Property Insurance FundamentalsQuestion 196 of 215
Under a 'contribution by equal shares' other-insurance method, how do two policies generally share a loss?
a.Each policy pays equal amounts of the loss until one policy's limit is exhausted, after which the other policy continues to pay alone up to its limit
b.Only the policy with the higher limit pays anything
c.Strictly by which policy was issued first
d.In proportion to their stated premiums
Explanation
Under contribution by equal shares, each policy pays an equal dollar share of the loss until the lower-limit policy is exhausted; the policy with the higher limit then continues to pay alone up to its remaining limit. This method is common in commercial liability; pro rata by limit is the common method in property insurance.
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Related questions on this topic
- After paying the insured the full insured value of a damaged commercial freezer, the insurer claims the damaged freezer itself. This right is best described as which of the following?
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