Property & Casualty Insurance Exam (National Portion)Casualty InsuranceHard
A client has a Personal Auto Policy (PAP) with liability limits of $100,000 per person / $300,000 per accident for bodily injury, and $50,000 for property damage. The client causes an accident, resulting in $150,000 in bodily injury to one person, $50,000 in bodily injury to a second person, and $30,000 in property damage. How much will the policy pay in total for this accident?
- A$150,000
- B$200,000
- C$230,000
- D$180,000
Show answer & explanationAnswer & explanation
Correct answer: D. $180,000
For Person 1, the $150,000 bodily injury is capped at the per-person limit of $100,000. For Person 2, the $50,000 bodily injury is paid in full. The total bodily injury payout is $100,000 + $50,000 = $150,000. This is less than the per-accident limit of $300,000. The property damage of $30,000 is paid in full (within the $50,000 limit). Total payout = $150,000 (BI) + $30,000 (PD) = $180,000.
Why the other options are wrong
- A. This calculation likely only includes the bodily injury payout and ignores property damage.
- B. This calculation likely ignores the property damage or miscalculates bodily injury.
- C. This calculation incorrectly applies limits, likely overpaying for Person 1.
Split Limits Combination
Split limits apply separate maximums for bodily injury per person, bodily injury per accident, and property damage per accident, and all limits must be considered when calculating the total payout for a single event.
- Individual bodily injury claims are subject to the per-person limit.
- The sum of all bodily injury claims is subject to the per-accident limit.
- Property damage is a separate limit, applied after bodily injury calculations.
Memory trick: First, cap each person, then cap the crowd, then cap the car's damage.