Co-Insurance
What You Don’t Know May Hurt You

 

Insurance policies are legal contracts that have exclusions, limitations and other stipulations that affect your claim payment.  With the increased cost of materials and labor, having the correct amount of insurance is crucial.   Most people think that they can collect up to the amount of insurance they purchase. However, in some cases, this may not be true.

 

Co-Insurance  is a clause in most insurance policies that affects you at the time of a claim payment. In short, it’s a penalty if you do not purchase the correct amount of insurance. Here is an example of how it works:

 

$1,000,000 Building Replacement Cost
80% Co-Insurance
$600,000 Building Insurance Purchased
$100,000 Loss

 

On the above example, the insured is require to purchase  80%  of the replacement cost limit or  $800,000.   The $600,000 of insurance they purchased is only  75%  of what they should have purchased. Because of the co-insurance clause, they will only get paid  75% of the loss or $75,000.

 

Due to a co-insurance clause,  it’s critical to review your building and business property  limits   to make sure you have enough coverage. Call us today if you have any questions on co-insurance or to discuss the limits on your policy.