Property & Casualty Insurance Exam (National Portion)Casualty InsuranceEasy
A client's Personal Auto Policy (PAP) includes Supplementary Payments. Which of the following would be covered under this provision?
- AMedical expenses for the insured's passengers.
- BLoss of earnings for the insured due to appearing in court for a covered accident.
- CDamage to the insured's vehicle caused by a collision.
- DThe cost of a rental car while the insured's vehicle is being repaired.
Show answer & explanationAnswer & explanation
Correct answer: B. Loss of earnings for the insured due to appearing in court for a covered accident.
Supplementary Payments in a PAP cover additional expenses associated with a liability claim, separate from the policy's liability limits. These typically include expenses like bail bonds, appeal bonds, interest on judgments, and the insured's loss of earnings for attending hearings or trials at the insurer's request.
Why the other options are wrong
- A. Medical expenses for the insured's passengers are covered by Medical Payments (Med Pay) coverage, not Supplementary Payments.
- C. Damage to the insured's vehicle is covered by Collision or Comprehensive coverage, not Supplementary Payments.
- D. Rental car costs are typically covered by rental reimbursement endorsement, not supplementary payments.
PAP Supplementary Payments
Supplementary Payments in a Personal Auto Policy (PAP) are additional payments made by the insurer for expenses related to a covered liability claim, paid in addition to the policy's stated liability limits.
- Paid in addition to liability limits.
- Common examples include bail bonds, appeal bonds, interest on judgments, and loss of earnings for court appearances.
- Designed to assist the insured with legal and related costs.
- Do not reduce the liability limits.
Memory trick: SUPPLEMENTARY = extra help for legal stuff, on top of the main limits.