When multiple insurance policies pay a proportionate share of a loss, this is referred to as?

The term that describes when multiple insurance policies pay a proportionate share of a loss is known as pro-rata liability. This concept ensures that each insurer contributes to the payment of a claim based on the amount of coverage they provided relative to the total amount of insurance in place. This approach prevents an insured party from receiving more than the actual loss incurred, as each policy only covers a part of the total exposure.

Pro-rata liability is particularly important in cases where a single loss may have multiple coverages from different insurers, maintaining fairness and equitable distribution of claims. This methodology is common in property and casualty insurance, where multiple insurers may partake in underwriting a single risk. In contrast, terms like shared coverage or aggregate liability may refer to different contexts of risk sharing and not specifically to the proportional payment of multiple insurers under a single event. Meanwhile, co-insurance, although related to the sharing of risk, often refers to a provision in which the insured must carry a certain level of insurance to receive full payment for a loss, rather than the proportionality of multiple policies in play.