What is the Co-Insurance Clause
Have you ever wondered what the coinsurance clause on your policy means?
According to the independent Insurance Agents of America, most business policies include a "coinsurance" clause, determining what percentage of the value of your property must be insured in order to be fully reimbursed for a loss.
If you insure your business for less than that amount your insurance company imposes a "coinsurance penalty" once a claim is filed.
Here's how it works:
Let's say you have a building that you believe would cost $100,000 to replace and a coinsurance penalty in your policy of 80 percent.
You insure the building for $80,000 thinking you have fulfilled the coinsurance clause. A fire loss causes $60,000 worth of damage so you submit a claim.
Your insurance company subsequently determines that the replacement cost of the building is actually $150,000.
To determine how much to pay on the claim, the insurer divides the amount of insurance you purchased ($80,000) by the amount you should have purchased (80% of $150,000 or $120,000).
The result (two-thirds, or $40,000) is the amount of your claim the insurer will pay.
If the building had been insured for atleast $120,000, the insurer would have reimbursed you for the full amount of the loss.
Coinsurance can be tricky and cost you a ton of money if you under insure your property.
We recommend you take the time to review your policy coverages as your policy with your agent or broker.
It's also important to shop your insurance premium and coverages to see if you have the best available...
| 
Insurance
needs are different for each and every client that we
serve. We realize that at times we are judged by
the company we keep. We continually evaluate new
companies that may be an asset to your business or
personal security..
