What is coinsurance?

Coinsurance is a clause requiring you to insure your property for a specified percentage of its value (typically 80-90%) or face penalties that reduce claim payouts proportionally.

What you need to know

If your building is worth $1 million and you have an 80% coinsurance clause, you must carry at least $800,000 in coverage. If you only carry $600,000, your insurer will only pay 75% of any claim ($600k/$800k = 75%).

Why it matters for restaurant owners

Coinsurance penalties devastate partial claims. Even a $50,000 kitchen fire could result in only a $37,500 payout if you’re underinsured.

Protecting yourself from coinsurance penalties:

Combat this by:

• Getting annual property valuations
• Adjusting coverage limits to match current property values
• Considering agreed value policies that waive coinsurance requirements

Critical reminder: Property values increase over time due to inflation and improvements—your coverage must keep pace.