Talk:Coinsurance
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[edit] underreporting penalty
A building valued at $1,000,000 has an 80% coinsurance clause but is insured for only $750,000. It suffers a $200,000 loss. The insured would recover $750,000 ÷ (.80 × 1,000,000) × 200,000 = $187,500 (less any deductible).
In this example the underreporting penalty would be $12,500.
So, if the building is insured for 900 thousand dollars: $900 000 ÷ (.80 × 1 000 000) × 200 000 = $225 000, more than the loss. This can't be right - should explain how these cases are handled—Random832 20:48, 12 October 2007 (UTC)
- Good question. The coinsurance penalty doesn't "kick in" unless the building's insured value was *less* than its actual value by more than the coinsurance percentage. In your example, since $900,000/$1,000,000 > 80%, the coinsurance penalty formula isn't used to calculate the reimbursement. Lawyer2b (talk) 16:12, 15 May 2008 (UTC)
- So then they simply reimburse the whole loss in that case, and there is no penalty at all for underreporting? I assume, though, that a total loss would only be reimbursed for the insured value ($900k) rather than the actual value ($1000k) in that case, correct? --Random832 (contribs) 17:05, 15 May 2008 (UTC)
[edit] The 80% or the 20% is the level of coinsurance?
I understand that coinsurance refers to the fact that part of the insurance is provided by the owner. Can you say that a policy has a low coinsurance level if the percentage covered by the owner is low?Koczy (talk) 09:53, 29 February 2008 (UTC)
