What is the Coinsurance Clause?

The Coinsurance Clause refers to a provision in property insurance policies that requires the policyholder to maintain insurance coverage on the property that meets a specified percentage of its total value, often around 80% to 90%. This clause is designed to ensure that the insured maintains adequate coverage to protect against losses. If a policyholder fails to meet this requirement and suffers a loss, the insurance company may reduce the claim payment based on the ratio of the coverage maintained to the coverage required.

This emphasizes the importance of accurately assessing property values and maintaining appropriate insurance levels, making it a critical concept in risk management and insurance policies. The focus of the Coinsurance Clause is primarily on the adequacy of coverage relative to property value rather than any specific types of coverage or policy limitations that other options might suggest.