Question

B.C fruit Inc. declared the value of the shipment to the insurer to be $200,000. At the time of the loss, the shipment was valued at $190,000. How much is the insured entitled to collect in the event of a total loss?

Answer 1

In the event of a total loss, B.C fruit Inc. would be entitled to collect the actual value of the shipment at the time of the loss, which is $190,000. This is because insurance indemnity principles prevent insured parties from profiting from a claim, allowing only for compensation up to the actual loss.

Step-by-step explanation:

The student is asking about the principles of insurance indemnity and how the insured value affects the payout in the event of a total loss. Specifically, B.C fruit Inc. declared that their shipment was worth $200,000, but at the time of the loss, it was valued at $190,000. According to the principle of indemnity in insurance, an insured party should not profit from an insurance claim and can only be compensated up to the actual loss.

Therefore, in the event of a total loss, the insured, in this case B.C fruit Inc., would be entitled to collect the actual value of the shipment at the time of the loss, which is $190,000. This is based on the concept that insurance is meant to restore the insured to the economic position they were in before the loss and not to provide a gain.

If they had declared the value as $200,000 but the actual value at the time of loss is less, the insurer is obligated to compensate only up to the actual value, which is the lesser amount.