South Carolina Personal Lines Practice Exam

What sub-limit in a liability policy puts a ceiling on the payment for all claims arising from a single accident?

1. Per occurrence

2. Per person

3. Aggregate limit

4. Per accident

The correct answer is: Per occurrence

The per occurrence limit in a liability policy is designed to cap the total amount that the insurer will pay for all claims related to a single incident or accident. This is significant because it protects the insurance company from excessive losses stemming from any one event. For example, if multiple parties are injured or suffer damages in a car accident caused by the insured, the per occurrence limit would establish the maximum payout the insurer would be liable for, regardless of the number of claims filed as a result of that specific accident. In contrast, the other options serve different purposes. The per person limit specifically caps the payout for individual claims made by each person involved in an accident; the aggregate limit sets a maximum total payout over the policy period regardless of how many incidents occur; and the per accident limit, while somewhat similar to per occurrence, is not the standard terminology most commonly used in liability policies. Therefore, the per occurrence limit is the appropriate choice for establishing a ceiling on payments arising from a single accident.