Coinsurance/ Insurance to value
Coinsurance can be described as a property insurance provision that imposes a penalty on an insured’s loss recovery if the limit of insurance purchased is not at least equal to a specified percentage of the value of the insured property. Why is it necessary? it is well established that most building property losses are partial in that they do not result in the total destruction of the structures involved. For insured’s that recognize this, there may be a tendency to play the odds and limit the amount of insurance purchased. Why pay the premium for full coverage when chances are the full amount may never be needed? Of course, when the property is pledged as security for a mortgage loan, the mortgage company typically requires that the property be insured for an amount that il cover the balance of the mortgage .