Simons purchased a home for $120,000,insuring it for $120,000 with Mutual Life.She later purchased a $60,000 policy from Equitable.The home was totally destroyed by fire while it still had a fair market value of $120,000 and the losses amounted to $30,000.Under these circumstances,which of the following statements is true?

Question

Quizplus · Accepted Answer

When the insured has purchased insurance policies from more than one insurer,the amount for which any particular insurer is liable is calculated by determining the total amount of the insurer's policy in proportion to the total amount of insurance covering the property.It is applicable to both total and partial losses.However,each company's liability is limited by the face value of the policy.Hence,Simons cannot recover more than $60,000 from Equitable or $120,000 from Mutual Life.

Simons Purchased a Home for $120,000,insuring It for $120,000 with Mutual