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Coinsurance Simulator
Coinsurance Penalty Simulator
See how coinsurance penalties change as rebuild values, limits, and loss size change. Use this for renewal conversations when replacement cost and building limits may be out of date.
(Did ÷ Should) × Loss = Payout
The coinsurance formula determines claim payments when a property is underinsured. Did is the amount of coverage you carried (your building limit). Should is the required coverage—usually 80% or 90% of the replacement value. If Did is less than Should, a penalty reduces the payout.
Valuation & Limits
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$
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Common: 80% or 90%
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Loss Scenario
Renewal Checklist — Update Values Before Quoting
Valuation and Limits
- Confirm current replacement cost per sq ft and building square footage
- Check if demolition and debris is included or needs an extension
- Confirm by law and ordinance requirements and local code updates
- Confirm soft costs exposure (architect, engineering, permits, project management)
- Confirm inflation guard percentage and whether it is still appropriate
- Review any coinsurance endorsements and the stated percentage
Building Changes and Risk Features
- Any additions, major renovations, tenant improvements
- Roof age and updates
- Electrical, plumbing, HVAC updates
- Fire protection changes (sprinklers, alarms, monitoring)
- Vacancy or occupancy changes
Documentation Underwriters Commonly Request
- Replacement cost report or valuation worksheet
- Photos of exterior and key building systems
- Contractor quotes for major upgrades
- Statement of values if multiple locations
- Loss history and maintenance program summary
Results
Required Insurance (RI)
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Insurance-to-Value (IVR)
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Estimated Payout (before deductible)
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Payout (after deductible)
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Penalty ($)
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Penalty (%)
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Target Limit (no penalty)
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Limit Gap ($)
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Limit Gap (%)
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Notes: Coinsurance penalties apply when limits are below required insurance. Actual settlement depends on policy wording, valuation basis, deductibles, and endorsements.
Disclaimer: This simulator provides estimates for planning and renewal discussions. Final claim settlement and coinsurance application are determined by the insurer and the policy wording.
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Frequently Asked Questions
Common questions about coinsurance, underinsurance, and commercial property limits.
Coinsurance is a clause in many property policies requiring you to insure the building to a stated percentage of its replacement cost (often 80% or 90%). If you insure for less than that amount, the insurer may apply a penalty at claim time, reducing your payout.
If your limit is below the amount required by the coinsurance clause, the insurer can reduce your claim payment proportionally. For example, if you should have had $1M but only had $500K (50%), you might only recover half of a covered loss above the deductible.
An 80% coinsurance clause means you agree to insure the property to at least 80% of its replacement cost. If you do, claims are paid in full (subject to deductible and policy terms). If you insure for less, a penalty formula is applied to partial losses.
Have your broker or insurer update your building limit to match current replacement cost, and aim for at least the percentage required by your policy (e.g. 80% or 90%). This simulator helps you see the impact of different limits and loss amounts.
Yes. Coinsurance only affects how much the insurer pays on a claim when you are underinsured. It does not change your premium directly, but carrying adequate limits ensures you are fully protected and may be required by your lender.
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