If an insured has two different insurance coverages, how is a loss typically paid?

When an insured has multiple insurance coverages for the same loss, the typical approach is for each policy to pay on a prorated basis. This means that the total loss is divided among the insurance policies according to the proportion of coverage provided by each.

For example, if one policy has a coverage limit significantly higher than the other, the policy with the larger limit will cover more of the loss, while the other will contribute its share based on its limit. This method ensures that the insured does not receive more than the total loss amount while allowing policyholders to share the responsibility of the claim in a fair manner.

This prorated payment method is rooted in the principle of contribution, which prevents an insured from profiting from a loss by collecting from multiple insurers in excess of the actual loss incurred. It promotes fairness and equity in the settlement of claims when multiple insurers are involved.