In: Accounting
Limit of Liability (LOL) method- the amount that an insurer would pay for a particular loss if they were the ONLY insurer covering it.
Example:
You buy two policies from Insurers A and B, respectively: FAA = $20,000 and FAB = $80,000. If a loss = $50,000 occurs and it is covered by both contracts, how do insurers pay for this loss?
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