Property Insurance FundamentalsQuestion 232 of 474
Two policies share a loss pro rata: one carries an $80,000 limit, the other $120,000. A covered $50,000 loss occurs. The $80,000 policy pays:
a.$20,000
b.$50,000
c.$30,000
d.$25,000
Explanation
Total insurance is $200,000, so the smaller policy carries 80/200, or 40%, of the $50,000 loss, which is $20,000, while the larger policy pays $30,000. The $25,000 answer divides the loss equally between the insurers. Paying the whole $50,000 would ignore the other-insurance condition entirely.
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