CoInsurance

[Sonny]

In a recent thread, there was a discussion about insurance coverage and some of the terms used. One of these terms was "co-insurance". I offered an explanation which, I have learned since, is incorrect. So this thread is to address my mistake. Here is the correct explanation of co-insurance according to a friend in the business.

The 90% coinsurance clause states that if the building owners don't insure to at least 90% of the value of the building they will be penalized.

So, if they insure a building worth $500,000 for $500,000, then they receive the full amount less their deductible. If they insure the same building, worth $500,000 to replace, for only $450,000 (according to a 90% co-insurance clause), they will not be penalized, but the most they will be paid is $450,000.

So the co-insurance has to do with indicating the minimum amount of coverage the insured must have for the building, and can limit an insurance settlement if the owners only insure to the percentage specified in the co-insurance clause. If the owners insure for the full value, then the co-insurance clause actually has no relevance.

A link with clear examples is here http://www.mumby.com/acrobat/Co-Insurance.pdf

 

[Fletch]

So what is your point?

No offense, but this is the last place I thought I would see insurance mentioned once, let alone twice.

 

[jjinvan]

No offense, but this is the last place I thought I would see insurance mentioned once, let alone twice.

You've been here that long and you are surprised to see ANYTHING come up as a topic?