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Commercial Lines Rating Series: Part 3 – Coinsurance

February 11, 2013

BuildingCoinsurance is a common insurance policy provision that requires at least a certain percentage (usually 80%) of insurable value in order to collect the full amount of a partial-loss claim.

The purpose of this provision is to help achieve rate equity and adequacy; to lessen both moral and morale hazards that insurance commonly creates; to assist in keeping insurance premiums affordable.

Coinsurance lessens underinsurance by requiring the insured to pay a certain percentage of his losses that is proportional to the amount of the underinsurance.

80% rates can be converted as follows:

For 90% coinsurance, apply a factor of .95

For 100% coinsurance, apply a factor of .90


Example of loss payment:

The coinsurance examples below are taken from Building & Personal Property coverage form CP 00 10 Section F, Additional Conditions.


Coinsurance chart


The formula:

(Amount of Insurance written ÷ Required Amount of Insurance) x Loss – Deductible = Payment



Article by: Terry Krueger, Subscriber Administrator

Read more articles from our Commercial Lines Rating Series.

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