Glossary

Coinsurance

A property policy condition requiring you to insure to a set percentage of value, or share the loss. (Health plans use the word for a cost share.)

Also called: coinsurance clause, coinsurance penalty, coinsurance condition

In commercial property insurance, the coinsurance condition says you must carry limits equal to a stated percentage, commonly 80%, 90% or 100%, of the property's value at the time of loss. If you carry less, the insurer reduces every claim, including partial losses, by the shortfall. The ISO CP 00 10 form's coinsurance condition sets it out in four steps.

The formula: limit carried ÷ limit required × loss, minus the deductible. Say a building is worth $1,000,000 with an 80% clause, so $800,000 is required. The owner carries $600,000 and suffers a $100,000 loss. The insurer pays $600,000 ÷ $800,000 × $100,000 = $75,000, minus a $1,000 deductible, or $74,000. The owner absorbs $26,000 even though the loss was far below the limit.

The usual trap is a stale valuation. Construction costs rise, nobody updates the limit, and the penalty appears at claim time. Avoid it by valuing at current replacement cost, reviewing yearly, or buying agreed value, which suspends the clause. The coinsurance penalty calculator runs your numbers, and the guide on the the coinsurance clause and how underinsurance is penalized explains the variations. In health insurance, coinsurance means your percentage share of costs after the deductible, which is a different idea.

Last reviewed October 10, 2026

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Related terms

Insurance to value Carrying a property limit that matches the full value of what you insure, so a loss is paid in full and no coinsurance penalty applies. Agreed value A property policy option where insurer and insured agree on the covered value in advance, which suspends the coinsurance penalty for the agreed period. Replacement cost A valuation basis that pays the cost to repair or replace damaged property with like kind and quality, without deducting for depreciation. Blanket limit A single property limit applied across several buildings, locations or types of property, so the insurer pays a loss at any one up to the total. Statement of values A schedule listing each insured location with its building, contents and income values and construction details, used to rate and model a property program.

Related guides

Agreed value, blanket limits and margin clauses How agreed value suspends coinsurance, how a blanket limit spreads one limit across locations, and how a margin clause caps the payment at each building. The annual business insurance review: what to update What to check each year, from property values and payroll to contract limits, cyber controls and new forms, and which changes should trigger an earlier review. The statement of values: what property underwriters need How to build a statement of values underwriters trust: the fields, ISO construction classes, replacement cost basis, and how errors in it surface in a claim. Business insurance myths that leave owners uninsured Ten common beliefs about business insurance that are wrong, from LLC protection and homeowners coverage to certificates, flood, closures and cyber. Business interruption insurance: how business income coverage works What business income coverage pays after a covered physical loss, how the 72-hour wait, period of restoration and extended income work, and where the gaps are. A restaurant kitchen fire claim, step by step, from first call to final check A hypothetical composite walkthrough of a kitchen fire claim: business income, extra expense, spoilage, coinsurance, proof of loss, appraisal and a timeline.

Related industries

Condo and HOA insurance What condo and homeowners associations need: master policy, D&O, crime and fidelity, liability, plus lender rules and Florida reserve and inspection laws.

Related tools

Business income (interruption) limit calculator Estimate the business income limit you need after a covered loss, including extended recovery and extra expense, then test it against your coinsurance clause. Coinsurance penalty calculator See what a commercial property policy pays when your limit falls short of the coinsurance requirement, how big the penalty is and the limit that avoids it. Property valuation helper A rough check of your building limit from your own cost per square foot, an optional dated cost trend, code and debris allowances, and your coinsurance.

Related en español

Seguro de interrupción de negocios: cómo funciona la cobertura de ingresos Qué paga la cobertura de ingresos del negocio tras una pérdida física cubierta: la espera de 72 horas, el periodo de restauración, la extensión y los huecos. Seguro de propiedad comercial: qué cubre y qué no Cómo funciona la póliza ISO estándar de propiedad comercial: bienes cubiertos, causas de pérdida, extensiones y sus límites, valuación y los huecos por cerrar.