Contribution
Contribution: what happens when the same risk is insured with more than one insurer, how the loss is shared between them, how health policies handle it differently, and why it never applies to life insurance.
What it is
The principle of contribution applies when the same risk is insured with two or more insurers. Holding more than one policy is not wrong in itself. What the principle prevents is collecting the same loss more than once: the total claim across all insurers cannot exceed the actual loss.
Contribution is a corollary of indemnity. Claiming the full loss from each insurer would breach both principles.
When it applies
For contribution to apply, the policies must cover the same subject matter, the same insured and the same peril. They need not be for the same amount. A fire policy on a shop's stock and a burglary policy on the same stock do not contribute to a fire loss, because only one of them covers fire.
The principle belongs to contracts of indemnity. It does not apply to life insurance: a person can hold several life policies and the full sum assured is payable under each. Fixed-benefit health plans such as hospital cash or critical illness likewise pay their stated benefit independently of any other policy.
How the loss is shared
The insured can claim from any one insurer. An insurer that pays the full claim then has the right to call on the other insurers to share the loss proportionately. This is the right of contribution, and it is a matter between insurers.
The classic method for property policies is by sums insured: each insurer's share = its sum insured ÷ total sum insured across all policies × loss. The formula assumes that the policies are on the same terms and that the loss is within each policy's sum insured. No insurer pays more than its own sum insured.
Health policies and disclosure
Reimbursement health policies work differently. Where a person holds more than one indemnity health policy, the insured chooses which insurer to claim from first, and any balance is then met by the other policy. The effect is sequential, not a proportionate split, and the total paid still cannot exceed the admissible expenses.
Existing insurance on the same subject matter has to be declared when a new policy is proposed. Leaving it out of the proposal form is a breach of utmost good faith and can complicate claim settlement.
Rules at a glance
Two health policies and one hospital bill
Illustration: Suresh, an engineer in Coimbatore, is covered by his employer's group health policy for ₹3,00,000 and by his own reimbursement policy for ₹5,00,000. Assume admissible expenses of ₹4,20,000 for a surgery, with no co-pay or sub-limits in either policy.
He chooses to claim first under the employer's policy, which pays ₹3,00,000. The balance of ₹4,20,000 − ₹3,00,000 = ₹1,20,000 falls on his own policy, and the insurer he chose first coordinates with the other insurer for it. He receives ₹4,20,000 in all, exactly his admissible expenses.
Sharing a fire loss between two insurers
- Assumptions, for arithmetic only: a warehouse's stock is insured against fire with Insurer A for ₹40,00,000 and with Insurer B for ₹10,00,000, on the same terms; there is no under-insurance; a fire causes a loss of ₹8,00,000, which is within each policy's sum insured.
- Total sum insured = ₹40,00,000 + ₹10,00,000 = ₹50,00,000.
- A's share = ₹40,00,000 ÷ ₹50,00,000 × ₹8,00,000 = 0.8 × ₹8,00,000 = ₹6,40,000.
- B's share = ₹10,00,000 ÷ ₹50,00,000 × ₹8,00,000 = 0.2 × ₹8,00,000 = ₹1,60,000.
- Check: ₹6,40,000 + ₹1,60,000 = ₹8,00,000, the actual loss.
Result. A bears ₹6,40,000 and B bears ₹1,60,000. The insured receives ₹8,00,000 in total, not ₹8,00,000 from each.
Key points
- Contribution applies when the same subject matter, insured and peril are covered by two or more insurers.
- The total paid by all insurers together cannot exceed the actual loss.
- In property insurance each insurer's share is its sum insured ÷ total sum insured × loss.
- Under reimbursement health policies the insured chooses which insurer to claim from first.
- Contribution does not apply to life insurance or to fixed-benefit covers.
Common misunderstandings
- Two policies do not mean two payments for one loss: the total recovered cannot exceed the actual loss.
- The proportionate formula is not how health claims are shared: under reimbursement health policies the insured picks the insurer to claim from first.
- Having several life policies is not over-insurance to be shared: each pays its full sum assured.
Questions people ask
Can the insured claim the whole loss from just one insurer?
Yes. The insured can claim from any one insurer, and that insurer can then call on the others for their proportionate shares.
Do the policies have to be for the same amount?
No. They must cover the same subject matter, insured and peril, but the sums insured can differ; the shares follow the sums insured.
Is it a problem to hold a second policy without telling the new insurer?
Yes. Not disclosing existing insurance on the same subject matter in a proposal form is a breach of utmost good faith and can complicate claim settlement.
What this lesson relies on
- IRDAI Master Circular on Health Insurance Business (29 May 2024) — claims under more than one policy
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.