**Explanation:** Coverage B covers detached structures such as garages, sheds, and fences.
**Question 8.** Which of the following perils is typically excluded from a standard
homeowners policy unless an endorsement is added?
A) Fire
B) Theft
C) Flood
D) Windstorm
**Answer:** C
**Explanation:** Flood is a common exclusion; separate flood insurance or an endorsement is
required for coverage.
**Question 9.** The difference between Replacement Cost Value (RCV) and Actual Cash Value
(ACV) is that RCV:
A) Depreciates the item’s value.
, AIIM Certified Personal Lines Insurance Agent
CPLIA Exam
B Provides reimbursement based on the item’s current market price.
C) Pays the cost to replace the item with a new one of similar kind and quality.
D) Is always lower than ACV.
**Answer:** C
**Explanation:** RCV reimburses the cost to replace the damaged property new, while ACV
subtracts depreciation.
**Question 10.** In a Personal Auto Policy (PAP), the *Bodily Injury Liability* (BI) limit of
100/300/50 means:
A) $100,000 per person, $300,000 per accident, $50,000 for property damage.
B) $100,000 total per accident, $300,000 per person, $50,000 for property damage.
C) $100,000 per person, $300,000 per accident, $50,000 per accident for property damage.
D) $100,000 per accident, $300,000 per person, $50,000 total.
**Answer:** C
**Explanation:** Split limits are expressed as $100,000 bodily injury per person, $300,000 total
per accident, and $50,000 property damage per accident.
**Question 11.** Which endorsement adds coverage for the loss of use of a rental car after
your insured vehicle is in the shop?
A) Towing and Labor
B) Rental Reimbursement
C) Gap Insurance
D) Roadside Assistance
**Answer:** B
**Explanation:** Rental Reimbursement provides a daily allowance for a rental vehicle while
the insured car is being repaired.
