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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

Mr. Arvind has two health policies covering the same hospitalisation: Policy A with sum insured Rs 4 lakh and Policy B with sum insured Rs 6 lakh. The eligible claim is Rs 5 lakh. Assuming strict ratable contribution based on sums insured and no other limits, how much does Policy B bear?

Policy B bears Rs 3 lakh. Under the principle of contribution, insurers share the loss in proportion to their sums insured. Policy B's share is 6 out of 10, which is 60 percent of the Rs 5 lakh claim, giving Rs 3 lakh, while Policy A bears Rs 2 lakh.

  1. ARs 2.5 lakh
  2. BRs 3 lakhCorrect
  3. CRs 2 lakh
  4. DRs 5 lakh

Explanation

Under contribution, each insurer pays in proportion to its sum insured. Policy B share = 6/(4+6) x 5 lakh = Rs 3 lakh; Policy A bears Rs 2 lakh. Rs 2.5 lakh assumes an equal split, and Rs 2 lakh is Policy A's share.

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