What is coinsurance and how does it affect a claim?

Coinsurance is a clause found in many commercial property insurance policies that encourages property to be insured close to its full replacement value. If a building or business personal property is underinsured, the policyholder may have to share in part of the loss, even on a partial claim. For example, if your policy requires you to insure your property to at least 80% of its replacement cost, but you only insure it for 50%, the insurance company may reduce the amount paid on a claim proportionally. This can result in unexpected out-of-pocket costs after a loss. That’s why it’s important to regularly review property values, construction costs, equipment, and renovations with your NCG Account Manager to help ensure your coverage limits remain adequate.