Property And Casualty Insurance License Casualty Insurance Basics 2 — Questions and Answers
Question 1: What is the split limit '25/50/10' on an auto liability policy?
- $25,000 per accident, $50,000 per person, $10,000 property damage
- $25,000 per person bodily injury, $50,000 per accident bodily injury, $10,000 property damage (Correct answer)
- $25,000 medical, $50,000 liability, $10,000 collision
- $25,000 collision, $50,000 comprehensive, $10,000 uninsured motorist
Correct answer: $25,000 per person bodily injury, $50,000 per accident bodily injury, $10,000 property damage
The split limit 25/50/10 means $25,000 maximum per injured person, $50,000 maximum per accident for all bodily injuries, and $10,000 for property damage.
Question 2: What does 'occurrence' mean in a liability policy?
- Any intentional act by the insured
- An accident or continuous exposure to conditions that result in bodily injury or property damage (Correct answer)
- A single claim filed against the insured
- A policy anniversary date
Correct answer: An accident or continuous exposure to conditions that result in bodily injury or property damage
An occurrence is an accident, including repeated exposure to substantially the same general harmful conditions, that results in bodily injury or property damage.
Question 3: What is the difference between an 'occurrence' form and a 'claims-made' form?
- Occurrence covers only intentional acts; claims-made covers accidents
- Occurrence covers losses that happen during the policy period; claims-made covers claims filed during the policy period (Correct answer)
- Claims-made is always more expensive than occurrence
- There is no difference; they are interchangeable
Correct answer: Occurrence covers losses that happen during the policy period; claims-made covers claims filed during the policy period
An occurrence form triggers coverage based on when the loss occurred, while a claims-made form triggers coverage based on when the claim is first reported during the active policy period.
Question 4: Personal Injury Protection (PIP) coverage is associated with which type of auto insurance system?
- Tort (at-fault) system
- No-fault system (Correct answer)
- Comparative negligence system
- Contributory negligence system
Correct answer: No-fault system
PIP is a component of no-fault auto insurance systems, providing medical and income loss benefits to the insured regardless of who caused the accident.
Question 5: What is the purpose of an 'umbrella' liability policy?
- To replace primary liability policies
- To provide excess limits above underlying primary policies and drop-down coverage for some uncovered claims (Correct answer)
- To cover property losses excluded by the homeowners policy
- To cover business interruption losses
Correct answer: To provide excess limits above underlying primary policies and drop-down coverage for some uncovered claims
An umbrella policy sits above primary liability policies, paying claims that exceed underlying limits and sometimes covering gaps left by underlying policies.
Question 6: Employers Liability coverage (Part 2 of workers' compensation) protects the employer against:
- OSHA fines and penalties
- Employee lawsuits alleging negligence beyond standard workers' comp benefits (Correct answer)
- Injuries to independent contractors
- Claims from customers injured on business premises
Correct answer: Employee lawsuits alleging negligence beyond standard workers' comp benefits
Employers liability covers the employer if an employee sues for damages beyond what workers' compensation statutes provide, such as in dual-capacity or loss-of-consortium suits.
Property And Casualty Insurance License Casualty Insurance Basics 2
What is the split limit '25/50/10' on an auto liability policy?