Co-Insurance penalties…be sure to have the proper commercial property coverage

Co-Insurance penalties...be sure to have the proper Commercial property coverage

Most property insurance policies contain a coinsurance provision. A coinsurance provision requires the insured to insure the covered property to a specified percentage of it’s full value, typically 80, 90 or 100%. If a loss occurs, and it is determined the limits purchased are less than what is required by the coinsurance clause, the loss recovery will be limited to that same percentage of loss as the ratio of insurance amount carried to the insurance amount.

Coinsurance in a commercial property policy does not come into play until a loss occurs. When this event/loss happens, the replacement cost is assessed at the time of the loss to determine the limit of insurance that should be in place. Depending on the coinsurance percentage selected in the policy, an insured may only have to cover up to a certain amount to avoid a coinsurance penalty.

Example below:

How to prevent under payment? Be sure to evaluate your property coverage every year. Make updates if you add new equipment, furnishings or improvements to the property. Call Mindi McKinley today to evaluate your current Commercial Property coverage.