Pro Rata Distribution Clause
What Does Pro Rata Distribution Clause Mean?
A pro-rata distribution clause is a provision in property insurance contracts where the insurer allocates a specific amount of coverage to each property insured under a single policy.
The allocation varies, with the largest coverage amount assigned to the most valuable property and the smallest to the least valuable. The allocation is adjusted if a property’s value increases over time.
Insuranceopedia Explains Pro Rata Distribution Clause
For business owners, a pro-rata distribution clause in property insurance is ideal when they own properties in multiple locations. Instead of purchasing separate insurance policies for each property, they can buy a single policy that covers all properties at varying amounts.
The insurance coverage is distributed based on the value of the properties, with the largest amount allocated to the most valuable one.
The insured is responsible for notifying the insurer of any changes in the value of their properties, allowing the distribution of insurance limits to be adjusted accordingly.
