How does "secondary insurance" work in relation to claims?

Prepare for the IBABC Automobile Insurance Exam with our multiple choice questions with explanations and hints. Study effectively with our engaging quizzes and ensure you're exam-ready!

Secondary insurance functions as a supplemental layer of protection, engaging after the primary insurance has been exhausted. This means that once the primary policy has paid up to its coverage limits on a claim, the secondary insurance can then address any outstanding costs that remain, providing additional financial support. This is particularly beneficial in scenarios where damages or medical expenses exceed the primary insurance limits, ensuring that the insured party has comprehensive protection and coverage for more significant liabilities.

While other options mention specific scenarios or limitations of insurance types, they do not accurately reflect the broad intention and utility of secondary insurance, which is designed to back up primary insurance. This structure allows policyholders to have peace of mind knowing that they have an extra layer of financial support for unexpected and potentially significant costs that could arise from accidents or other incidents.

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