Find the amount paid by each insurance company. Assume that any coinsurance requirement is met.
-Insurance loss: $10,000
Company A coverage: $84,000
Company B coverage: $28,000

Question

Quizplus · Accepted Answer

To determine the amount paid by each insurance company, you need to calculate their proportionate share of the total coverage. The total coverage is $112,000 ($84,000 + $28,000). Company A's proportionate share is 75% ($84,000 ÷ $112,000) and Company B's is 25% ($28,000 ÷ $112,000). The insurance loss of $10,000 is then divided proportionately, with Company A paying $7,500 (75% x $10,000) and Company B paying $2,500 (25% x $10,000). Therefore, the answer is C. You can find the amount each company pays by multiplying their coverage amount by the percentage that it represents of the total coverage ($112,000). For company A: 
$84,000/$112,000 = 0.75 or 75%, so A pays: $10,000 x 0.75 = $7,500 
For company B: 
$28,000/$112,000 = 0.25 or 25%, so B pays: $10,000 x 0.25 = $2,500 
Therefore, the correct answer choice is C.

Find the Amount Paid by Each Insurance Company