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.
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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 2026-06-14
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