Study guide
10.2 Part A Liability and Part B Medical Payments
Associate in Insurance AINS
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1 Introduction & Exam Overview
1.1 Current Exam Facts 1.2 Designation Path: Core, Concentration, Elective, Ethics 1.3 How to Study for AINS and Use This Guide
2 AINS 101 Assignment 1: Why Do We Have Insurance?
2.1 Risk, Peril, Hazard, and Loss Exposures 2.2 The Risk Management Process 2.3 Insurable Risk, Pooling, and the Law of Large Numbers
3 AINS 101 Assignment 2: How Do Insurers Succeed?
3.1 Types of Insurers 3.2 Premiums, Loss Ratio, Expense Ratio, and Combined Ratio 3.3 Reinsurance, Capital, and Solvency
4 AINS 101 Assignment 3: How Does Underwriting Work?
4.1 Purpose and Steps of Underwriting 4.2 Adverse Selection, Hazards, and Underwriting Authority 4.3 Ratemaking and Premium Components
5 AINS 101 Assignment 4: How Do Insurers Handle Claims?
5.1 From First Notice of Loss to Settlement 5.2 First-Party vs Third-Party and Coverage Determination 5.3 Good Faith, Subrogation, and Salvage
6 AINS 101 Assignment 5: How Do Insurers Reach Customers?
6.1 Independent Agents, Exclusive Agents, and Brokers 6.2 Direct Writers, MGAs, and Digital Distribution 6.3 Producer Compensation and Customer-Facing Roles
7 AINS 101 Assignment 6: What Goes Into an Insurance Policy?
7.1 Declarations, Insuring Agreement, Conditions, Exclusions 7.2 Definitions, Endorsements, and Who Is an Insured 7.3 Legal Principles of Insurance Contracts
8 AINS 101: How Insurers Operate in a Regulated Market
8.1 State Regulation and the McCarran-Ferguson Act 8.2 NAIC, Rate Regulation, and Solvency Oversight 8.3 Producer Licensing, Unfair Practices, and Residual Markets
9 AINS 102 Assignment 1: Why Do People Need Insurance?
9.1 Personal Loss Exposures 9.2 Personal Risk Management and Why People Buy 9.3 Personal Lines Landscape: Auto, Home, Liability, Life, Health
10 AINS 102 Assignment 2: What’s in a Personal Auto Policy?
10.1 PAP Eligible Vehicles, Insureds, and Policy Structure 10.2 Part A Liability and Part B Medical Payments 10.3 Part C UM/UIM and Part D Damage to Your Auto 10.4 PAP Exclusions, Conditions, and Common Endorsements
11 AINS 102 Assignment 3: What’s in a Homeowners’ Policy?
11.1 HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8 Compared 11.2 Section I Property Coverages A–D 11.3 Perils, Exclusions, and Loss Settlement 11.4 Section II Liability (E and F) and HO Conditions
12 AINS 102 Assignment 4: What Other Policies Do People Need?
12.1 Personal Umbrella and Excess Liability 12.2 Scheduled Personal Property, Flood (NFIP), and Earthquake 12.3 Life, Health, and Disability Insurance Basics
13 AINS 102 Assignments 5–6: Evolution and Key Roles
13.1 Telematics, Usage-Based Insurance, and Personal Lines Innovation 13.2 Personal Lines Underwriting and Claims Roles 13.3 Agency, Customer Service, and Cross-Role Collaboration
14 AINS 103 Assignment 1: Why Do Businesses Need Insurance?
14.1 Commercial Property, Liability, Net Income, and Personnel Exposures 14.2 Commercial Risk Management Techniques 14.3 Monoline vs Package and the Commercial Lines Landscape
15 AINS 103 Assignment 2: What’s in a Commercial Property Policy?
15.1 Commercial Package Policy and the BPP Coverage Form 15.2 Basic, Broad, and Special Causes of Loss 15.3 Business Income and Extra Expense
16 AINS 103 Assignment 3: What’s in a Commercial Liability Policy?
16.1 CGL Coverage A — Bodily Injury and Property Damage 16.2 Coverage B Personal/Advertising Injury and Coverage C Medical Payments 16.3 Occurrence vs Claims-Made, Limits, and CGL Exclusions
17 AINS 103 Assignment 4: What Other Policies Do Businesses Need?
17.1 Business Auto Coverage Form 17.2 Workers Compensation and Employers Liability 17.3 Commercial Umbrella, Professional Liability, and Management Liability 17.4 Inland/Ocean Marine, Crime, Surety, Cyber, and Environmental
18 AINS 103 Assignments 5–6: Small Business Coverage and Evolving Roles
18.1 Businessowners Policy (BOP) 18.2 Tailoring Coverage for Small Businesses 18.3 Evolving Commercial Underwriting, Claims, and Producer Roles
19 Ethics 311: Ethical Decision Making in Risk and Insurance
19.1 Ethical Behavior and Professionalism 19.2 Conflicts of Interest and Resolving Ethical Dilemmas 19.3 Institutes Integrity Rules and Ethical Guidelines for Insurance Professionals
20 Electives, Career Path, and Virtual Exam Strategy
20.1 Choosing an AINS Elective 20.2 Related Designations: CPCU, ARM, AIC, API, AU, AIS, AIO, SPPA 20.3 Virtual Exam Strategy, Windows, and Retakes
10.2 Part A Liability and Part B Medical Payments
Key Takeaways Explain This Topic AI
Part A pays bodily injury and property damage for which an insured is legally responsible; typical PAP defense costs are in addition to the limit of liability until that limit is exhausted by judgments or settlements.
Split-limit notation such as 25/50/25 illustrates BI per person / BI per accident / PD per accident; those numbers are state-varying and are not a national legal minimum.
Out-of-state coverage raises Part A to at least the other state's compulsory amounts for that accident; financial-responsibility clauses make the policy certify as proof of FR to the extent required.
Part A exclusions include intentional injury, public or livery (share-the-expense carpools are usually excepted; ride-share generally needs an endorsement), vehicles with fewer than four wheels, and vehicles furnished for regular use such as a company car.
Part B medical payments is first-party and no-fault as to the occupant; you and family members are also covered as pedestrians struck by a motor vehicle designed mainly for public-road use, and occupying means in, upon, getting in, on, out, or off.
Last updated: August 2026
10.2 Part A Liability and Part B Medical Payments
Quick Answer: Part A pays bodily injury and property damage for which an insured is legally responsible , and a typical PAP pays defense in addition to the limit . Limits may be split (illustrated as 25/50/25 —BI per person / BI per accident / PD) or a combined single limit (CSL) . Those numbers are state-varying , not a U.S. legal minimum. Part B Medical Payments is first-party and no-fault as to the occupant . A company car furnished for regular use is a Part A trap; borrowing a neighbor’s car is usually excess on the borrower’s PAP.
AINS 102 will not ask you to define liability in the abstract. It will give you an accident with two injured people, a split-limit dec page, a rideshare weekend, or a sedan the employer issued. Your job is to name the grant, the insured, the limit that actually pays, and the exclusion that may kill the file.
Part A: the third-party grant
Part A agrees to pay damages for BI and PD for which an insured becomes legally responsible because of an auto accident. Legal responsibility is the point. A courtesy payment to a friend is not the grant. A judgment, a settlement the insurer defends, or a statutory obligation the form recognizes is the grant.
Defense. The typical ISO PAP promises to settle or defend and treats investigation and defense costs as in addition to the limit of liability . Paying a lawyer does not erode the $50,000 BI cap the way a CGL defense-inside-limits endorsement would. When the limit is exhausted by judgments or settlements , the duty to defend ends . Supplementary payments (bail bonds up to a modest stated amount, appeal bonds, post-judgment interest, loss of earnings for attendance at hearings at a stated daily cap) sit beside that defense promise. They are not a second liability limit.
Split limits versus combined single limit
Split limits are written as three numbers. The illustration 25/50/25 means:
- Number Meaning
- 25 $25,000 BI per person
- 50 $50,000 BI per accident (all persons combined)
- 25 $25,000 PD per accident
If one person has $40,000 of BI and a second has $20,000, and PD is $12,000, Part A pays $25,000 on the first person (per-person cap), $20,000 on the second (within the leftover per-accident BI), and $12,000 PD— $57,000 , not $72,000. The per-accident BI cap of $50,000 would have cut a larger two-person total.
25/50/25 is a teaching illustration, not a national legal minimum. Compulsory auto and financial responsibility (FR) limits are set by each state and change. Some states sit below that illustration; many sit above it. Never tell an exam reader that every U.S. driver “must carry 25/50/25.” Read the dec page and, when the stem mentions another state, read that state’s compulsory amounts.
A combined single limit is one dollar amount for all BI and PD in one accident. A $100,000 CSL can pay one person’s $90,000 BI and $10,000 PD, or several people, until the single pot is gone. Split-limit math and CSL math are not interchangeable.
Out-of-state coverage and financial responsibility
If an accident occurs in another state or province that requires higher compulsory liability limits or a different kind of coverage (for example, a no-fault add-on the PAP does not otherwise provide), Part A’s out-of-state coverage clause typically raises this policy to at least those compulsory amounts for that accident. The insured does not have to call the CSR from the rest-stop to “activate” it.
The financial responsibility clause says the policy conforms to the FR law of the state to the extent required and can be certified as proof of FR. Certification can impose extra obligations (no inner limits that undercut the certified amount). It is not a promise that the PAP matches every residual-market or no-fault statute in the country without endorsements.
Part A exclusions that AINS actually tests
Walk exclusions only after you have a grant and an insured.
Intentional BI or PD by that insured. Road rage that is a deliberate ramming is not an accident the grant was built to finance.
Public or livery conveyance. Using the auto as a taxi or to haul paying strangers is excluded. A share-the-expense carpool (coworkers splitting gas and parking, no fare-profit business) is usually excepted from that exclusion. Uber/Lyft and other transportation network company (TNC) use is not a carpool. Period 1 (app on, waiting for a match) is the famous PAP gap; the TNC’s commercial policy may respond in later periods. The household typically needs a ride-share / TNC endorsement if that exposure exists.
Fewer than four wheels or vehicles designed mainly for off-road use (with narrow exceptions such as a medical emergency, a trailer, or a non-owned golf cart). Motorcycles do not sneak into Part A because someone has a PAP.
Vehicles furnished or available for regular use of the named insured, other than your covered auto. The company car the employer issues for weekday commuting is the trap. The employee’s PAP is not a free excess policy on that sedan. Extended non-owned coverage is how many households buy that exposure back. A neighbor’s car borrowed twice a year is not “regular use.” A coworker’s car used every workday may be.
Auto-business use (selling, repairing, servicing, storing, parking autos) except in limited “you / family / partner / employee” situations involving your covered auto; racing; nuclear and war; care, custody, or control of property (other than a residence or private garage) that the insured damages.
Workplace walk: an insured with a PAP and no extended non-owned endorsement totals a fleet sedan the employer furnished. Part A on the personal policy is the wrong well to drink from. The employer’s business auto form is the starting point.
Part B Medical Payments
Part B pays reasonable expenses for necessary medical and funeral services because of bodily injury caused by an accident and sustained by an insured . It is first-party . You do not have to prove the insured was legally liable. It is no-fault as to the occupant in the sense that occupancy-plus-accident triggers the grant, subject to exclusions and to other-insurance rules. Limits are typically per person . Many editions also impose a time window (often three years from the accident) for incurred expenses.
Who is an insured for Part B:
You and any family member while occupying a motor vehicle designed mainly for use on public roads, or as a pedestrian when struck by such a vehicle (or by a trailer of one).
Any other person while occupying your covered auto .
A guest in the listed Honda can have Part B. A guest in a borrowed neighbor car generally cannot take Part B from your PAP; that occupant looks to the owner’s Part B or to health insurance. You and a family member can take Part B from your PAP while occupying that neighbor car, unless an exclusion (regular use, fewer than four wheels, no reasonable belief of permission) applies.
Occupying is defined: in, upon, getting in, on, out, or off . Shutting a door, sliding out of a seat, or being on the auto can still be occupying. Standing a block away after parking is not.
Pedestrian coverage is easy to miss. A named insured walking a dog who is struck by a city bus is a Part B insured on the family PAP. The bus does not have to be a covered auto. The striking vehicle does have to be a motor vehicle designed for public-road use —not a claim that a falling bicycle in a park is Part B.
Part B exclusions overlap Part A in places (public/livery, fewer than four wheels, furnished-for-regular-use vehicles, racing, occupying without reasonable belief of permission) and add others (vehicles used as a residence, workers compensation, uninsured vehicles the insured owns).
Borrowing the neighbor’s car
Name the auto first. The neighbor’s sedan is not your covered auto . While you drive it with permission and it is not furnished for your regular use, you (and typically a family member) are a Part A insured on your PAP for that non-owned auto. The neighbor is an insured on the neighbor’s PAP, which is usually primary . Your Part A is typically excess (Part F other-insurance, taught in 10.4). Passengers in the neighbor’s car are not additional named insureds on your policy. That single walk—covered auto versus non-owned, who is an insured, primary versus excess—is the Assignment 2 liability item.