AIIM Certified Insurance Broker CIB Exam
Question 1. Which of the following best defines a pure risk?
A) A risk that results in a gain or loss
B) A risk that only results in a loss or no loss
C) A risk with speculative financial outcomes
D) A risk that only results in a gain
Answer: B
Explanation: Pure risk refers to situations where the only possible outcomes are loss or no loss,
not gain.
Question 2. What is the primary purpose of risk transfer in insurance?
A) To eliminate all risks
B) To shift the financial consequences of risk to another party
C) To increase the chances of a loss
D) To speculate for profit
Answer: B
Explanation: Insurance transfers the financial burden of risk from the insured to the insurer.
Question 3. Which legal principle requires full disclosure of all material facts by both parties in
an insurance contract?
A) Subrogation
B) Insurable Interest
C) Utmost Good Faith
D) Proximate Cause
Answer: C
Explanation: Utmost good faith, or uberrimae fidei, requires full disclosure by both insurer and
insured.
, AIIM Certified Insurance Broker CIB Exam
Question 4. Which type of risk is associated with changing economic conditions?
A) Static risk
B) Dynamic risk
C) Pure risk
D) Fundamental risk
Answer: B
Explanation: Dynamic risk arises due to changes in the economy and environment.
Question 5. In the risk management process, what comes immediately after risk identification?
A) Risk avoidance
B) Risk evaluation
C) Risk transfer
D) Risk retention
Answer: B
Explanation: After identifying risks, their frequency and severity are evaluated.
Question 6. What does the law of large numbers enable insurers to do?
A) Predict individual losses accurately
B) Eliminate all risks
C) Predict overall losses for a pool of risks
D) Increase premiums at will
Answer: C
Explanation: The law of large numbers helps insurers predict total losses for a group.
Question 7. Which of the following is NOT a method of risk treatment?
A) Avoidance
, AIIM Certified Insurance Broker CIB Exam
B) Retention
C) Gambling
D) Transfer
Answer: C
Explanation: Gambling is not a method of risk treatment in insurance.
Question 8. What is the main difference between perils and hazards?
A) Perils cause loss, hazards increase its likelihood
B) Hazards cause loss, perils increase its likelihood
C) Both are the same
D) Hazards reduce the chances of loss
Answer: A
Explanation: Perils are the actual events that cause loss; hazards increase the likelihood or
severity of perils.
Question 9. Which principle ensures that an insured cannot recover more than the actual loss?
A) Proximate cause
B) Indemnity
C) Subrogation
D) Contribution
Answer: B
Explanation: Indemnity means compensation is limited to the actual loss suffered.
Question 10. In insurance, what is a moral hazard?
A) Physical characteristic increasing risk
B) The chance of a natural disaster
, AIIM Certified Insurance Broker CIB Exam
C) An insured’s behavior that increases risk because they have insurance
D) Statistical likelihood of an event
Answer: C
Explanation: Moral hazard is the risk that the insured may act differently because they have
insurance.
Question 11. When does insurable interest need to exist in life insurance policies?
A) Only at the time of loss
B) Only at the inception of the policy
C) At inception and at the time of loss
D) At renewal only
Answer: B
Explanation: Insurable interest must exist at the policy’s inception in life insurance.
Question 12. What is subrogation in insurance contracts?
A) Sharing of losses between insurers
B) Insurer’s right to recover from a third party after paying a loss
C) Insured’s right to claim double compensation
D) The process of underwriting
Answer: B
Explanation: Subrogation allows the insurer to seek recovery from third parties after paying a
claim.
Question 13. What is the proximate cause in insurance?
A) The nearest event to the loss
B) The dominant, effective cause of a loss
C) The least important cause
Question 1. Which of the following best defines a pure risk?
A) A risk that results in a gain or loss
B) A risk that only results in a loss or no loss
C) A risk with speculative financial outcomes
D) A risk that only results in a gain
Answer: B
Explanation: Pure risk refers to situations where the only possible outcomes are loss or no loss,
not gain.
Question 2. What is the primary purpose of risk transfer in insurance?
A) To eliminate all risks
B) To shift the financial consequences of risk to another party
C) To increase the chances of a loss
D) To speculate for profit
Answer: B
Explanation: Insurance transfers the financial burden of risk from the insured to the insurer.
Question 3. Which legal principle requires full disclosure of all material facts by both parties in
an insurance contract?
A) Subrogation
B) Insurable Interest
C) Utmost Good Faith
D) Proximate Cause
Answer: C
Explanation: Utmost good faith, or uberrimae fidei, requires full disclosure by both insurer and
insured.
, AIIM Certified Insurance Broker CIB Exam
Question 4. Which type of risk is associated with changing economic conditions?
A) Static risk
B) Dynamic risk
C) Pure risk
D) Fundamental risk
Answer: B
Explanation: Dynamic risk arises due to changes in the economy and environment.
Question 5. In the risk management process, what comes immediately after risk identification?
A) Risk avoidance
B) Risk evaluation
C) Risk transfer
D) Risk retention
Answer: B
Explanation: After identifying risks, their frequency and severity are evaluated.
Question 6. What does the law of large numbers enable insurers to do?
A) Predict individual losses accurately
B) Eliminate all risks
C) Predict overall losses for a pool of risks
D) Increase premiums at will
Answer: C
Explanation: The law of large numbers helps insurers predict total losses for a group.
Question 7. Which of the following is NOT a method of risk treatment?
A) Avoidance
, AIIM Certified Insurance Broker CIB Exam
B) Retention
C) Gambling
D) Transfer
Answer: C
Explanation: Gambling is not a method of risk treatment in insurance.
Question 8. What is the main difference between perils and hazards?
A) Perils cause loss, hazards increase its likelihood
B) Hazards cause loss, perils increase its likelihood
C) Both are the same
D) Hazards reduce the chances of loss
Answer: A
Explanation: Perils are the actual events that cause loss; hazards increase the likelihood or
severity of perils.
Question 9. Which principle ensures that an insured cannot recover more than the actual loss?
A) Proximate cause
B) Indemnity
C) Subrogation
D) Contribution
Answer: B
Explanation: Indemnity means compensation is limited to the actual loss suffered.
Question 10. In insurance, what is a moral hazard?
A) Physical characteristic increasing risk
B) The chance of a natural disaster
, AIIM Certified Insurance Broker CIB Exam
C) An insured’s behavior that increases risk because they have insurance
D) Statistical likelihood of an event
Answer: C
Explanation: Moral hazard is the risk that the insured may act differently because they have
insurance.
Question 11. When does insurable interest need to exist in life insurance policies?
A) Only at the time of loss
B) Only at the inception of the policy
C) At inception and at the time of loss
D) At renewal only
Answer: B
Explanation: Insurable interest must exist at the policy’s inception in life insurance.
Question 12. What is subrogation in insurance contracts?
A) Sharing of losses between insurers
B) Insurer’s right to recover from a third party after paying a loss
C) Insured’s right to claim double compensation
D) The process of underwriting
Answer: B
Explanation: Subrogation allows the insurer to seek recovery from third parties after paying a
claim.
Question 13. What is the proximate cause in insurance?
A) The nearest event to the loss
B) The dominant, effective cause of a loss
C) The least important cause
