The coinsurance percentage sets the required percentage of a property’s value that must be insured to avoid underinsurance penalties.
How it is used
Policies may require 80%, 90%, or 100% insurance against replacement value. The percentage is a contract condition, not just a recommendation.
Claims impact
The lower the insured value below requirement, the larger the proportional reduction on some losses.
Scenario
If a property requires 90% coinsurance and is underinsured by design, claims paid may be adjusted because the required risk-sharing proportion is not met.