Which statement best describes how payments are made under property and liability lines of a policy?

Which statement best describes how payments are made under property and liability lines of a policy?

• A. Property insurance pays the insured; liability insurance pays the claimant
• B. Property insurance pays the claimant; liability insurance pays the insured
• C. Both property and liability payments go to the insured
• D. Both property and liability payments go to the claimant

Answer: (A)

Property insurance is designed to put the insured back in the position they were in before their loss, so the payout goes to the person who owns or has an insurable interest in the damaged property—the insured (or, in some cases, a mortgagee who has that interest protected). Liability coverage, by contrast, handles claims made by others who allege the insured caused harm or damage; the insurer pays the third party claimant (or their insurer) to compensate them for the loss. So saying that property insurance pays the insured and liability insurance pays the claimant best describes how these lines function. For example, a damaged own car or home is paid to you, while if you’re at fault in an accident, the settlement or court-awarded damages go to the other party.

Property insurance is designed to put the insured back in the position they were in before their loss, so the payout goes to the person who owns or has an insurable interest in the damaged property—the insured (or, in some cases, a mortgagee who has that interest protected). Liability coverage, by contrast, handles claims made by others who allege the insured caused harm or damage; the insurer pays the third party claimant (or their insurer) to compensate them for the loss. So saying that property insurance pays the insured and liability insurance pays the claimant best describes how these lines function. For example, a damaged own car or home is paid to you, while if you’re at fault in an accident, the settlement or court-awarded damages go to the other party.