Property Insurance FundamentalsQuestion 234 of 474
Two partners each own an undivided one-half interest in a $300,000 rental building. One buys a policy in her own name with a $300,000 limit. Fire destroys the building. She may collect:
a.the full $300,000 policy limit
b.her one-half interest, $150,000
c.the full $300,000 building value
d.$75,000, one half of her share
Explanation
Indemnity limits recovery to the insured's own financial interest, and hers is half the building, so $150,000 is the ceiling no matter what limit she bought. Collecting the whole limit or the whole building value would pay her for her partner's loss as well and leave her better off than before the fire. Halving her share a second time has no basis in the ownership.
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Related questions on this topic
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