Written by Andy Gurczak

April 8, 2022

What is Coinsurance in a Homeowners’ Policy?

If a storm or fire damages a home, the homeowner will file an insurance claim with his homeowners’ insurance company. An adjuster comes to inspect the damaged real estate. Later the insurance company confirms the amount of the loss. However, the company tells the homeowner that the claim payment will be reduced by a coinsurance penalty. The homeowner asks himself: what is coinsurance in a homeowners’ policy?

What is coinsurance in a homeowners’ insurance policy?

Most homeowners’ insurance policies have coinsurance clauses. As such, these clauses are meant to protect insurance companies. The coinsurance requirement makes the homeowner buy the correct amount of insurance coverage for his home.  It ensures that the insurance company receives the correct amount of premium payments relative to the risk it is assuming by insuring the home.

This means if the homeowner’s home is worth $1 million, he must buy $1 million in insurance coverage. For instance, that homeowner cannot pay $500,000 in insurance to cover a home with a $1 million replacement cost.

The homeowner must buy insurance coverage at least equal to 80 percent to 100 percent of the value of the home, depending on the company. 

Consequently, if the homeowner purchases an amount of insurance below the percentage in the coinsurance provision, he becomes a coinsurer with the insurance company. 

How Does the Coinsurance Clause Work?

While it sounds somewhat complicated, coinsurance is simple to understand in practice. For instance, in the $1 million home example, the homeowner only purchased $500,000 in loss recovery protection. Furthermore, his homeowners’ company had an 80% minimum coverage requirement in its coinsurance clause.

Therefore, the insurance company would consider him a coinsurer for 50% of any insurance claims he submitted ($500,000 of insurance protection on a $1 million home equals 50%). 

As a result, if a storm does $80,000 in damages to this homeowner’s home, the coinsurance percentage would apply. Therefore, the insurance company would only pay 50% of the claim, or $40,000.

Conversely, if the building had been insured at or above 80% of its current value, the homeowner would have been fully covered. As a result, he would have received $80,000

If You Are Having a Coinsurance Issue with Your Homeowners’ Insurance Company, Call AllCity Adjusting

We are a family-owned claims company with five decades of combined adjusting experience. As a result, if there’s one thing we understand, it’s that you need 100% of your claim value.

At AllCity Adjusting we work to ensure you get 100% of your damage claim value. Equally important, with over 50 years of combined adjusting experience, we know insurance companies and understand where they cut corners. 

Don’t Let your Homeowners’ Insurance Company Push You Around

If you are having a problem with your homeowners’ insurance company over coinsurance, call AllCity Adjusting first. We are experts on insurance policies. We can tell you if your insurance company is making a mistake.

As another example, we can tell you if your insurance agent made e a mistake in reporting the value of your home to the carrier.

Therefore, if you have received a low-ball offer from the insurance company because of a coinsurance issue, call us at 844.692.3587. Or you can email us at info@allcityadhjusting.com.


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At AllCity Adjusting we help residential and commercial clients alike get the claims support they need. Moreover, we have over 50 years of combined experience helping get our clients the max settlement time and time again. If your claim has been low balled or denied entirely we can help increase your maximum settlement. Call us today for a FREE consultation. Experience the AllCity difference.

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