Property and Casualty Insurance Practice Exam

How does a Split Limit Basis differ from a Single Limit Basis?

1. It has a single limit for all claims

2. It combines bodily injury and property damage coverage

3. It provides individual limits for bodily injury and property damage

4. It covers only bodily injury claims

The correct answer is: It provides individual limits for bodily injury and property damage

The correct interpretation of a Split Limit Basis is that it provides individual limits for bodily injury and property damage. This means that in an insurance policy utilizing a split limit, there are designated maximum amounts that the insurer will pay for bodily injury claims and separate maximum amounts for property damage claims. This approach allows for more precise management of coverage risks because it distinguishes between the two types of liability. In contrast, a Single Limit Basis encompasses both bodily injury and property damage under one overarching limit. This single limit means there is no separation between the two types of claims; instead, any combination of claims would be paid up to the overall maximum limit of the policy. The other options, while relevant to insurance policies, do not accurately describe the defining characteristic of a Split Limit Basis, which is the specific allocation of individual limits for bodily injury and property damage coverage.