Which term describes the order in which losses are paid under an automobile policy?

Which term describes the order in which losses are paid under an automobile policy?

• A. Priorities of payment
• B. Direct Compensation
• C. No-fault benefits
• D. Loss of income coverage

Answer: (A)

The idea being tested is priority of payment—the defined order in which auto policy coverages respond to a loss. When a claim could be covered by more than one provision, the policy or state rules specify which coverage pays first and up to its limits before the next coverage applies. This ensures claims are settled smoothly and avoids paying twice or leaving gaps. The other terms describe types of benefits or no-fault concepts rather than the sequencing of payments, so they don’t capture the ordering principle.

The idea being tested is priority of payment—the defined order in which auto policy coverages respond to a loss. When a claim could be covered by more than one provision, the policy or state rules specify which coverage pays first and up to its limits before the next coverage applies. This ensures claims are settled smoothly and avoids paying twice or leaving gaps. The other terms describe types of benefits or no-fault concepts rather than the sequencing of payments, so they don’t capture the ordering principle.