Two policies apply to a covered loss of $12,000. Policy A limit 50,000; Policy B limit 100,000. What would each carrier pay?

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Multiple Choice

Two policies apply to a covered loss of $12,000. Policy A limit 50,000; Policy B limit 100,000. What would each carrier pay?

Explanation:
When two policies both cover the same loss, they share the payment pro rata based on their limits. Add up the limits: 50,000 + 100,000 = 150,000. The loss is 12,000. The policy with the 50,000 limit pays 50,000/150,000 of the loss, which is 1/3 of 12,000 = 4,000. The policy with the 100,000 limit pays the remaining 2/3 of the loss, which is 8,000. So the smaller-limit policy pays 4,000 and the larger-limit policy pays 8,000.

When two policies both cover the same loss, they share the payment pro rata based on their limits. Add up the limits: 50,000 + 100,000 = 150,000. The loss is 12,000. The policy with the 50,000 limit pays 50,000/150,000 of the loss, which is 1/3 of 12,000 = 4,000. The policy with the 100,000 limit pays the remaining 2/3 of the loss, which is 8,000. So the smaller-limit policy pays 4,000 and the larger-limit policy pays 8,000.

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