What does the Pro Rate Provision state?

The Pro Rate Provision is an important principle in insurance that ensures fairness among multiple insurers when a loss occurs. This provision is typically invoked in situations where there are multiple insurance policies covering the same risk. According to this provision, when a loss happens, each insurer is responsible for paying only their proportionate share of the claim based on the total limits of all policies in effect. Therefore, if multiple insurers are providing coverage for the same property or risk, they will collectively cover the loss according to the extent of their individual coverage limits.

This prevents any one insurer from being solely liable for the total loss and ensures that policyholders do not receive more than they are entitled to based on their coverage. It also helps to keep the insurance market stable by distributing risk among various insurers. The principle of proportionality helps to avoid claims issues and disputes among insurers, promoting a balanced and equitable response to losses.