Which principle of insurance states that coverage applies separately to each insured?

The principle that states that coverage applies separately to each insured is known as severability. This principle ensures that each insured party under a single insurance policy is treated as if they possess their own separate coverage, independent of other insured individuals covered under that policy.

For example, in a policy that covers multiple individuals or entities, if one insured party fails to comply with the terms of the policy, it does not affect the coverage available to the other insured parties. Severability allows each insured to be evaluated on their own merits concerning claims and coverage, ensuring that the actions or omissions of one do not negate the rights of others under the same policy. This is particularly important in liability policies, where the behavior of one insured could otherwise impact the coverage available to another insured.

In contrast, the other principles listed do not pertain to the separate application of coverage. Liberalization refers to broadening coverage without additional cost when certain changes occur, indemnification pertains to restoring the insured to their pre-loss condition without profit, and conditional contracts outline the specific terms and conditions that must be met for coverage to apply. These principles each serve distinct purposes in the insurance framework, but severability is unique in addressing how coverage applies individually to each insured.