Property and Casualty Insurance Practice Exam

What does a Single Limit Basis signify in insurance?

1. Separate limits for bodily injury and property damage

2. A combined total limit for all claims from one accident

3. Unspecified coverage for general liabilities

4. Unlimited coverage for damages incurred

The correct answer is: A combined total limit for all claims from one accident

A Single Limit Basis in insurance signifies a combined total limit for all claims resulting from a single accident, regardless of whether those claims are for bodily injury or property damage. This means that the insurer will pay up to the specified single limit for all eligible claims stemming from the incident rather than dividing that limit between various types of damages. This structure is beneficial in simplifying coverage limits, as it provides a capped amount that can be utilized for multiple types of claims incurred in one event. For example, if an accident results in both bodily injuries and property damage, the insured does not have to worry about whether they are exceeding one limit while remaining under another; they only need to keep the total claims within the single aggregate limit. This can provide peace of mind and makes it easier for policyholders to understand their coverage. In contrast, limits that specify separate amounts for bodily injury and property damage (as in the first option) can lead to complications if one type of claim exceeds its individual limit while the other remains under its own. Unspecified coverage or unlimited coverage (the last two options) do not apply in a Single Limit Basis context, as this type of policy involves defined limits on the insurer's liability.