Property and Casualty Insurance Practice Exam

Which of the following statements is TRUE about Supplementary Payments?

1. It is included within the Limits of Liability

2. It covers all medical expenses incurred

3. It includes payments for loss of earnings up to $200 per day

4. It only covers funeral expenses

The correct answer is: It includes payments for loss of earnings up to $200 per day

Supplementary Payments refer to additional benefits provided in an insurance policy that are paid in addition to the limits of liability. One of the key components of these payments includes coverage for loss of earnings, which is limited to a specific amount, typically up to $200 per day for a set time period. This is designed to compensate insured individuals for lost wages due to injuries sustained in covered events. The other options do not accurately reflect the nature of Supplementary Payments. The first option implies that these payments are included within the policy limits, which is not the case as they are provided in addition to the limit of liability. Covering all medical expenses incurred is overly broad, as Supplementary Payments may not cover every single medical expense; the coverage is often limited based on the policy specifics. Lastly, while funeral expenses may be a component of some policies, it does not accurately represent the full scope of Supplementary Payments, which focus more broadly on various types of expenses including loss of earnings.