Preston, Alex and George recently purchased a house together, and each person bo

Question

Preston, Alex and George recently purchased a house together, and each person bought their own insurance policy on the house. Preston bought $200,000 of coverage, Alex bought $200,000 of coverage, and George bought $100,000 of coverage. The day after they purchased their insurance policies, George’s electric guitar stereo shorted out and started a fire. The resulting damage totaled $40,000.   How much of the loss did George's insurance company pay, assuming that all three policies contained pro?rata
clauses?

16,000

24,000

40,000

8,000

Explanation / Answer

loss to be paid by George's insurance cmpany = 40000 * 100000/500000

loss to be paid by George's insurance cmpany = 40000 * .20

loss to be paid by George's insurance cmpany = 8000

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