Coinsurance

In commercial property insurance, coinsurance is a clause requiring you to insure your property to a stated percentage of its value (often 80%). If you carry less than required when a loss occurs, the insurer reduces the payment proportionally — a coinsurance penalty. In health insurance, the same word means the share of a covered medical cost you pay (for example, 20%) after meeting your deductible.

If your policy has an 80% coinsurance clause and you insure the property for less than 80% of its value, the insurer pays only the ratio of what you carried to what you should have carried, minus your deductible. For example, insuring a $1,000,000 building for $600,000 when $800,000 was required means the insurer pays roughly three-quarters (600k/800k) of a covered loss — leaving you to absorb the rest.

Insure your property to at least the percentage the clause requires (commonly 80–100% of full replacement value) and update the limit as values rise. Some policies offer an "agreed value" option that waives the coinsurance requirement when you and the insurer agree on the insured value upfront. Your broker can review your declarations page to confirm you meet the requirement.