Coinsurance Clause

Most property insurance policies (but generally not package policies) include a coinsurance clause. Coinsurance requires you to share in the cost of covered services up to a reasonable percentage of the actual cash value of the property, in order to receive full coverage of losses. If you fail to insure your property to the required amount of property insurance the insurance company will pay less than 100% of any covered loss.

A typical coinsurance arrangement is 80%. This means that if your insurance policy contains an 80 percent coinsurance clause used to insure a building with an insurable value of $100,000 you are required to have insurance for $80,000 at the time of loss.