Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client has an auto policy with Medical Payments (Med Pay) coverage with a limit of $10,000. The client is injured in an accident and incurs $12,000 in medical bills. The client also has personal health insurance, which pays $8,000 of the medical bills. If the auto policy's Med Pay coverage is primary, how much will it pay?
- A$2,000
- B$4,000
- C$10,000
- D$0
Show answer & explanationAnswer & explanation
Correct answer: C. $10,000
If Med Pay coverage is primary, it pays first, up to its limit, regardless of other insurance. Since the medical bills ($12,000) exceed the Med Pay limit ($10,000), the Med Pay coverage will pay its full limit of $10,000. The remaining $2,000 in medical bills would then typically be covered by the health insurance.
Why the other options are wrong
- A. This would be the amount if Med Pay was excess and only covered the remaining balance after health insurance.
- B. This incorrectly assumes a coordination of benefits where Med Pay pays only a portion after health insurance.
- D. Incorrect, as Med Pay is designed to cover medical expenses.
Medical Payments (Med Pay) - Primary Coverage
Medical Payments (Med Pay) in an auto policy provides coverage for reasonable and necessary medical and funeral expenses incurred by an insured due to an auto accident. When primary, it pays up to its limit before other insurance, such as health insurance.
- Covers medical and funeral expenses for the insured and passengers.
- Paid regardless of fault.
- If primary, it pays first up to its limit.
- Subject to a per-person limit.
Memory trick: PRIMARY Med Pay is the FIRST to pay, like a lead runner in a race.