How a coinsurance clause works

It is a formula printed in your policy, and it fires on an honest schedule.

A coinsurance clause compares what you insured to what you should have insured, and multiplies a partial-loss payment by the shortfall.

Say the equipment costs $1,000,000 to replace and the policy carries a 90% coinsurance requirement. The requirement is $900,000. If the schedule carries $720,000, the ratio is $720,000 divided by $900,000 — eighty per cent.

A $250,000 partial loss is then paid at eighty per cent, before the deductible. The remaining twenty per cent is not a deductible and it is not negotiable. It is the penalty, and it is arithmetic.

Nobody has to have done anything wrong for this to cost you. The penalty fires on an honest schedule built from honest books.

The check takes a minute and you can do it yourself. Pull your declarations page. Find the coinsurance percentage on the building personal property line. If it says Agreed Value, this does not apply to you and you can stop reading.

Read the full argument, with the county record →

How a coinsurance clause works

It is a formula printed in your policy, and it fires on an honest schedule.

A coinsurance clause compares what you insured to what you should have insured, and multiplies a partial-loss payment by the shortfall.

A $250,000 partial loss is then paid at eighty per cent, before the deductible. The remaining twenty per cent is not a deductible and it is not negotiable. It is the penalty, and it is arithmetic.

Nobody has to have done anything wrong for this to cost you. The penalty fires on an honest schedule built from honest books.