General Insurance PrinciplesQuestion 136 of 158
A homeowner has two policies on the same dwelling: Policy A with a $300,000 limit and Policy B with a $100,000 limit. A covered loss of $80,000 occurs and both policies share on a pro rata basis. How much does Policy A pay?
a.$20,000
b.$40,000
c.$50,000
d.$60,000
Explanation
Pro rata: each policy pays the share of the loss equal to its limit divided by the total of all applicable limits. Policy A pays 300,000 / 400,000 = 75% of $80,000 = $60,000. Policy B pays the remaining 25% = $20,000. Indemnity still limits total recovery to the actual $80,000 loss.
Law Reference: Industry standard pro rataPractice all 158 questions free — no signup required.
Related questions on this topic
- Under California Insurance Code §331, a MATERIAL concealment by the applicant entitles the insurer to rescind the policy:
- For PROPERTY insurance in California, when must the insured have an insurable interest in the covered property?
- An insured's home is damaged by a contractor working on the neighbor's property. The homeowner's insurer pays the $40,000 covered loss and then sues the contractor to recover the $40,000. This is an example of:
- Which statement BEST describes the difference between an admitted and a non-admitted insurer in California?
- Which statement about stock and mutual insurers is CORRECT?
- The principle of indemnity is BEST expressed by which statement?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Personal Lines Insurance License Exam · How we review