South Carolina Personal Lines Practice Exam

What provision defines how a policy will respond if there is more than one insurance policy written on the same risk?

1. Primary Insurance

2. Excess Insurance

3. Other Insurance

4. Pro rata Liability

The correct answer is: Other Insurance

The provision that defines how a policy will respond when there is more than one insurance policy written on the same risk is known as "Other Insurance." This provision outlines the rules and guidelines for how multiple policies will interact when a loss occurs, including how claims will be paid and any limitations that may apply. In situations where multiple policies cover the same risk, the "Other Insurance" clause is critical as it helps to prevent overpayment or duplication of benefits. This provision can dictate whether one policy will pay as primary, or if the coverage will be shared among the policies involved, thus establishing an equitable process for claims settlement. The other terms listed refer to different aspects of insurance coverage. "Primary Insurance" refers to the first layer of coverage that responds to a loss. "Excess Insurance" provides additional coverage above the limit of the primary policy. "Pro rata Liability," while related, specifically pertains to the calculation of each insurer's share of the loss when multiple policies are involved, but it doesn't encompass the broader framework established by the "Other Insurance" provision.