Lisa has three fire insurance policies on her office building.The policy from company A is for $400,000,and the policies from companies B and C are for $100,000 each.If Lisa has a $360,000 loss,how much of the loss will be covered by each policy if the loss is settled on a pro rata basis by the insurers?

Question

Quizplus · Accepted Answer

The total coverage is $600,000 ($400,000 from A and $200,000 from B and C combined). The loss is $360,000. On a pro rata basis, each policy covers a portion of the loss proportional to its share of the total coverage. Company A's policy is 2/3 of the total coverage ($400,000 of $600,000), so it covers 2/3 of the loss, which is $240,000. Companies B and C each provide 1/6 of the total coverage ($100,000 of $600,000 each), so each covers 1/6 of the loss, which is $60,000 each.

Lisa Has Three Fire Insurance Policies on Her Office Building