Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client has a Personal Auto Policy (PAP) with bodily injury liability limits of $50,000 per person / $100,000 per accident. The insured driver causes an accident where three people are injured. One person sustains $60,000 in injuries, another sustains $30,000, and the third sustains $20,000. How much will the policy pay for the total bodily injury claims?
- A$110,000
- B$100,000
- C$50,000
- D$100,000, but only $50,000 to the most severely injured person
Show answer & explanationAnswer & explanation
Correct answer: B. $100,000
The per-person limit of $50,000 applies to each individual. The per-accident limit of $100,000 is the maximum paid for all injuries in a single accident, regardless of the sum of individual claims. The total payable is the sum of the individual claims, capped by the per-person limit for each, and then capped by the per-accident limit overall.
Why the other options are wrong
- A. This is the sum of all injuries without applying the per-person or per-accident limits.
- C. This is the per-person limit, not the total paid for all claims.
- D. While the $50,000 per-person limit applies, the total payable is $100,000, as calculated from the individual payments ($50k + $30k + $20k). The phrasing is misleading regarding the total payment.
Per-Accident Limit
The maximum amount an insurance policy will pay for all covered losses arising from a single accident or occurrence, regardless of the number of injured persons.
- Applies after per-person limits are applied.
- Caps the total payout for a single event.
- Common in auto and general liability policies.
Memory trick: Per-Person first, then Per-Accident second, like a two-stage rocket for payouts.