If you’ve recently checked your home insurance policy, then you might have seen something called a coinsurance clause. Most property insurance policies contain coinsurance clauses.
Confused about the coinsurance clause in your home insurance policy? Today, we’re explaining what a coinsurance clause means in your home insurance policy.
A coinsurance clause requires the policyholder to carry an amount of insurance equal to or greater than the stated coinsurance percentage of the insurable value of the covered property to avoid a penalty on claims. This percentage is often 80%.
In non-legalese terms, that means you cannot have cheap insurance on an expensive home and expect your home insurance company to completely cover your losses.
Insurance companies place coinsurance clauses in policies to encourage insured individuals to carry an appropriate amount of insurance relative to the value of the property.
Without a coinsurance clause, a policyholder might be able to get a cheap policy with low monthly premiums when they should be paying high premiums for a more valuable policy. You might be paying for $200,000 of home insurance coverage on a $350,000 home.
These are the types of situations a coinsurance clause is designed to prevent. If you try to make a claim on your $200,000 policy for your $350,000 home, then your coinsurance clause might kick into effect. The clause states that a percentage of your claim will be deducted if you bought an insurance policy that did not adequately cover the value of your home.
If you’re dealing with a problem related to coinsurance clauses in your home insurance policy, then you may consider hiring a public adjuster or an insurance attorney to help deal with your claim.