Help Desk

Pro rata is an adverb or adjective meaning in equal portions or in proportion. The term is used in many legal and economic contexts. The hyphenated spelling pro-rata for the adjective form is common, as recommended for adjectives by some English-language style guides. In American English this term has been vernacularized to prorated or pro-rated.

So if the loss is 100% covered then _$10,000_ is paid from Policy A and $20,000 from Policy B.

If a loss occurs that is covered by more than 1 insurance policy that was purchased by the insured, then each policy pays a portion of the loss that is proportional to the amount of that policy over the total amount of all policies for the loss — each policy pays its pro rata share.

So if you add the coverage limits of Policy A and Policy B it equals $300,000. Policy A is responsible for 1/3 of the loss since $100,000 is 1/3 of the total coverage limits of $300,000. Policy B is responsible for 2/3 of the loss since $200,000 is 2/3 of the total coverage limit of $300,000. As a result, Policy A would pay $10,000 since that is 1/3 of the $30,000 loss and Policy B would pay $20,000 since that is 2/3 of the $30,000 loss.