What does Coinsurance require a consumer to do?

Coinsurance is a property insurance clause designed to encourage policyholders to insure their property to a value reflective of its actual worth. Specifically, in many standard property insurance policies, coinsurance typically requires the insured to carry coverage that is at least 80% of the total value of the property. This means that if a consumer insures their property for less than this stipulated percentage, they may face penalties in the event of a claim, potentially reducing their payout proportionally based on the amount of coverage they actually carry.

Opting for the 80% threshold helps ensure that the insured is adequately covered to reflect a significant portion of their property value. By doing so, the risk is shared more effectively between the insurer and the insured, which can help maintain lower premiums for property coverage. If a property is underinsured, in the event of a loss, the insured would only receive a payout relative to the amount they had insured, as long as it met the required coinsurance percentage. Thus, choosing the option that specifies the need to insure the property for at least 80% aligns with the standard practice within the insurance industry.