Coinsurance clause
Certified Financial Planner glossary · Certified Financial Planner
Definition
A property insurance provision reducing recovery on partial losses where the insured carries less than a required percentage of replacement cost.
Coinsurance clause in plain English
A building worth 1,000,000 carries only 600,000 of insurance under an 80% coinsurance requirement, then takes a $100,000 partial hit. The coinsurance clause reduces the payout because the insured failed to carry the required percentage of replacement cost. Recovery is typically did-carry over should-carry times loss, minus the deductible. This is property-insurance math, not health-plan coinsurance. Underinsurance paired with a partial loss is the exam signature.
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