Full Definition
Coinsurance is a property insurance provision that requires the insured to carry coverage equal to a specified percentage (typically 80%, 90%, or 100%) of the property's replacement cost value. If the insured fails to maintain adequate limits, the coinsurance penalty reduces claim payments proportionally. For example, with an 80% coinsurance clause on a $10M building, the insured must carry at least $8M in coverage. If they only carry $6M, they would recover only 75% ($6M/$8M) of a partial loss — receiving $75K on a $100K claim instead of the full $100K. Agreed value endorsements eliminate the coinsurance penalty entirely.
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