Under the "other insurance" provision, how much will Company A pay for a $100,000 loss if it issued a policy for $200,000 and Company B issued one for $300,000?

To understand the calculation under the "other insurance" provision, it's essential to recognize that this provision comes into play when a loss is covered by multiple insurance policies. In this case, we have two insurers covering the same risk: Company A with a policy limit of $200,000 and Company B with a policy limit of $300,000.

When a loss occurs, each insurer contributes to the total payout proportionally based on the limits of the policies they issued. This is often referred to as "pro-rata liability."

First, you need to determine the total amount of insurance in force. Company A provides $200,000, and Company B provides $300,000, giving a total of $500,000.

Next, calculate Company A's share of the payout relative to the total insurance:

1. Company A’s share = Company A’s policy limit / Total insurance = $200,000 / $500,000 = 0.4 or 40%
2. Multiply that share by the amount of the loss to determine what Company A will pay. In this scenario, the loss is $100,000.

So, Company A pays:

$100,000 (total loss) x 40% (Company A's share) =