2025 New York State Property and Casualty Licensing Practice Exam – Complete Prep Guide

Supplementary Payments in auto insurance provide coverage for costs that are associated with legal defense in claims made against the insured. This is crucial because it helps the policyholder by covering expenses related to legal proceedings, including attorney fees, court costs, and any other necessary expenses incurred while defending against a lawsuit for a covered claim.

This feature of an insurance policy offers extra financial protection beyond the limits of the liability coverage. For instance, if someone is sued as a result of an auto accident, the costs to defend that lawsuit can accumulate quickly, and having additional funding in the form of Supplementary Payments can alleviate the financial burden.

The other potential answers focus on specific types of losses or payments that do not fall under the classification of Supplementary Payments. While costs for auto repair, bodily injury to passengers, and lost wages may be covered by various aspects of an auto insurance policy, they do not reflect the additional benefits outlined under Supplementary Payments meant to assist with defense costs. This delineation is key for understanding how auto insurance policies structure their benefits and aid policyholders in more complex situations.