Serena purchased a home for $220,000, insuring it for $120,000 with Falcon Insurance. She later purchased a $60,000 policy from Devon Life. The home was totally destroyed by fire six months later. 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, Serena cannot recover more than $60,000 from Devon Life or $120,000 from Falcon Insurance.

Serena Purchased a Home for $220,000, Insuring It for $120,000