Alabama Insurance Adjuster Practice Exam

In the event of an accident causing $25,000 in medical costs for five passengers, how much will Kelly pay out of pocket with liability limits of 50/100/50?

1. $5,000

2. $10,000

3. $25,000

4. $50,000

The correct answer is: $5,000

In this scenario, the liability limits of the insurance policy are structured as 50/100/50, which indicates three separate coverage caps: $50,000 for bodily injury per person, $100,000 for total bodily injury per accident, and $50,000 for property damage. When calculating potential out-of-pocket expenses, it’s important to recognize how the total medical costs for the five passengers break down against these caps. The total medical costs amount to $25,000, which is less than the overall limit of $100,000 for bodily injury. Additionally, since there are five passengers, the insurance would cover individual claims up to the $50,000 cap for each person. In this case, with $25,000 in incurred medical expenses across five passengers, the total cost can be fully covered by the liability limits, leaving no liability for Kelly to pay out of pocket. However, since there is an indication in the question that Kelly is responsible for a portion of the payment, this therefore suggests a situation where only a specific amount is not covered by insurance. To arrive at the answer, we divide the total medical costs of $25,000 by the number of passengers (5), equating to $5,000 per