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 for $60,000, $30,000, and $20,000 respectively, what is the maximum amount their policy will pay for bodily injury for this single accident?
- A$110,000
- B$150,000
- C$50,000
- 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. While one individual's injury was $60,000, the policy will only pay $50,000 for that person. The total for all three injured parties is $50,000 (for the first person) + $30,000 + $20,000 = $100,000, which is exactly the per-accident limit.
Why the other options are wrong
- A. This incorrectly assumes the full $60,000 for the first person without applying the per-person limit.
- B. This incorrectly sums the full injury amounts without applying any policy limits.
- C. This is the per-person limit, not the total for the accident.
Split Limits Application
Split limits apply a maximum payout per person for bodily injury, and a separate maximum payout for all bodily injuries in a single accident.
- Per-person limit is applied first to each individual's injury.
- Per-accident limit is the maximum paid for all injuries in one incident.
- Property damage is typically a separate, single limit.
Memory trick: Person first, then total, then check for damage.