Property & Casualty Insurance Exam (National Portion)Casualty InsuranceEasy
An insured driver causes an accident while driving their personal vehicle. The damages include $10,000 to the other driver's car and $5,000 for the other driver's lost wages due to injury. The insured's Personal Auto Policy (PAP) has liability limits of $50,000 per person / $100,000 per accident for bodily injury and $25,000 for property damage. Which part of the insured's policy will cover the other driver's lost wages?
- ABodily Injury Liability
- BMedical Payments
- CUninsured Motorist Coverage
- DProperty Damage Liability
Show answer & explanationAnswer & explanation
Correct answer: A. Bodily Injury Liability
Lost wages, along with medical bills, pain and suffering, are considered components of bodily injury damages in liability claims. Therefore, they would be covered under the Bodily Injury Liability section of the insured's Personal Auto Policy.
Why the other options are wrong
- B. Medical Payments covers medical expenses for the insured and their passengers, not lost wages for third parties.
- C. Uninsured Motorist Coverage protects the insured from damages caused by an uninsured driver, which is not the case here.
- D. Property Damage Liability covers damage to tangible property, not lost wages.
Bodily Injury Liability Coverage
Bodily Injury Liability coverage in an auto policy pays for damages for which the insured is legally responsible due to causing bodily injury to others in an accident.
- Covers third-party injuries.
- Includes medical expenses, lost wages, pain and suffering, and funeral expenses.
- Subject to per-person and per-accident limits.
- Pays only when the insured is at fault.
Memory trick: BI = Blame + Injuries. It pays others when YOU are at fault.