In a property insurance policy with a coinsurance clause, the standard required coverage is 80% of the value. Which option below is the correct corresponding percentage?

In a property insurance policy with a coinsurance clause, the standard required coverage is 80% of the value. Which option below is the correct corresponding percentage?

• A. 50%
• B. 70%
• C. 90%
• D. 80%

Answer: (D)

Coinsurance in property insurance requires you to carry a minimum portion of the property's value to qualify for full coverage on a loss. The standard required coverage is 80% of value. If you meet or exceed that 80%, you’re generally paid the full amount of a covered loss (up to the policy limits). If you fall short, the payout is reduced proportionally to how underinsured you are. For example, if a property is valued at 100,000 and you must carry 80% (80,000), insuring for 80,000 means you’ll receive the full approved loss. If you only insure for 60,000 (60%), and the loss is 20,000, the insurer applies the underinsurance formula: 60,000 divided by (0.8 × 100,000) equals 0.75, so you would receive 75% of the loss, or 15,000. This illustrates why the 80% requirement is the standard: it prevents underinsurance from eroding the payout and ensures you’re protected at a level close to the property's value.

Coinsurance in property insurance requires you to carry a minimum portion of the property's value to qualify for full coverage on a loss. The standard required coverage is 80% of value. If you meet or exceed that 80%, you’re generally paid the full amount of a covered loss (up to the policy limits). If you fall short, the payout is reduced proportionally to how underinsured you are.

For example, if a property is valued at 100,000 and you must carry 80% (80,000), insuring for 80,000 means you’ll receive the full approved loss. If you only insure for 60,000 (60%), and the loss is 20,000, the insurer applies the underinsurance formula: 60,000 divided by (0.8 × 100,000) equals 0.75, so you would receive 75% of the loss, or 15,000. This illustrates why the 80% requirement is the standard: it prevents underinsurance from eroding the payout and ensures you’re protected at a level close to the property's value.