Why this review matters
A property coinsurance clause encourages the policyholder to maintain insurance equal to a stated percentage of the property’s value at the time of loss. When the carried limit is below the required amount, a covered partial loss may be reduced by the same carried-to-required ratio before the deductible is applied. Actual claim calculations depend on the policy and adjusted values.
Information to prepare
- Property value using the valuation basis required by the policy
- Coinsurance percentage shown in the declarations
- Applicable building, contents, or other property limit
- Covered loss amount and deductible
- Any agreed value, blanket, margin, or valuation provisions
Decisions to discuss
- Whether current values support the selected limit
- Replacement cost versus actual cash value
- Coinsurance, agreed value, or other valuation structure
- How deductible and policy limits affect the final calculation
Common pitfalls
- Using market value instead of the policy’s valuation basis
- Applying the percentage to an outdated value
- Assuming a policy limit is automatically sufficient
- Treating an illustration as a claim settlement
Frequently asked questions
What is the standard coinsurance formula?
A common simplified calculation is insurance carried divided by insurance required, multiplied by the covered loss, then reduced by the deductible and subject to the policy limit.
What is insurance required?
For a simplified illustration, it is the property value at the time of loss multiplied by the coinsurance percentage. Actual policy definitions and valuation methods control.
Can agreed value change the calculation?
Potentially. Some policies may suspend or modify coinsurance when agreed value or another provision applies and its conditions are satisfied. The actual policy must be reviewed.
Coverage descriptions are general. Availability, eligibility, limits, exclusions, and policy terms vary. Review actual policy documents and requirements with an appropriate insurance professional.