Find the amount paid by each of the multiple carriers.
-The Star Tool Company had an insured fire loss of $1,416,000. It had insurance coverage as follows: Company A, $4,500,000; Company B, $2,500,000; and Company C, $1,000,000. Find the amount paid by each carrier assuming that the coinsurance requirement had been met.

Question

Quizplus · Accepted Answer

The coinsurance requirement is the percentage of the total amount of insurance required to be carried on the property in order to be fully covered in the event of a loss. In this case, the coinsurance requirement would be:

Coinsurance requirement = [($4,500,000 + $2,500,000 + $1,000,000)/$1,416,000] x 100% = 425%

Since the coinsurance requirement has been met, each carrier's share of the loss is proportional to the amount of insurance they provided.

Amount paid by Company A = ($4,500,000/$8,000,000) x $1,416,000 = $796,500
Amount paid by Company B = ($2,500,000/$8,000,000) x $1,416,000 = $442,500
Amount paid by Company C = ($1,000,000/$8,000,000) x $1,416,000 = $177,000

Therefore, the best choice is B, as it correctly gives the amount paid by each carrier after meeting the coinsurance requirement.

Find the Amount Paid by Each of the Multiple Carriers