Quick Tip: Co-insurance – Is it a penalty?

By May 16, 2016 April 15th, 2018 Quick Tips

Lisa Terrasi, Commercial Account Associate, clarifies co-insurance.

Coinsurance requires an insured to maintain coverage in an amount that is at least that percentage of it’s actual replacement value and can act like a penalty. For example, if you have 80% coinsurance on a building that has a replacement value of $10,000,000, you are required to maintain coverage in an amount of at least 80% or $8,000,000. If you don’t, in the event of a claim, the insurance company will penalize you. In this example, if you maintained only $4,000,000 of coverage, which is 50% of the minimum required limit of $8,000,000, the insurance company would only pay 50% of a property claim. If possible, you should always ask your broker if the insurance company will provide Agreed Amount, which waives coinsurance.

Please note, we will be closing at 1pm on Friday, May 24 and closed on Monday, May 27 in observance of Memorial Day.