Hawaii Insurance Adjuster License Practice Exam

If there were other existing insurance, how would coverage under crime insurance be affected?

1. Completely nullified

2. Pro Rated

3. Increased coverage

4. Capped at a certain amount

The correct answer is: Pro Rated

When exploring the impact of existing insurance on crime insurance coverage, it’s essential to understand the concept of "pro-rating." Pro-rating means that in the event of a loss, the claims are adjusted based on the total amount of coverage available from all policies, rather than one policy being completely responsible for the claim. In scenarios where multiple policies provide overlapping coverage, pro-ration ensures that policyholders are compensated fairly across all their insurance options. This way, if a crime insurance policy is triggered, it shares the financial burden with other existing policies, aligning payouts with the amount of coverage each policy contributes. The principle aims to prevent excessive payouts that exceed the actual loss, thereby maintaining the integrity of the insurance system and ensuring that the policyholder doesn’t receive more than their actual loss from overlapping coverages.