Coinsurance (Commercial Property)
Definition. Coinsurance is a Commercial Property requirement to insure to at least 80% (sometimes 90%) of replacement cost. Under-insuring triggers a penalty at claim time.
Also known as: Coinsurance Clause, Co-Insurance
If you insure for less than the coinsurance percentage at claim time, the claim payment is pro-rated downward. Coinsurance penalty is one of the most common owner complaints about commercial property settlements.
Example
Building actual replacement cost $1M, insured at $600K (60% — below 80% requirement). $200K claim — coinsurance penalty reduces payout to $150K ($200K × 60/80).
Sources cited
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Reviewed by California-licensed Property & Casualty insurance agent
Jason Wootton (CA License #0I94454). Not insurance advice, an individual recommendation, or a solicitation in any state. Insurance regulations vary by state. For specific coverage decisions, consult a licensed insurance agent in your state.
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