Policy Structure & ProvisionsQuestion 469 of 474
Two policies cover the same $30,000 loss, one with a $200,000 limit and one with a $100,000 limit. Under the other insurance condition, the larger policy pays:
a.$15,000
b.$20,000
c.$10,000
d.$30,000
Explanation
The other insurance condition makes each policy pay the proportion of the loss that its limit bears to the total of all applicable limits, so the larger policy pays 200,000 divided by 300,000, or two thirds of $30,000, which is $20,000, and the smaller one pays $10,000. The insured collects $30,000 in total and no more, because indemnity does not allow a profit from carrying two policies.
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