See what a property claim pays when the building is insured for less than the policy requires. For rental houses, duplexes, apartment buildings and business property.
This is property insurance coinsurance. Health insurance uses the same word for your share of a medical bill, which works differently.
Free to use, with no sign-up. The numbers you type stay on your device unless you share a link.
Most property policies written for rental houses, apartment buildings and business property include a coinsurance clause. It asks you to insure the building for at least a set share of its value, usually 80%, 90% or 100%. When your limit meets that share, covered losses are paid in full, up to the limit and after the deductible.
When the limit falls short, every covered claim is cut in the same proportion, small claims included. Insure for 75% of what the clause requires, and the policy pays 75% of the loss before the deductible comes off.
Think of it as a promise with a matching rule. You promise to insure $800,000 and insure $600,000, so you kept three quarters of the promise. The insurer then keeps three quarters of its side.
The payment is never less than $0 and never more than the limit carried.
Worked example. A building valued at $1,000,000 with an 80% clause needs a limit of $800,000. The owner carries $600,000, so the ratio is 75%. A $100,000 loss pays 75% of $100,000, which is $75,000, minus a $1,000 deductible: $74,000. The coinsurance penalty is $25,000, and the owner pays $26,000 out of pocket.
Use the value your policy's valuation clause names. A loan appraisal measures market value, which is a different number. Replacement cost vs actual cash value.
Homeowners policies (HO-3) and many landlord policies (DP-3) use a different rule. If the dwelling limit is at least 80% of the home's full replacement cost, covered damage is paid at the full repair cost, up to the limit and after the deductible.
Below 80%, the policy pays the greater of two amounts: the actual cash value of the damage, or a proportional share of the repair cost. The deductible comes off the repair cost before that share is worked out. Choose My policy has no coinsurance % in the calculator to run this version. Some rental houses are insured on a commercial property policy instead; if the policy shows a coinsurance percentage, choose My policy shows a coinsurance % instead. Basic landlord policies (DP-1) usually pay actual cash value only, so this rule does not apply to them. Landlord insurance.
Two more rules from the same policy wording. The 80% is measured without foundations, excavation and underground pipes. And until the repair is actually done, the insurer usually pays only the actual cash value, then the rest once the work is finished.
Business income coverage can carry its own coinsurance clause. There, the percentage applies to 12 months of net income plus operating expenses. Some policies replace that clause with a monthly limit or a maximum period of indemnity. This calculator covers the building and contents only.
Yes. The ratio applies to every covered loss. A $20,000 claim on a building insured at 75% of the required limit pays $15,000 before the deductible.
The value your policy uses: replacement cost or actual cash value. The purchase price, market value and tax assessment all measure something else. This calculator does not estimate the value for you.
Commercial property policies use a coinsurance clause. Homeowners (HO-3) and many landlord policies (DP-3) use the 80% replacement cost rule instead, so choose My policy has no coinsurance % in the calculator. Some rental houses are written on a commercial policy with a coinsurance percentage; for those, choose My policy shows a coinsurance %. Basic landlord policies (DP-1) usually pay actual cash value only.
A higher percentage often earns a lower rate. The trade is less room for error: at 100%, any rise in building costs that the limit does not follow triggers a penalty.
The Agreed Value option suspends the clause for the period shown on the policy, once the insurer accepts a signed statement of values. It has to be renewed when it expires. In the calculator, tick My policy has the Agreed Value option.
That is called a blanket limit. Coinsurance is then measured against the total value of everything the limit covers. To use the calculator, enter the total value of all of those buildings and the blanket limit.
Yes. Minnesota commercial property policies use a form (ISO CP 01 57) under which the coinsurance condition applies only at the insured's written request. Once requested, it stays on at renewal until the insured asks in writing to remove it. Without it there is no coinsurance penalty, and the premium may be higher.
Other deductibles, such as a wind or hail percentage deductible, sublimits, the policy's valuation terms and state law all change the final number. Use this calculator as an illustration, and have the policy itself read before you rely on a figure.
This calculator is for illustration only and is not a coverage determination or offer of insurance. Actual claim payments depend on your policy terms, conditions, valuation, and applicable state law. See our Terms of Service, section 11.
