Final answer:
The condition is known as 'contribution by equal shares' and is used in insurance to ensure that insurers only pay a proportional share of a loss when other policies are also in place.
Step-by-step explanation:
The condition that states the insurer will only be responsible for a proportional share of an insured loss when the insured also has other insurance written according to the same plan, terms, and conditions is known as contribution by equal shares. This principle is used to prevent an insured party from profiting from a loss when more than one policy is in place. It ensures that each insurer pays an equal portion until the loss is covered or until each insurer's limit of liability is reached.
Coinsurance is a related concept where an insurance policyholder pays a percentage of a loss, and the insurance company pays the remaining cost. For example, in a policy with 80% coinsurance, the insurance might cover 80% of the costs of repairing a home after a fire, while the homeowner would pay the other 20%. The principle of coinsurance helps in reducing moral hazard by ensuring the policyholder also bears a share of the costs, which can deter negligence or recklessness with the insured property.