What must occur if more than one policy covers the same property?

When more than one policy covers the same property, claims payment follows the pro-rata liability principle, which is the correct understanding of how multiple policies operate in such situations. Under this principle, when a loss occurs, the insurers will each pay a portion of the claim based on the coverage limits and the total coverage amount among all policies involved. This prevents the insured from receiving a total payout that exceeds the actual loss sustained, while also ensuring that all insurance carriers involved contribute fairly according to their respective shares of the total coverage.

For instance, if three insurance policies cover the same property with varying limits, and a loss occurs, the claims will be divided among the insurers in proportion to the coverage amounts. This system is designed to maintain equity and fairness in the payment of claims, ensuring that no insurer pays more than their share based on policy terms and conditions.

In this context, it becomes clear why merely paying claims in full by each insurer would not be appropriate, as it would allow for the possibility of overcompensation and create a potential for fraud. Policies being terminated is not a requirement or a common practice when multiple policies are involved; instead, they can coexist and operate under the pro-rata liability framework. Additionally, requiring the insured to choose one policy to use