Why Is an Insured Entitled to Collect Only the Amount

question 64

Multiple Choice

Why is an insured entitled to collect only the amount of the actual loss incurred from its insurance coverage?

• A) Contracts of indemnity prevent profiting from an insured against event.
• B) A bank is entitled to an indemnity contribution on a prorated basis.
• C) Insurance coverage typically covers a minimum portion of the value of property.
• D) A bank may be entitled to an interest in the proceeds for a secured loss.

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Definitions:

Opportunity Costs

The cost of foregoing the next best alternative when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Fixed Costs

Expenses that do not change with the level of goods or services produced over the short term.

Variable Costs

Costs that vary directly with the level of production or business activity, such as raw materials, packaging, and labor directly involved in a company's manufacturing process.

Sunk Costs

Expenses that have already been incurred and cannot be recovered or altered, and should not be considered in future business decisions.