What does the Coinsurance Clause require?

The Coinsurance Clause is a common provision in property insurance policies that requires the policyholder to carry insurance coverage that meets or exceeds a specified percentage of the property's value, typically 80% of the replacement cost. This clause is designed to encourage property owners to insure their property adequately, protecting both the insurer and the insured from losses due to under-insurance.

When a policyholder meets the coinsurance requirement—having insurance that equals at least 80% of the replacement cost—they are eligible for the full benefits of their insurance. If the insured amount is less than the required percentage, the payout in the event of a loss may be reduced. Thus, this clause incentivizes property owners to properly assess and insure their properties, reflecting their true value. It is a critical aspect of ensuring fair coverage and minimizing disputes between insurers and policyholders regarding claim payouts.

The other options suggest requirements either unrelated to coinsurance or misrepresent its purpose. For instance, requiring coverage to match 100% of the replacement cost is not typical under coinsurance, as the goal is to ensure a reasonable level of coverage rather than a complete match of property value.