Hawaii Insurance License Practice Exam

In the context of pairs and sets coverage, the insurance payout for a damaged item is determined by considering the value of the entire set rather than just the individual item. When an insured has coverage for a pair or set, it means that the insurance will cover loss or damage to the entire set, not just the individual component.

In this scenario, the insured has a pair and set coverage totaling $5,000. When one item within the set, worth $500, is broken, the insurance adjusts the payout based on the total value of the set rather than paying for the damaged item alone. The insurance would account for the fact that the set's value is diminished by the loss of this item.

To determine the payout, you subtract the value of the damaged item from the total value of the coverage. Thus, the payout would be calculated as $5,000 (the value of the coverage) minus $500 (the value of the damaged item), resulting in a payout of $4,500. This approach helps maintain the integrity of the set while compensating the insured for their loss.