What principle refers to the sharing of the financial burden between multiple insurances for the same loss?

The principle that refers to the sharing of the financial burden between multiple insurers for the same loss is best identified as Pro Rata Share. This principle comes into play when there are multiple insurance policies covering the same risk. In such scenarios, each insurer is responsible for a proportionate share of the loss based on the limits of their respective policies relative to the total coverage.

For example, if two insurers cover a property with a total insured value of $200,000—where one policy covers $100,000 and the other covers $50,000—the loss settlement will reflect the proportion of coverage each insurer provides. If a loss of $100,000 occurs, the first insurer would pay 66.67% of the loss (reflecting its $100,000 coverage in relation to the total $150,000 coverage), while the second one would pay 33.33%, aligning their share with their coverage limits.

Understanding this principle is crucial for anyone involved in insurance, as it ensures fair distribution of payments among insurers and avoids the scenario where an insured party receives more than the total loss amount due to overlapping policies.

Other terms like Loss Sharing, Shared Liability, and Collective Coverage do not accurately describe this principle in the context of multiple