What provision states each insurance policy must pay its proportionate share of loss in the event there is more than one policy?

The provision that indicates each insurance policy must pay its proportionate share of a loss when there is more than one policy in effect is known as Pro Rata. This concept is fundamental in insurance because it ensures that if multiple policies cover the same risk, the payment of claims is divided among them based on the proportion of each policy's coverage limits compared to the total amount of coverage.

For example, if two policies cover a loss and one policy provides 70% of the total coverage while the other provides 30%, the loss payment will also be distributed accordingly, meaning the first policy will cover 70% of the loss, and the second will cover 30%. This method prevents the insured from receiving more than the loss amount, thus maintaining fairness and equity among insurers and ensuring that each company pays its fair share of the claim.

Understanding this concept is essential for effective risk management and ensuring that coverage is properly coordinated when multiple policies are involved.