How will the $200,000 liability insurance be distributed for Bodily Injury and Property Damage?

In a liability insurance policy with a per occurrence limit of $200,000, the distribution of coverage between Bodily Injury and Property Damage can vary based on how the policy is structured. In the choice provided as the correct answer, allocating $190,000 for Bodily Injury and $10,000 for Property Damage demonstrates a scenario where the insurer anticipates that Bodily Injury claims may be more significant in terms of their potential cost or frequency.

Typically, Bodily Injury claims, which cover medical expenses, lost wages, and pain and suffering related to injuries caused by an insured incident, tend to be higher than claims for Property Damage, which covers repair or replacement of physical property.

This division reflects a common real-world scenario where injuries are prioritised over material damage due to the potentially higher financial implications of medical care. The choice of this allocation is therefore logical and aligns with typical industry expectations regarding the nature and severity of claims, particularly in situations where costly medical treatment is anticipated.

Understanding this distribution is crucial for insurance professionals as they assist clients in assessing their coverage needs based on potential risks associated with their operations, ensuring that adequate protections are in place for the most likely and costly liabilities.