A coinsurance limit is the required coverage minimum against a property’s insured value used in many property policies to prevent underinsurance.
Why the limit exists
It aligns policy value with likely replacement value. If insured value falls below the required percentage, the insurer may reduce payments on a claim.
Claims impact
The limit is applied using policy formulas and valuation assumptions, especially for valuation changes and partial losses.
Scenario
A building is insured for $350,000 with an 80% coinsurance requirement and a replacement value of $600,000. If not met, a loss payment is reduced to reflect the underinsured proportion of coverage.