Posted in Finance, Accounting and Economics Terms, Total Reads: 289
Apportionment in simple language means the distribution or allocation of benefits or liabilities among different parties. In financial terms, apportionment is the allocation of a loss that is distributed between all the insurance companies that insure a piece of property.
Apportionment answers the question that how much should each entity that has insured a particular property pay to the person or entity that has insured a property or a piece of property in case of a loss. It can also mean division of loss between an employer and a fund that pays for the portion of the claim.
Let us understand this with the help of an example. Suppose a building is insured by three insurance companies A, B and C. the contribution of insurance provided is 50%, 30% and 20% by A,B and C respectively. If the building catches fire and there is a loss to be paid by these insurance companies then they will be providing the amount proportionate to the amount insured by them. This allocation of loss among these three companies is called apportionment.