Colin's cottage is covered by two fire insurance policies. If a fire causes damage costing £60,000 and contribution is agreed, how much will be paid by the first policy valued at £50,000?

In the scenario where Colin's cottage is covered by two fire insurance policies, understanding the principle of contribution is essential. Contribution is the rule that allows insurers to share the cost of a claim when there are multiple policies covering the same risk.

Given that the total loss from the fire is £60,000 and Colin has two insurance policies—one valued at £50,000 and another with a value that can be inferred from the context, we first need to apply the formula for contributions:

1. Add the total coverage from all policies. Here, the first policy covers £50,000, and we need to ascertain the value of the second policy if it is not explicitly mentioned. However, the contribution calculation typically assumes that the amount paid out is proportional to the amount insured for each policy against the total loss.

2. In Colin's case, the maximum amount the first policy can pay is £50,000. If we assume the second policy has sufficient coverage to cover the remaining portion of the loss, the first policy will be liable for a portion of the loss based on its proportionate share of the total cover.

3. To calculate how much the first policy will pay, we can determine the proportion of the first policy's limit relative to the