North Carolina Adjuster Practice Exam

Which of the following statements about liability limits is true?

1. They cover only property damage

2. They are defined per person and per accident

3. They do not apply in hit-and-run scenarios

4. They increase automatically each year

The correct answer is: They are defined per person and per accident

Liability limits are a key aspect of insurance policies, particularly when it comes to understanding the extent of coverage provided. The accurate statement regarding liability limits is that they are defined both per person and per accident. This means that the insurance policy sets a maximum amount that will be paid for injuries to a single individual (per person) as well as a total maximum amount for all injuries or damages resulting from a single incident (per accident). This structure is essential as it provides clarity on how much coverage is available for multiple claimants involved in a single event. For example, if an accident involves several people, the liability limits delineate how much can be allocated to an individual claimant and how much the insurer will cover in total for that particular incident. Understanding these limits is crucial for adjusters when assessing claims and determining the payout amounts. In contrast, some statements like those regarding coverage limitations to property damage only or the non-application of limits in hit-and-run situations do not accurately reflect the comprehensive nature of liability coverage. Additionally, the notion of automatic increases each year is not standard for all policies and would typically depend on the specific terms of an insurance policy or rider. Therefore, recognizing that liability limits are structured to apply both per incident and per individual provides a