What is Coinsurance?
Many commercial property policies contain a coinsurance clause. This clause imposes a penalty when a policyholder suffers a partial loss and has failed to purchase an adequate limit of insurance. In property insurance , coinsurance is based on the concept of insurance to value, meaning the ratio of your limit of insurance to the value of your insured property. For example, suppose that you own a small office building. Coinsurance clauses encourage businesses to buy adequate insurance. Most property insurance claims involve partial losses. If coinsurance clauses did not exist, many policyholders would try to save money on premiums by insuring their property for only a portion of its value.Read More