General Concepts

Coinsurance Clause (Property)

A property coinsurance clause — typically 80% or 90% of replacement cost — penalizes underinsurance by making the policyholder a co-insurer for the uninsured portion of any loss.

Last reviewed: May 2026 · Editorial methodology

Definition

Unlike health insurance coinsurance (a cost-sharing percentage), the property coinsurance clause is about maintaining adequate coverage-to-value ratios. If your policy requires you to insure your building for at least 80% of its replacement cost and you fail to do so, you become a co-insurer for the shortfall. The penalty is calculated as: (Amount of Insurance Carried ÷ Amount Required) × Loss = Insurer's Share. For example, if a building is worth $1,000,000 and you insure it for only $600,000 (against an 80% requirement of $800,000), and a fire causes $200,000 in damage, the insurer pays only $150,000 ($600k ÷ $800k × $200k) — leaving you to absorb $50,000 out of pocket even though your loss is well within your policy limits. Inflation can silently create coinsurance violations as replacement costs rise while coverage amounts stay static; an annual insurance-to-value review is essential for commercial policyholders.

Where this term matters

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Tip

Glossary definitions are educational. Always check your own policy language — insurers can define common terms differently from one another. When in doubt, request a written explanation from your agent.

Related terms

IndemnityThe principle of restoring an insured to their financial position before a loss — no better, no worse.Declarations PageThe summary page ("dec page") of your policy listing coverage limits, deductibles, premium, and insureds.EndorsementA written modification to a policy that adds, removes, or changes coverage — same as a rider.UnderwritingThe insurer's process of assessing risk and setting price — or declining to offer coverage.
Source: Cover Forge USA editorial team|Last verified: May 2026|Methodology
Definitions are educational and may be simplified. Always refer to your policy contract and consult a licensed agent for terms that affect coverage decisions.
CF

Cover Forge USA Editorial Team

Editorial Lead

This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.

Reviewed June 2026

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