What is Coinsurance – Could You Be Left Out Of Pocket?

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Avoid Coinsurance

Don’t under-insure to save on premium

Many SME owners when seeking new business insurance quotes, under estimate the value of their stock to reduce the insurance premium, according to Steve Sloan a broker with Insure 247. “Business owners need to consider what would happen to their businesses cash flow in the event of a catastrophic loss, the potential savings in premium could result in the business going broke or at least triggering the under-insurance clause their policy”

Under most business policy wordings the insurer is entitled to impose a penalty via under-insurance averaging or co-insurance provisions, under this provision insurance companies assume that the business owners will fully insure their assets, for example if a business insures $100,000 worth of stock, but at the time of a claim they were carrying $200,000 worth the insurer would pay less maybe as low as $50,000.

What is a Average or Coinsurance clause

This means that if the Sum Insured for is less than 80% of its value at the time you take out this Policy and at each renewal of the Policy, then for any loss or damage You will be Your own in surer for the difference, that is You will bear a rateable proportion of each claim in accordance with the following formula. Sum Insured x Amount of loss or damage 80% of value = Amount Payable (up to Sum insured)

 

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