Coinsurance
Coinsurance is a property insurance provision requiring a business to insure its property for at least a specified percentage, commonly 80%, 90%, or 100%, of its full replacement value, or face a proportional penalty on any claim payout if it's underinsured. The Allen Thomas Group runs the coinsurance math against current replacement cost at every renewal, since property values (and rebuild costs) change every year and coverage limits often don't keep up.
How the Coinsurance Penalty Is Calculated
If a policy has an 80% coinsurance clause, the property is worth $1,000,000 to replace, and the business only carries $600,000 in coverage, it has met only 75% of the required $800,000 (80% of $1,000,000). On a covered loss of $200,000, the insurer would pay only 75% of that claim, or $150,000, leaving the business responsible for the remaining $50,000 out of pocket, on top of any deductible.
Common Coinsurance Percentage Tiers
| Coinsurance Requirement | What It Means |
|---|---|
| 100% | Coverage limit must equal full replacement value, or the penalty applies |
| 90% | Coverage limit must be at least 90% of replacement value |
| 80% | Coverage limit must be at least 80% of replacement value; the most common standard requirement |
Why This Matters
Coinsurance penalties apply even on partial losses, not just total losses, which is why they catch businesses off guard. A business that hasn't updated its property limit in several years, while construction costs rose, can end up significantly underinsured under the coinsurance formula without ever realizing it until a claim is already underway and the payout comes back reduced.
How The Allen Thomas Group Can Help You
We'll help you understand exactly how coinsurance affects your coverage and cost, then shop your policy across 15+ A-rated carriers to find the right fit.
Get a Precise Quote