Originally published in Comments - Spring 2012
The terms and conditions of a property insurance policy remain a
mystery to many. One of the critical aspects of an insurance policy
is the co-insurance clause. If present, it affects the amount
payable in the event of a partial or total loss.
In broad terms, co-insurance under a property policy is defined
as the "sharing of risk between an insurer and the insured...
normally expressed as a percentage."1 If a policy is subject
to a co-insurance requirement, this means that the policy owner
must satisfy the specified criteria in the event of a loss claim.
Most claims are for partial loss only; therefore, insuring for less
than 100% of the asset value may be advantageous in reducing annual
premiums. However, be forewarned: in the event of a total loss,
insuring 100% of the asset value is the only means to get full loss
compensation (less the applicable deductible). Otherwise, the
policy limit will apply.
