Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client has a Personal Auto Policy (PAP) with liability limits of $50,000 per person / $100,000 per accident. The client causes an accident, injuring three people. Person 1 incurs $60,000 in bodily injuries, Person 2 incurs $30,000, and Person 3 incurs $20,000. How much will the policy pay for bodily injuries in total?
- A$110,000
- B$80,000
- C$100,000
- D$90,000
Show answer & explanationAnswer & explanation
Correct answer: C. $100,000
The policy has a per-person limit of $50,000 and a per-accident limit of $100,000. Person 1's claim is capped at $50,000. The total payout for all three individuals cannot exceed the per-accident limit.
Why the other options are wrong
- A. This total exceeds the per-accident limit of $100,000.
- B. This calculation incorrectly applies the limits or totals.
- D. This calculation incorrectly applies the limits or totals.
Split Limits Application
Split limits in auto insurance specify separate maximum payouts for bodily injury per person, bodily injury per accident, and property damage per accident.
- Per-person limit: Maximum for one individual's bodily injury.
- Per-accident limit: Maximum for all bodily injuries in one accident, subject to per-person limits.
- Property damage limit: Maximum for all property damage in one accident.
Memory trick: Each person gets a 'slice', but the whole 'pie' has a maximum size.