South Carolina Personal Lines Practice Exam

What sub-limit in a liability policy puts a ceiling on bodily injury payments for a single person?

1. Per occurrence

2. Aggregate limit

3. Per person

4. Per accident

The correct answer is: Per person

The concept of a sub-limit in liability insurance is essential to understanding how coverage works, particularly regarding bodily injury payments. A 'per person' sub-limit specifically sets a maximum limit on how much can be paid out for bodily injury claims involving a single individual involved in an incident. This means if multiple people are injured in an accident, the total payout for one person's injuries cannot exceed this established limit, regardless of the total damages incurred. This is important for insurers to manage risk and liability effectively, as it creates predictability in their exposure to claims. While terms like 'per occurrence', 'aggregate limit', and 'per accident' are also relevant in the context of liability insurance, they serve different functions. 'Per occurrence' limits apply to the total payout for all claims arising from a single event, not limiting individual claims. An 'aggregate limit' is the maximum amount an insurer will pay for all claims during a policy period, also not specific to individual injuries. 'Per accident' is similar to 'per occurrence' but usually refers to continuous injuries resulting from a single event. Understanding these distinctions clarifies the role of the 'per person' sub-limit in protecting both the insured and the insurer.