What the heck is Coinsurance?
Your property insurance will be written with a 90% coinsurance clause. The coinsurance clause is the insurance company’s way of ensuring that you provide them with the correct replacement cost estimates for the property you are insuring. If you insure your property for less than the stated percentage of replacement value, you will likely be penalized in the event of a claim. For example; if you have a true replacement value of your property of $500,000 the insurance company will require that you insurance your property for a minimum of $450,000 ($500,000 X .90 = $450,000). The only time that this coinsurance clause is tested, is at the time of a claim. Let’s say that you have $500,000 in equipment, furnishings, fixtures, etc. and you elect to save a little premium and only insure your “contents” for $225,000. Now let’s say that you had a water pipe burst inside your facility over the weekend and when you open on Monday morning, you find that you have sustained $100,000 damage to your a
