“The commercial property policy allows the insured the option to use 80%, 90% or 100% coinsurance. As the coinsurance percentage increases, the property rate (or loss cost) decreases. But should 100 percent coinsurance be used?<\/strong><\/em><\/p>\n

From an errors and omissions perspective, probably not; using 100 percent coinsurance leaves no room for an incorrect calculation which requires the insured to always have 100 percent of the value in force. Even attaching the inflation guard endorsement may not give the insured adequate coverage at the time of the loss.<\/strong><\/em><\/p>\n

Commercial property policy insureds also have the opportunity to write all property coverage under a blanket limit of protection. Blanket limit policies are the preferred method when the insured is trying to avoid undervaluing a particular class of property or a particular property location (especially if there are several properties or contents moving among several buildings or locations). However, use of a blanket limit requires the minimum coinsurance percentage be increased to 90 percent.
\n…
\nBut, as stated above, even though the property is valued at 100 percent of its TIV, do not increase the commercial client’s coinsurance to 100 percent (even though there is a slight premium break). Use 90 percent to avoid most miscalculation problems and allow some room for an unexpected increase in replacement cost.<\/strong><\/em>”<\/p>\n<\/blockquote>\n

This is excellent advice. It is very difficult to accurately estimate the replacement cost of a significant structure. Even bids for construction can wildly vary. How much should anybody really bet on any one estimate getting the replacement cost just right?<\/p>\n

Another useful tip was to use “agreed values:”<\/p>\n

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“One approach CPP insureds can employ to avoid the application of coinsurance is "agreed value." As the name suggests, the agreed value is the value the insured and the underwriter agree the property is worth. Attaching the agreed value endorsement suspends the coinsurance provision for one year. At the end of the year, a new schedule must be submitted and a new agreement reached.”<\/p>\n<\/blockquote>\n

The last thing a policyholder wants is to have a loss. Having a loss where the claim is not paid in full will undoubtedly cause issues about why enough insurance was not obtained. My view is “safe is better than sorry.” I suggest when it comes to coinsurance, it is the best policy.<\/p>\n","protected":false},"excerpt":{"rendered":"

Coinsurance penalties are the last thing policyholders worry about following a loss. My experience has been that many field adjusters fortunately do not go through the costly calculations to accurately determine if a structure is underinsured. Thus, the penalties from being underinsured do not arise as often as they could.<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[],"tags":[37,2,49,4],"class_list":["post-7580","post","type-post","status-publish","format-standard","hentry","tag-business-property","tag-co-insurance","tag-home-owners-insurance","tag-insurance"],"acf":[],"yoast_head":"\n