Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client's auto policy has a bodily injury liability limit of $25,000 per person / $50,000 per accident. If the insured is found legally liable for causing severe injuries to one person totaling $75,000, and no other parties were injured, how much would the policy pay for this claim?
- A$75,000
- B$0, as the damages exceed the policy limits.
- C$25,000
- D$50,000
Show answer & explanationAnswer & explanation
Correct answer: C. $25,000
The bodily injury liability coverage is limited to $25,000 per person. Even though the actual damages are $75,000, the policy will only pay up to its per-person limit.
Why the other options are wrong
- A. The policy will not pay more than its stated per-person limit, regardless of the total damages.
- B. The policy will pay up to its limits; it does not deny the claim entirely just because the damages exceed the limits.
- D. This is the per-accident limit, which applies if multiple people are injured, but the per-person limit is the primary restriction for a single individual.
Per-Person Liability Limit
The maximum amount an auto insurance policy will pay for bodily injury to any one person in a single accident.
- Applies to a single individual's injuries.
- Part of a split-limit liability structure.
- Overrides the per-accident limit if only one person is injured.
- Does not include property damage or supplementary payments.
Memory trick: Each Person's Payout Has a Ceiling.