Question

Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state?

Answer 1

Answer: C) Larry's policy automatically provided $50,000 of liability coverage.

Explanation:

Larry's Personal Auto Policy (PAP) seems to only cover him for the MINIMUM amount required in a state to be considered financially responsible and this is why in a state that required $25,000, he was covered for $25,000.

In a state therefore where the minimum financial responsibility limit is $50,000, his cover automatically becomes $50,000.

Answer 2

Answer : Larry's policy automatically provided $50,000 of liability coverage.

Explanation: Larry's PAP is dynamic according to the definition of his PAP, Larry's PAP limit is the minimum amount required by his state to be considered financially responsible. His previous $25,000 limit is the minimum financial responsibility offered by that state.

Therefore, when on vacation in another state, his policy automatically provides him the minimum financial responsibility offered by the visited state which in this case is $50,000.