An "other insurance" clause is included in an insurance policy to deal with the problem of:

Duplicate insurance coverage.

Excess insurance coverage.

Inadequate coverage.

Conditional coverage.

Duplicate insurance coverage.

Answer: The other insurance clause is included in an insurance policy to provide a method of determining how much of a covered claim each insurer will pay when an insured carries more than one insurance policy. Settling a claim on a pro-rata basis is an example wherein each insurer pays its fair share of a loss, as determined by the percentage that the insurer's limit bears to the total coverage carried.

Alabama Property and Casualty

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

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