Property & Casualty Insurance Exam (National Portion)Casualty InsuranceHard
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 insured causes an accident that results in $70,000 in bodily injury to one person and $10,000 in property damage. The client is found legally liable. How much will the policy pay in total for this accident?
- A$75,000
- B$50,000
- C$60,000
- D$80,000
Show answer & explanationAnswer & explanation
Correct answer: C. $60,000
For bodily injury, the per-person limit is $50,000, so despite $70,000 in damages, the policy will pay only $50,000 for that person. For property damage, the $10,000 is within the $25,000 limit. Therefore, the total payout is $50,000 (BI) + $10,000 (PD) = $60,000. The per-accident bodily injury limit of $100,000 is not a factor here as only one person was injured.
Why the other options are wrong
- A. Incorrect; this sum is not derived from applying the limits correctly.
- B. Incorrect; this only accounts for the bodily injury payout, not property damage.
- D. Incorrect; this sum does not correctly apply the per-person limit for bodily injury.
Split Limits Combined Payout
The total amount an auto insurance policy with split limits will pay for both bodily injury and property damage from a single accident, after applying per-person, per-accident, and property damage limits.
- Separate limits for bodily injury (per person/per accident) and property damage.
- Each component is capped by its specific limit.
- Total payout is the sum of the capped bodily injury and property damage amounts.
Memory trick: Split Limits are like separate 'buckets' for BI and PD; you fill each bucket up to its cap, then add them together for the total payout.