Risk Mgt HW Ch.10

Risk Mgt HW Ch.10 - the insurers promise to perform. This...

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Ch. 10 AQ’s, 4 + 6 4A)   A = $100,000k; B = $200,000; C = $200,000  Company A:  100,000/500,000 = 20% * 100,000 = $20,000 Company B:  200,000/500,000 = 40% * 100,000 = $40,000 Company C:  200,000/500,000 = 40% * 100,000 = $40,000 In this example there is a pro rata liability clause which prevents Andrew from collecting  $100,000 from each of the three insurance companies—which would conflict with the  principle of indemnity, which prevents policy holders from profiting off the insurance. The  percentage that each company has provided is the portion of the loss that they will  cover. 4B)   The purpose of the other-insurance provisions frequently found in insurance contracts  helps to protect both the insurer and the insured from incurring significant losses. Typically, in  the other this section, there are conditions, which are provisions in the policy that qualify or limit 
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Unformatted text preview: the insurers promise to perform. This can include restrictions such as time constraint notifications, cancellations, grace periods, and fraud. It is important for the insurer to always have the conditions to protect themselves; the insured should also always be aware of these additional provisions. 6) Under an 80-20 coinsurance clause, Ashleys $10,000 surgery, less the $500 deductible, would cost the insurer 80% or $7600, leaving the remaining $1900 to be paid by Ashley, plus the $500 deductible payment, totaling $2400. $10,000 - $500 = $9500 * 0.8 = $7600 paid by the insurer $10,000 - $500 = $9500 * 0.2 = $1900 + $500 = $2400 paid by Ashley...
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