Coinsurance Penalty

A coinsurance penalty occurs when a homeowner fails to insure their property for at least a specific percentage (usually 80%) of its true replacement value. In the market, where construction costs fluctuate rapidly, being under-insured can be devastating. If a loss occurs and you are below the 80% threshold, the insurer will apply a penalty, reducing your payout proportionally. This means you might receive only 60% of a claim’s value even if the damage is below your policy limit.