Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
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. The client causes an accident injuring three people. Person 1 has $60,000 in bodily injuries, Person 2 has $30,000, and Person 3 has $20,000. What is the maximum total amount the policy will pay for bodily injury for this 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. For Person 1, the policy pays the $50,000 per-person limit. For Person 2 and Person 3, the policy pays their full injury amounts ($30,000 and $20,000, respectively). The total payment is $50,000 + $30,000 + $20,000 = $100,000, which does not exceed the per-accident limit.
Why the other options are wrong
- A. This represents only the per-person limit, not the total for the accident.
- B. This incorrectly adds the full injury amount for Person 1, exceeding the per-person limit.
- C. This sums all injuries without applying the per-person limit, and also exceeds the per-accident limit.
Split Limits Application - Bodily Injury
Split limits in auto insurance specify separate maximum amounts for bodily injury liability per person, per accident, and for property damage per accident.
- Per-person limit applies to each individual injured.
- Per-accident limit is the maximum paid for all bodily injuries in one accident.
- Both limits must be respected; the lesser of the two applicable limits will be paid.
Memory trick: Remember to limit EACH person, THEN limit the TOTAL accident.