Preston,Alex and George recently purchased a house together,and each person bought their own insurance policy on the house. Preston bought $200,000 of coverage,Alex bought $200,000 of coverage,and George bought $100,000 of coverage. The day after they purchased their insurance policies,George's electric guitar stereo shorted out and started a fire. The resulting damage totaled $40,000. How much of the loss did George's insurance company pay,assuming that all three policies contained pro-rata clauses?
A)$8,000
B)$16,000
C)$24,000
D)none of the above

Question

Quizplus · Accepted Answer

George's insurance company would pay a pro-rata share of the loss based on the total coverage. George's coverage is $100,000 out of a total of $500,000 ($200,000 + $200,000 + $100,000), which is 1/5 of the total coverage. Therefore, George's insurance company would pay 1/5 of the $40,000 loss, which is $8,000.

Preston,Alex and George Recently Purchased a House Together,and Each Person