CLAIMS & POLICY MECHANICS
Contribution, principle of definition
The principle of contribution is an insurance principle that shares a loss between multiple indemnity policies covering the same risk and peril.
In practice, this means a principle related to the principle of indemnity that provides for the possibility of dual insurance (i.e. an insured having one or more insurance policies in force for the same risk). The principle of contribution provides that when two or more policies of the same item exist, those insurers share the cost of a claim. This gives insurers, brokers, reinsurers and risk managers a shared way to discuss the concept when reviewing policies, claims, regulation or market data.
This term is especially useful in insurance market analysis, policy wording and risk transfer decisions. It helps users interpret insurance terminology consistently across markets, policies and risk data. It also helps users compare how insurance is structured, regulated, priced or claimed across different markets.
Contribution, principle of is closely related to indemnity, dual insurance, subrogation and rateable proportion. Linking these concepts together helps build a clearer glossary structure and gives readers a stronger understanding of how individual insurance terms connect within wider international insurance practice.
At a glance
- Used in
- Insurance market analysis, policy wording and risk transfer decisions.
- Purpose
- Helps users interpret insurance terminology consistently across markets, policies and risk data.
- Important because
- Clear definitions support better comparison of insurance products, market practices and regulatory requirements across jurisdictions.
- Related terms
- indemnity, dual insurance, subrogation and rateable proportion.
Example of the contribution principle in insurance
A company has two property policies covering the same insured loss. The principle of contribution helps determine each insurer’s share of the claim payment.