Property & Casualty Insurance Exam (National Portion)Casualty InsuranceHard
An insured's auto policy has bodily injury liability limits of $50,000 per person / $100,000 per accident. The insured causes an accident, injuring three people. Person A has $60,000 in damages, Person B has $40,000, and Person C has $30,000. How much will the policy pay in total for these injuries?
- A$120,000
- B$130,000
- C$100,000
- D$150,000
Show answer & explanationAnswer & explanation
Correct answer: C. $100,000
The per-person limit of $50,000 applies to each individual. So, Person A will receive $50,000 (capped at limit), Person B will receive $40,000, and Person C will receive $30,000. The sum of these payouts is $50,000 + $40,000 + $30,000 = $120,000. However, this total is then subject to the per-accident limit of $100,000. Therefore, the policy will pay a maximum of $100,000.
Why the other options are wrong
- A. This is the sum of the individual payouts after applying the per-person limit, but it fails to apply the per-accident limit.
- B. This is the sum of all damages, not factoring in the per-person or per-accident limits.
- D. This represents three times the per-person limit, which is incorrect due to the per-accident limit.
Split Limits of Liability
Common form of auto liability limits expressed as three separate numbers: per person for bodily injury, per accident for bodily injury, and per accident for property damage.
- The first number is the maximum for one person's bodily injury.
- The second number is the maximum for all bodily injuries in one accident.
- The third number is the maximum for all property damage in one accident.
- Both per-person and per-accident limits apply, with the lower of the two (or the total of individual caps) being the payout.
Memory trick: Split Limits: Person, Then Accident, Then Total.