coinsurance provision
A property insurance provision that penalizes the insured's loss recovery
if the limit of insurance purchased by the insured is not at least equal to
a specified percentage (commonly 80 percent) of the value of the insured property.
A business income coverage coinsurance provision penalizes the insured's loss
recovery if the business income limit of insurance is not at least equal to
a specified percentage of the business income that would have been earned during
the 12-month policy period. The coinsurance provision specifies that the insured
will recover no more than the following: the amount of the loss multiplied by
the ratio of the amount of insurance purchased (the limit of insurance) to the
amount of insurance required (the value of the property on the date of loss
multiplied by the coinsurance percentage), less the deductible.
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