Property & Casualty Insurance Exam (National Portion)Casualty InsuranceEasy
A client has a Personal Auto Policy (PAP) with liability limits of $50,000 per person / $100,000 per accident for bodily injury and $25,000 for property damage. If the insured causes an accident injuring three people with damages of $60,000, $30,000, and $20,000 respectively, what is the maximum amount the policy will pay for bodily injury in this single accident?
- A$50,000
- B$110,000
- C$125,000
- D$100,000
Show answer & explanationAnswer & explanation
Correct answer: D. $100,000
The policy has a per-person limit of $50,000 and a per-accident limit of $100,000. Although the total bodily injury damages are $110,000, the policy will not pay more than the per-accident limit.
Why the other options are wrong
- A. This is the per-person limit, not the total for the accident.
- B. This is the sum of the actual damages, but it exceeds the per-accident limit.
- C. This amount includes property damage, which is not relevant to the bodily injury question, and exceeds the bodily injury limits.
Per-Accident Limit (Bodily Injury)
The maximum amount an insurer will pay for all bodily injuries to all persons injured in a single accident, regardless of the number of individuals involved.
- Applies to all bodily injury claims from one occurrence.
- Cannot exceed this limit, even if individual claims are below the per-person limit.
- Part of split liability limits.
Memory trick: An accident's total pain has an 'Accident Cap' for the insurer's gain.