A client in California is purchasing a Personal Auto Policy with liability limits of 25/50/25. They are involved in an at-fault accident where three individuals are injured. The first injured person incurs $30,000 in medical bills, the second incurs $20,000, and the third incurs $15,000. Additionally, the client causes $40,000 in damage to another vehicle. How much will the policy pay for the bodily injury claims?
- A$50,000
- B$55,000
- C$75,000
- D$65,000
Show answer & explanationAnswer & explanation
Correct answer: A. $50,000
The liability limits are 25/50/25. This means $25,000 per person for bodily injury, $50,000 total per accident for bodily injury, and $25,000 for property damage. For bodily injury, the policy will pay a maximum of $25,000 to any one person and a maximum of $50,000 for all bodily injuries in that single accident. The first person's $30,000 claim is capped at $25,000. The second person's $20,000 claim is paid in full. The third person's $15,000 claim is paid in full. Summing these: $25,000 (for person 1) + $20,000 (for person 2) + $15,000 (for person 3) = $60,000. However, the policy's 'per accident' limit for bodily injury is $50,000. Therefore, the policy will pay a maximum of $50,000 for all bodily injury claims.
Why the other options are wrong
- B. This is the sum of the first person's capped claim ($25k) and the second person's claim ($20k) and the third person's claim ($15k), which totals $60k, but then incorrectly capped at $55k, or perhaps miscalculation of total paid.
- C. This is an incorrect calculation; it might reflect a misunderstanding of how the split limits apply.
- D. This is the sum of all individual bodily injury claims ($30k + $20k + $15k = $65k) without applying the per-person or per-accident limits correctly.
Split Limits (Personal Auto)
Liability limits in a Personal Auto Policy expressed as three numbers: per person bodily injury, per accident bodily injury, and per accident property damage.
- Example: 25/50/25 means $25,000 per person BI, $50,000 per accident BI, $25,000 per accident PD.
- The 'per person' limit caps payment to any single injured individual.
- The 'per accident' BI limit is the maximum paid for all injured parties combined.
Memory trick: Split limits: P.P.A.P.D. — Per Person, Per Accident, Property Damage!