In this episode of Outside the Box, Terry Campbell breaks down one of the most misunderstood topics in property insurance, the coinsurance penalty.
A coinsurance penalty applies when a property isn’t insured for enough of its replacement value. It’s designed to ensure that policyholders carry adequate coverage, but if you fall short, it can lead to a significant out-of-pocket loss.
Here’s how it works:
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Most policies require coverage for 80–100% of replacement cost.
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If your facility costs $1M to rebuild but you only insure for $700K when you should have at least $800K, your claim payout could be reduced by 12.5% — or more.
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Add your deductible, and that “savings” could turn into a six-figure penalty.
Terry explains why it’s crucial to review your coverage regularly and insure to 100% of replacement cost, not only to stay compliant with your policy, but to protect your investment when the unexpected happens.
???? Watch the full video to learn how coinsurance penalties work and how to avoid them.
