In the event of a $20,000 loss, how much will Policy A ($100,000) and Policy B ($200,000) each pay?

The scenario described involves understanding how multiple insurance policies respond to a loss under the principle of proportional payment. In this case, if there is a total loss of $20,000 and two policies have coverage limits of $100,000 and $200,000 respectively, each policy's obligation is based on its proportion of total coverage available.

To determine how claims will be paid, we look at the total coverage provided by both policies combined, which amounts to $300,000 ($100,000 from Policy A and $200,000 from Policy B). The loss is then prorated based on the amount of insurance each policy contributes towards the total coverage.

When calculating the proportion, Policy A with the $100,000 limit is responsible for one-third of the total coverage (100,000 / 300,000), while Policy B with the $200,000 limit is responsible for two-thirds of the total coverage (200,000 / 300,000).

For the specific loss amount of $20,000:

• Policy A's share would be 1/3 of $20,000, which equals approximately $6,667.
• Policy B's share would be 2/3 of $20,000, which equals approximately $13