Personal Auto Policies Part A Liability for the Insurance Exam

All right, hello, this is Melissa, your insurance exam queen. And since this video will be on YouTube, please make sure to like and subscribe to the channel. Drop a comment below about what state you're in, what test you're taking. I will tell you what's important. And definitely check out my website, insuranceexamqueen.com for my class series. YouTube is the little meal, the little bite-sized pieces of the information. My class series, like gold, is the full-blown meal that will help explain all of this into more in-depth detail. But let's jump into part A for your car insurance, okay? So on your car insurance policy, you have different parts. On homeowners, they call it coverages. On auto, they call it parts. So the main coverage on an auto policy is known as part A. And part A is liability. And what that means is you're at fault. If you're liable, you're at fault. Liability means I'm at fault. So I wrote it out here in yellow. I hit crashed into you, so I owe you money, and my insurance company will pay you what I owe you up to my policy limits. That's basically what liability is saying. I hit you, I owe you money. So if someone else hit you, they owe you money, okay? And unless you're in a no-fault state, this is how insurance works. So whoever I hit, I am responsible to pay their medical bills. And if someone hit you, they are responsible to pay your medical bills, okay? That's what part A liability is. Now, there's two ways to have part A liability. You can either have it as a split limit or a combined single limit. Split limit is where we break it up, and it's the most common one. So it's the example that I'm using here, but I just wanted to clarify that this is a split limit type of part A liability. So when you look at part A, you're gonna see three coverages with dashes. You're gonna see three amounts of money with dashes. And these dollar amounts could change. You might see 25,000, 50,000, 25,000. You might see 50,000, 100,000, 50,000. You might see 100,000, 300,000, 100,000. Doesn't matter the number. I mean, you do need to memorize what your state minimum is. Every state will decide what is the minimum amount you're supposed to buy. So when you buy car insurance, your state will say, at a minimum, you have to buy these limits. And it changes in every state. Every state can be different. Like Arizona is 15, 30, 10. Texas is, I'm pretty sure Texas is 30, 60, 30. A lot of states are 25, 50, 25. You've gotta know what it is for your state. And your state-approved course, like Excel, will give you the numbers that you need to know for your state. Now, what are these numbers? So let's talk about these numbers. So again, liability says, I'm at fault. I hit you. I owe you money. I don't remember the limits. So if I said them wrong, double-check your state. I'm recalling it from memory, so I could have messed up. Okay, so what are these numbers? These numbers are your bodily, these are the limits you have available to pay out to someone. So if I crash into you, and my policy says 25,000, 50,000, 25,000, these are the limits I have to pay to you. But each one of these means something different. We're actually gonna start with the middle one. And the middle one is total bodily injury. And they'll say BI. And that is summarizing bodily injury. BI, total BI bodily injury. This number in the middle is how much money I have available to pay the people that I crashed into with my car. So if I crash into you, and I send you to the hospital, that's what the bodily, and you have a medical bill, that's what the bodily injury is gonna cover. However, this is total BI. And the first number here is actually BI per person. And what this is saying is that no matter how many, no matter how many injuries you have or whatever, no one person can get more than 25,000 from my policy. So if I crash into you, and you get a medical bill for $30,000, I can only give you 25. I know that I have 50 here, but this is for total. I am still limited by per person. So even if I hit you, cause you a $30,000 medical bill, I can only pay you 25 from my insurance. Now you can sue me for the rest, and you may or may not get it, depending on the court, whatever. But the point is, is that this number is how much one person can get. So even if I caused you harm beyond the 25, I can only pay you the 25. My insurance will only pay the 25. So this number is actually coming out of this number. Basically what it's saying is that I can hit, I can pay up to two people 25,000 each for a total of 50,000. Now you may crash into three people, four people, five people, whatever. No one person can get more than 25, and all of them added together cannot get more than 50. So these are the limits of what is available to pay out. The last number is total, this is total PD, known as property damage. And this is what pays out to the person's car. So if I crash into you, I send you to the hospital, and I damage your car, I have the 25,000 to pay you for your medical bill, and I have 25,000 to pay out you to fix your car. Now, whether I hit one car, 20 cars, 30 cars, 50 cars, I only got 25,000 to fix them. So whether I hit one car or 20 cars, if I'm the reason for a 20 car pileup and they blame me completely, I only got 25,000 and that's it. And these numbers, by the way, all of these numbers together are known as my per occurrence limit, per occurrence. What this is saying is basically each accident, each accident. So these are the limits I have available for every single accident. So if I was to have an accident on Monday, I could get 25 per person, 50,000 in total, so basically two people at 25 for a total of 50, and 25,000 to fix their car. I have another accident on Wednesday, 25 per person, 50,000 bodily injury total, 25,000 per car. So this is my per occurrence limit. Each accident gets this limit. And now there's only so many of these available. And what I mean by that is eventually, if you were to have an accident every day, five times a day, whatever, you're crashing car, crashing car, crashing, I hope you get off the road. I hope they take away your license or something. But if you were to have an accident every single day and the insurance, every time you have an accident, they can pay 25, 50, 25, 25, 50, 25, 25, 50, 25. At some point they'll say, we're done, you paid enough. And that means that you hit your policy aggregate. Your auto insurance policy when you purchase it is only good for like a million, maybe $2 million. And what they're saying is no matter how many accidents you have, if we pay out more than a million, or if we pay out a million, you're done. No more money is available to you. Okay, it's very hard to hit that aggregate. But if you were to have a lot of accidents, especially if you have lower limits like this, it can be hard. If you have bigger limits, it could be easy to hit that aggregate. But the lower your limits, the harder it would be to hit that aggregate. But this is your per occurrence each accident limit. And again, you've got per person, total bodily injury and total property damage. Now, it's not necessarily a test question, but it's important to understand. If this is my limits, well, this actually could be a test question. So they may say your limit, your per occurrence limit, your per occurrence limits are, and they usually abbreviate it by doing numbers like this, 25, 50, 25. They won't, they're rarely if ever write out the full dollar amount. They're usually just gonna write 25, okay? So you need to make sure you know that when they write this out, it's in the thousands, okay? So this is a possible test question here that I'm covering right now. Test question is your per occurrence limits are 25, 50, 25. What is the max amount of money what is the max amount of money the insurer will pay for any one accident, okay? So they tell you your per occurrence limits are 25, 50, 25. What is the max money the insurer will pay for any one accident? What they're basically asking is if these are my limits, and let's say you have the worst accident possible, you hit 20 people, 20 cars, like you're definitely gonna use every single penny. How many pennies, how much money will pay out? Some people will make the mistake of saying 25 plus 50 plus 25, and that is wrong because we have to remember that this 25,000 is part of the 50,000. This 25,000 is telling you how you're allowed to divide the 50. So when you get this question, your per occurrence limits are 25, 50, 25. What is the max amount of money the insurer will pay for any one accident? It's gonna be the two totals added together. It'll be total BI and total PD for a total of 75,000. So your answer down here would be 75,000. Now this is any policy you get. So let's look at another example. Let's say that my limits were 50,000, 100,000, 25,000, and we're answering this same question except we're switching out the limits here. Our answer would be these two added together. It's always the last two added together, okay? So in this example, our answer would be 125,000. We never add the first number in it because this number is coming out of that number. It's not an extra amount of money. It's pulling from that amount of money, okay? Okay, so this is part A, liability split limit, and I'm just gonna show you real quickly a possible math or a possible test question. So this is a test question. You hit a car with three people. Person one is injured at 25,000. Person two is, I'm gonna abbreviate, is injured at 30,000. Person three is injured at 40,000. Your part A is 25, let me give a bigger number. Yeah, yeah, no, it's fine. 25, ah, 25, 50, period. Now, technically, this confuses some people. There is a third number here, but since they're asking about medical bills, sometimes they don't throw in that number. So don't be alarmed if you don't see a third number because you're only doing math with the first two numbers anyway, okay? And especially in my videos, I'll tend to do that too. I only put the numbers that actually apply. So then they'll ask you, so they'll say, what is the max the insurer pays? What is the max the insurer pays? Or they may ask, so these are two variations of this question, how much will each person get, okay? So they could kind of ask this in two different ways. So let's kind of just draw this out here for a second. So let's say we have three people, one, two, three. Person one is 25,000. Person two is 30,000. Person four is 40,000. And like they said, our limit is 25,000, 50,000. Now, when we go down the line here for how much money these people are gonna get, when we look at person one, 25,000, we have to check the per person limit because no one person will get more than 25,000. So person one is exactly at 25,000, so they can get 25,000. Then we look at person two, they are injured at 30, but the per person is capped at 25. You cannot pay them more than the per person limit, okay? So then we can pay person two 25. So they're technically negative 5,000 and they could sue you for this. They could technically sue you for that if after your insurance pays. This is why as an insurance agent, you should always encourage your people to buy more than the state minimum so that when they are in an accident, they're not liable to be sued for anything, okay? Now, at this point, when we look at these two numbers, we have spent 50,000 and we look at the total BI is 50,000. We have no more money available. So person two is going to get zero, or person three, sorry, is gonna get zero dollars. There's no more money available, okay? So the max that the insurer pays is gonna be 50,000. And honestly, I didn't word this question very great. They won't give you a question like this for this example. They would use a much higher number if they're gonna use this example. So we can kind of ignore that one because it wouldn't be part of a question like this because here's the thing. In the real world, this third person will get some money. They're all gonna get some money, but it's gonna be in proportion to their injuries. So in the real world, everyone will walk away with something but it won't be enough. Like in order to pay this person, we're gonna have to take money out of here. We're gonna have to take money out of here. We wanna function, we wanna look at it like this to help us pass the test. In the real world, they will handle the claims differently. Everyone will get some money in proportion to their injuries. But in the real world, in the test world, I'm sorry, you wanna really focus on the per person and then the total bodily injury. You've gotta pay attention to that. So you wanna do it like this so that you can answer the questions correctly. So this one is kind of easy in that we can see big number, big number, big number. We can just pretty much assume they're gonna definitely hit their policy limit. This can get a little harder or a little tricky when they've got smaller numbers for injuries and bigger numbers for the limits. But as long as you go down the line and you go by each person and each person, you should be able to answer these questions correctly. Let me do one more example with different numbers to kind of show you, but I'm not gonna write out the full question. Let's just say we had three people and let's say our limit is 100, 300. Again, there is another number there, but when they're asking about bodily injury, they don't always throw in that last number, okay? And let's say person one was injured at 120,000, person two was injured at 50,000, and person three was injured at 200,000. Now, let's go down the line. Person one is injured at 120, but the max they can get is 100, so they can get 100. And again, you're liable to be sued for that other 20,000, so you wanna make sure you have bigger limits, okay? The next person is injured at 50, which is well below the per person, so they can get 50. Now, here's where some people will mess up because they'll say, okay, at this point, I have spent 150. I have one person left at 120, so they can get 150. And you will be wrong, wrong, wrong, wrong, wrong. No, no, no, no. Some people will make that error. I've done it myself when I've done these. We have to remember that even though there's plenty of money left over, we've only spent 150. So if we were to subtract 150, we have 150 left. Some people would say, oh, you have 150 left. Give it all to that person. No, we still have to look at that per person limit, per person limit. So they're not gonna get 150. They're gonna get 100. So we would have only spent 250,000. The max the insurer would pay is 250,000, okay? They're not gonna pay the full limit. So you can't always just assume, oh, lots of injuries, they're gonna pay the full limit. You've gotta break it down by person. You've gotta slowly do the math by person to make sure because we're only gonna end up spending a total of 250 here because person one cannot get more than 100. Person two cannot get more than 100. So even though person, or three, I'm sorry, person two didn't need it all, you still maxed out here, you still maxed out here. That's it. That's all you got, okay? All right. So that is part A, liability. Make sure you slow down. Make sure you understand, okay, again, you have three numbers, three numbers, bodily injury per person, total bodily injury, property damage for your car. They rarely, if ever, ask you about the property damage number. They really focus on the bodily injury per person and the total bodily injury. No one person can get more than the per person limit and no one person can get more, nobody all together can get more than the total bodily injury limit. So this is your insurance exam queen sending you all the loves, all the vibes past your exam. Again, make sure to like and subscribe to the channel and drop your state below and I will tell you what's important for your exam and definitely check out insuranceexamqueen.com so you can get my class series that will go into depth into all of these and give you, Gold will actually give you some student notes to break all this down and some practice questions. So love you all.