What is the consequence of not meeting the Coinsurance requirement?

The consequence of not meeting the Coinsurance requirement is that the insured will incur a coinsurance penalty. Coinsurance is a provision in property insurance policies that requires policyholders to insure their property for a specified percentage of its value, typically 80%, 90%, or 100%. If the insured does not carry the proper amount of insurance, they may face a penalty when a loss occurs.

This penalty generally takes the form of a reduction in the claim payment. For example, if a policyholder insures their property for less than the required percentage of its value and then suffers a loss, the insurer will calculate the payout based on the amount of insurance carried compared to what was required. Therefore, by underinsuring their property, the insured will receive only a proportionate payment for the loss, which can lead to financial hardship if they were counting on full recovery.

The other options do not accurately reflect the typical response of an insurance policy to a failure to meet the coinsurance requirement. The insurer does not pay the full value of the loss if the requirement is not met, the claim is not denied entirely as long as the policy is active and the loss is covered, and the policy does not become void due solely to coinsurance penalties.