Coinsurance (property)
Certified Financial Planner glossary · Certified Financial Planner
Definition
A property policy clause that reduces the claim payment if the building is insured below a required percentage of value.
Coinsurance (property) in plain English
A building worth 1,000,000 is insured for 600,000 under an 80% coinsurance clause, then a partial fire loss hits. Coinsurance in a property policy reduces the claim payment when the building is insured below the required percentage of value. The penalty formula compares the amount carried to the amount required at the time of loss. Paying the loss as if the building were fully insured forgets that formula and is correct math on the wrong question.
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