A client's Personal Auto Policy (PAP) includes a Medical Payments (Med Pay) limit of $10,000. The client is involved in an accident and incurs $12,000 in medical bills. Their health insurance pays $8,000 of the bills. What is the maximum amount the PAP's Med Pay coverage will pay for this claim?
- A$12,000
- B$4,000
- C$2,000
- D$10,000
Show answer & explanationAnswer & explanation
Correct answer: B. $4,000
Medical Payments coverage typically pays for reasonable and necessary medical expenses incurred as a result of an auto accident, regardless of fault. However, it often pays on an 'excess' basis if other valid and collectible insurance (like health insurance) is available, meaning it pays after the primary coverage, up to its limit. Here, the health insurance paid $8,000, leaving $4,000 outstanding ($12,000 - $8,000). Since $4,000 is less than the Med Pay limit of $10,000, the PAP will pay the remaining $4,000.
Why the other options are wrong
- A. This is the total medical bill amount, not the amount payable by Med Pay after other insurance.
- C. This would be true if Med Pay was primary and the client was responsible for a deductible or copay, which isn't the case here.
- D. This would be the amount if Med Pay was primary or if there was no other insurance, and the bills exceeded $10,000.
Medical Payments (Med Pay) - Excess Coverage
Medical Payments (Med Pay) coverage in an auto policy often acts as excess coverage, paying for medical expenses after other primary health insurance has paid, up to its stated limit.
- Covers reasonable and necessary medical expenses.
- Pays regardless of fault.
- Often secondary to health insurance.
- Subject to policy limits.
Memory trick: Health first, then Med Pay finishes the bill.