Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client's homeowner's policy has a personal liability limit of $500,000. While hosting a party, the client's guest trips over a rug and breaks their arm, incurring $15,000 in medical bills. The guest also claims $5,000 for lost wages. The client is found legally liable. How much will the homeowner's policy pay for this one guest's claim?
- A$15,000
- B$500,000
- C$0, as the guest was on the client's property
- D$20,000
Show answer & explanationAnswer & explanation
Correct answer: D. $20,000
Homeowner's personal liability coverage covers bodily injury and property damage for which the insured is legally responsible. This includes medical bills and lost wages for an injured guest. The total claim is $15,000 (medical) + $5,000 (lost wages) = $20,000. Since this is well within the $500,000 liability limit, the policy will pay the full $20,000.
Why the other options are wrong
- A. This only covers medical bills, ignoring lost wages. Personal liability covers both.
- B. This is the policy's overall liability limit, but the actual claim is much lower.
- C. Homeowner's liability specifically covers injuries to guests on the insured's property when the insured is legally liable.
Homeowner's Personal Liability Coverage
A section of a homeowner's policy that provides coverage for bodily injury and property damage to others for which the insured is found legally responsible, occurring on or off the insured's property.
- Covers bodily injury and property damage to others.
- Applies when the insured is legally liable.
- Coverage extends on and off premises.
- Includes defense costs.
Memory trick: Your house, your rules, your responsibility.