A client has a Personal Auto Policy (PAP) with Medical Payments coverage of $5,000. The insured is involved in an accident and incurs $7,000 in medical expenses. The insured's health insurance policy covers $4,000 of these expenses. How much will the PAP's Medical Payments coverage pay for this claim, assuming it is primary coverage in this scenario?
- A$1,000
- B$7,000
- C$3,000
- D$5,000
Show answer & explanationAnswer & explanation
Correct answer: D. $5,000
Medical Payments coverage in a PAP is typically primary for the insured, regardless of other health insurance. It pays for reasonable and necessary medical expenses incurred as a result of a covered accident, up to its policy limit. In this case, the total expenses are $7,000, but the PAP's Medical Payments limit is $5,000, so it will pay its maximum limit of $5,000. The health insurance payment is irrelevant to what the PAP Med Pay will cover, assuming Med Pay is primary.
Why the other options are wrong
- A. This would be the amount if the PAP paid only the difference after health insurance, which is not how primary Med Pay works.
- B. This is the total expense, which exceeds the PAP Med Pay limit.
- C. This calculation is incorrect and does not reflect the Med Pay limit.
PAP Medical Payments Coverage
PAP Medical Payments coverage pays for reasonable and necessary medical and funeral expenses for the insured and other occupants of a covered vehicle, incurred as a result of an auto accident, regardless of fault.
- Covers insured and passengers.
- Pays regardless of fault (no-fault coverage).
- Often primary coverage, or coordinated with health insurance.
Memory trick: Med Pay is for immediate care, up to its cap, no questions asked.