Property Insurance FundamentalsQuestion 230 of 474
Two policies with no conflicting other-insurance wording cover the same building. Pro rata sharing makes each insurer pay:
a.An equal half of the loss, whatever its limit
b.Only the amount above the other policy limit
c.Its share of the limits, applied to the loss
d.The whole loss, then collect from the other
Explanation
Pro rata sharing divides the loss in proportion to each policy's limit against the total insurance in force, so a larger limit carries a larger share. Splitting the loss down the middle ignores the limits and overcharges the smaller policy. The approach where one policy sits above the other is an excess other-insurance clause, not pro rata sharing.
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