What is Co-Insurance?
The success of any fire insurance program is measured by it’s effectiveness following the loss of an insured. Thus, in establishing adequate coverage, one must have firsthand information as to the insurable values at risk. Book values do not fulfill this purpose. Insurable values are the present day replacement costs with proper allowance for depreciation. Since replacement costs fluctuate, it is necessary to keep a constant check on insurance values.
The insurance applying in the following example is subject to the 90% Co-Insurance Clause. Under the terms of this clause, you should insure the property at risk, to the stipulated percentage of value. If you fail to do so, you will not be fully re-imbursed for any loss that may occur. The manner in which the Co-Insurance Clause would operate in the event of a partial loss is shown below and is a hypothetical example:
INSURABLE VALUE = $100,000.00
INSURANCE CARRIED = $60,000.00
INSURANCE REQUIRED (under 90% Co-Insurance Clause) = $90,000.00
AMOUNT OF LOSS = $10,000.00
POLICY PAYS = $6,667.00
INSURED PAYS = $3,333.00
The above example is merely to show you how Co-Insurance works. If at any time you
should substantially increase building values or contents values, you must notify us
immediately to increase your coverage, in order to avoid any Co-Insurance penalties.