What is coinsurance? Oh, my goodness. We have copays, coinsurance, all of this stuff on the medical side and now you’re throwing it at me in my property and casualty insurance? I don’t get it, and I don’t want to. Can you please explain it to me? Well, I’ll do my best.
Coinsurance Protects the Insurance company
Here’s the deal. Insurance companies have coinsurance in place for one reason and one reason only. They want to protect themselves from you. They want to make sure you understand that you are required to put an accurate value on your property. Now, when we place property policies at Florida Risk Partners, we make sure that our clients never have coinsurance above 80%. If you start getting into 90 and 100% coinsurance, you’re setting yourself up for a disaster because you’re more than likely not even going to be able to cover inflation from year to year.
Coinsurance is a Penalty
Here’s what that means. That means that if you have a building valued at a million dollars, the insurance company expects you to carry at least $800,000 of insurance on that building on a replacement cost basis. If you don’t carry $800,000, they’re going to take the amount that you carried, let’s just say it’s $600,000, they’re going to divide it into the amount you should have carried, which is $800,000, and they’re going to tell you that you only carried 75% of the insurance that you were required to carry. Here’s the problem with that. If you have a claim, they’re going to take the deductible, and then they’re going to multiply whatever the value of that claim is by 75%, and that’s what you’re going to get paid—the reason why is because you weren’t insured to value.
Make sure you Insure to Replacement Cost Value
So if you have coinsurance and you aren’t sure that your values are right, click the button below. We have a statement of values template that we use with all of our clients and prospects to make sure that their property is accurately insured at the correct replacement cost. This is not a ploy to get you to buy more insurance. This is a tool to make sure that the coverage you buy is right. We need to educate you. We want to teach you. We are not insurance salespeople, we are risk management consultants, and we want to make sure that you make educated decisions when it comes to risk. I don’t care if you buy insurance, I don’t care if you don’t buy insurance. All I want to do is make sure I told you the right thing to do, and then you can make the responsible decision. So if you have questions on coinsurance and insurance value, again, click the button down below, and we’ll get in touch. We’re not going to try and sell you something. We’re going to sell you ourselves. Once you see our work product, we’re 100% confident you’ll be willing to do business with us.