Property Insurance FundamentalsQuestion 231 of 474
A building is insured by one policy for $150,000 and another for $100,000, both sharing pro rata. A covered loss of $40,000 occurs. The $150,000 policy pays:
a.$24,000
b.$20,000
c.$16,000
d.$40,000
Explanation
Total insurance in force is $250,000, so the larger policy carries 150/250, or 60%, of the loss, which is $24,000, and the smaller policy pays the remaining $16,000. The $20,000 answer splits the loss evenly and ignores the limits. The full $40,000 would apply only if the second policy did not exist or sat in excess.
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