Pro Rata
insurance policy clause creditors
[Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share.
In a BANKRUPTCY case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. If the debtor has any remaining funds, the money is divided proportionately among the creditors, according to the amount of the individual debts.
A pro rata clause in an automobile insurance policy provides that when an insured person has other insurance policies covering the same type of risk, the company issuing the policy with the pro rata clause will be liable only for a proportion of the loss represented by the ratio between its policy limit and the total limits of all the available insurance.
User Comments
about 11 years ago
don't understand the concept. if you cloud add some example with the text then it would be fine enough for better understanding