What does the principle of contribution in insurance imply?

The principle of contribution in insurance implies that when a loss occurs that is covered by more than one insurance policy, the insurers involved will share the responsibility of paying the claim. This principle is grounded in the idea that no insured should profit from a loss and that the burden should be distributed among the parties who provided coverage for that risk. It ensures that if a policyholder holds multiple policies that cover the same loss, each insurer will contribute to the payout proportionately, preventing the insured from collecting more than the total amount of the loss.

In this context, the other options do not align with the principle of contribution. The notion of policyholders paying a single premium annually pertains to how premiums are structured rather than the distribution of claims. A single insurer covering all claims does not reflect the situation where multiple policies overlap, as contribution specifically addresses multitudes of coverage. Lastly, the statement about exclusions pertains to limitations of coverage rather than the financial mechanism concerning loss distribution.