Question

Which provision in an insurance policy defines how the policy will respond if there is other valid insurance written on the same risk?

a. Exclusion provision
b. Coordination of Benefits provision
c. Subrogation provision
d. Other Insurance provision

Answer 1

The provision that details the response of an insurance policy in the presence of other valid insurance is the Other Insurance provision. It helps to coordinate benefits and prevents over-insurance of the same risk.

Step-by-step explanation:

The provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk is known as the Other Insurance provision. This provision is included in insurance policies to detail how benefits are coordinated when more than one policy covers the same claim. The coordination of benefits mechanism prevents the policyholder from receiving more than 100% of the covered losses, ensuring fair and equitable payment among insurers.

The correct option for the student's question is d. Other Insurance provision. It is important to differentiate it from options such as the Exclusion provision, which outlines what is not covered under the policy; the Coordination of Benefits provision, commonly related to health insurance where it specifies the order in which multiple health policies will pay; and the Subrogation provision, through which an insurer might seek reimbursement from the responsible party after paying a claim.