Application of Coinsurance

Coinsurance Clause in Insurance Policy.

Your policy may contain an 80% coinsurance clause that requires you to insure your building or contents at a minimum of 80% of its replacement value.

Example, at the time of a loss it cost $100,000 to rebuild your building using the same quality materials and craftsmanship, you would need to have a minimum limit of insurance of $80,000 to satisfy the coinsurance requirement.

If at the time of loss your Limit of Insurance is not in compliance with the Coinsurance Clause the amount of loss paid may be reduced.

Example;

Replacement Value of Property				$500,000
Coinsurance Clause				80%
Limit of Insurance required to be carried on policy to satisfy Co-Insurance clause				$400,000 ($500,000 x 80%)
Limit of Insurance carried on policy				$300,000
Value of Damaged Property				$ 80,000
Amount Paid on Claim				$ 60,000 *
* limit carried on policy  Limit required to be carried on policy			x Loss =		Amount Paid on Claim
			or
$300,000 $60,000			X $80,000 =		$400,000