Coinsurance in Property Policies: Why 80% is Better

Coinsurance in Property Policies: Why 80% is Better

December 19, 2023

Let’s talk coinsurance in Property Policies.

It’s difficult to understand the concepts of coinsurance and why 80% coinsurance is better than 100% but in property insurance, 80% is better than 100%.  Why?  If you have 80% coinsurance, your policy is requiring you to insure the property for at least 80% of it’s value to get the full amount for a covered loss.  If you have 90% coinsurance, you need to carry 90% of the value of the property.  If you are carrying 100% coinsurance, you must insure the property to 100% of value to be fully covered at the time of a loss.  A 100% coinsurance clause may give you a discount on your premium, but it also means that you  are at higher risk of being penalized on a claim settlement if you are not adequately insuring your property value.  Central Utah Insurance has a number of commercial insurance companies to choose from. Give us a call for a review and quote on your commercial property today!

Why 80% Coinsurance is Better

At first glance, it may seem counterintuitive that insuring your property for 80% of its value would be better than insuring it for the full 100%. However, there are important factors to consider that make 80% coinsurance the wiser choice.

1. Flexibility and Adequate Coverage: By opting for 80% coinsurance, you have more flexibility at the time of a loss if you are not adequately insured for full replacement value on your property.   

2. Avoiding Penalties: With 80% coinsurance, you are protected from severe penalties in the event of an underinsured loss. If you have insured your property for at least 80% of its value, your insurance policy will cover the full amount of the loss, minus the deductible. This can save you from substantial out-of-pocket expenses.

3. Premium Considerations: Premium Considerations: Insuring your property for its full value is recommended to ensure complete coverage. However, it is important to note that some insurance companies may offer a premium discount for 100% coinsurance. You may find yourself underinsured at the time of the loss, thus receiving a coinsurance penalty on your loss settlement.