What term describes insurance policies that treat each insured as a separate entity?

The term that describes insurance policies treating each insured as a separate entity is known as "Severability of Interests." This concept highlights that the actions or omissions of one insured do not affect the coverage available to other insureds on the same policy. For instance, in a homeowners' policy that includes multiple insured members of a household, if one member engages in an activity that leads to a claim, the other members may still retain their coverage without any impact from that individual's actions.

This characteristic is crucial in insurance because it fosters a sense of security among multiple insured parties, ensuring that each person is protected regardless of the actions of others. It emphasizes the individuality within a collective policy, promoting fairness and comprehensive risk management among all insured individuals.