Coinsurance is a contractual requirement in an insurance policy stipulating that the property owner must maintain a minimum level of coverage, usually expressed as a percentage of the total property value (often 80% or 90%). If the landlord fails to insure the building for at least that amount, the insurance company will apply a penalty during a claim, effectively making the landlord responsible for a portion of the loss. This is designed to prevent property owners from underinsuring their assets to save on premium costs.
How It Applies to Florida Landlords
Many Florida landlords mistakenly underinsure their properties to lower annual insurance costs. If a hurricane causes $100,000 in damage, but the building is found to be underinsured due to a coinsurance clause, the insurer may only pay a fraction of the claim. In a state where rebuild costs are high and construction inflation is common, it is vital to keep building valuations current. Landlords should consult with their insurance agent annually to ensure their coverage limits meet the coinsurance requirements of their policy.
Key Takeaways
- Prevents the practice of underinsuring property.
- Failure to meet requirements results in a claim penalty.
- Requires accurate assessment of property replacement value.
- Essential to review coverage annually with an agent.