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:
- Get annual property valuations
- Adjust coverage limits to match current property values
- Consider agreed value policies that waive coinsurance requirements
Property values increase over time due to inflation and improvements — your coverage must keep pace, or the gap between what you carry and what's required will grow every year.
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