Coinsurance is a provision in the insurance industry which allows an insurance company and its policyholder to potentially apportion between them any loss covered by the policy. This is usually according to a fixed percentage of the value for which the property is insured. In property insurance policies, the coinsurance clause provides that property must be insured for a specific percentage, usually 80% to 100% of its value. This means that the insurance company can shift part of the risk of loss back to the policyholder if the property is not insured to a certain ratio of the value of the property at the time of a loss. If the value of the property times the coinsurance percentage is greater than the limit of insurance for the property, then the insurer may apply a coinsurance “penalty” and may not pay the full value of that loss. Associations and all policyholders should periodically review their policies to determine if they are subject to a coinsurance percentage and to ensure that they are adequately insured for the value of their property according to any coinsurance percentage. This “penalty” can be huge for associations suffering a large loss in the event of a large catastrophe like a hurricane.
Continue Reading Associations Should Review Their Policies To See If Their Insurers Have Made Them Responsible For A Share Of The Risk Of Loss – This Is Known As Coinsurance