State RegulationsMI specificDifficulty 2/5
A factory worker in Kalamazoo is totally disabled by a covered loss. He holds disability income policies from two different insurers, each containing the insurance with other insurers provision. How should the loss be handled?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under the insurance with other insurers optional provision permitted in Michigan individual disability policies under Chapter 34 of the Michigan Insurance Code, when an insured holds overlapping coverage with different companies the loss is apportioned among the insurers on a proportional basis. The combined recovery is limited to the permitted maximum for the loss, which discourages overinsurance while ensuring the disabled insured still receives a full, coordinated benefit.
Why the other options are wrong
- A) The insured does not forfeit a policy; the provision coordinates payments rather than eliminating coverage.
- B) Full payment by both insurers would duplicate the same loss, which is precisely what the provision prevents.
- D) The provision uses proportional sharing of the loss, not an order of priority between older and newer policies.
Memory hook
Two carriers cover one disability: pro rata sharing, capped total.