CLAIMS GLOSSARY · FLORIDA & NEW JERSEY

Coinsurance (Property Insurance)

Also called: coinsurance clause, coinsurance penalty, 80% rule, insurance to value

By Nelson Avila, Licensed Florida Public Adjuster (License G332385) · Florida Certified Contractor
Homeland Public Adjusters · Last reviewed: October 2026

Definition

Coinsurance, on a property policy, is a condition that requires the building to be insured for at least a stated percentage of its value (commonly 80%, sometimes 90% or 100%). If the limit is below that at the time of loss, the insurer pays only the proportion of the loss that the limit bears to the required amount: the coinsurance penalty. On homeowners forms the same idea appears as the 80% insurance-to-value condition that decides whether you get replacement cost.

The formula

Payment = (amount of insurance carried ÷ amount required) × loss, minus the deductible. Required amount = coinsurance percentage × the property’s value (replacement cost or actual cash value, whichever basis the policy uses). The penalty applies to partial losses; on a total loss you simply receive the limit.

Worked example

A church sanctuary with a replacement cost of $2,000,000 insured for $1,200,000 under an 80% coinsurance clause. Required: $1,600,000. A $300,000 roof and water loss is paid at $1,200,000 ÷ $1,600,000 = 75%: $225,000, less the deductible. The $75,000 difference is the coinsurance penalty, and the building was still $800,000 underinsured for a total loss.

Homeowners policies: the 80% condition

The HO-3 loss settlement clause pays replacement cost on the dwelling only if the Coverage A limit is at least 80% of the full replacement cost at the time of loss. If it is less, the policy pays the greater of actual cash value or the proportion of replacement cost that the limit bears to 80% of value. It is a coinsurance clause under another name, and after the construction-cost increases of 2021–2024 many Florida and New Jersey homes are under it without the owner knowing. See ACV vs. RCV.

How to challenge a coinsurance penalty

Dispute the valuation. The carrier’s replacement-cost figure is an estimate; a contractor’s or appraiser’s valuation at the time of loss can be lower.
Check the basis. If the policy settles at actual cash value, the required amount is 80% of ACV, not of replacement cost, which is a much lower bar.
Check for agreed value or waiver. Many commercial policies carry an agreed value option that suspends coinsurance for the policy year, or a coinsurance waiver for small losses.
Check the date. Value is measured at the time of loss, which matters if a building was mid-renovation or partly vacant.

Florida and New Jersey

Neither state prohibits coinsurance on commercial property. Florida’s valued policy law, §627.702, requires payment of the full policy limit on a total loss to a building from a covered peril, regardless of value, so coinsurance in Florida bites only on partial losses. New Jersey has no valued policy law; policy terms control. Condominium associations in both states should check the master policy for coinsurance, because §718.111(11) in Florida requires full insurable value and a penalty on a partial loss falls on the association and its owners.

Frequently asked questions

Does coinsurance apply to my homeowners policy?

Not by that name, but the 80% insurance-to-value condition in the replacement-cost loss settlement clause works the same way. Below 80% of replacement cost, you lose full replacement cost on partial losses.

How do I avoid a coinsurance penalty?

Insure to at least the coinsurance percentage of the building’s current replacement cost, review the limit every renewal against construction costs, and on commercial policies ask for the agreed value option.

Is the coinsurance penalty applied before or after the deductible?

The proportion is applied to the loss first, then the deductible is subtracted. Applying the deductible first and then the percentage shortchanges the claim.

Can the penalty be waived after a loss?

Only by the carrier. The argument is usually over the valuation: if the building’s replacement cost at the time of loss was lower than the carrier claims, the penalty shrinks or disappears.

Replacement cost value (RCV) is what it costs to repair or replace damaged property with new materials of like kind and quality today.

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Ordinance or Law Coverage

Ordinance or law coverage pays the increased cost of repairing or rebuilding damaged property to comply with current building codes, including demolition of undamaged portions that code requires you…

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Recoverable Depreciation

Recoverable depreciation is the money your insurer withholds from a replacement-cost claim payment until you repair or replace the damaged property.

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Policy Exclusions

A policy exclusion is a provision that takes a cause of loss, a type of property, or a situation out of coverage that the insuring agreement would otherwise provide.

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If this is your loss, call Homeland before you talk to the insurance company: Florida (305) 783-3777, New Jersey (732) 517-3777, 24 hours. A licensed public adjuster reviews the claim for free and calls you back right away. No Recovery, No Fee.

Sources

This article is for general information only and is not legal or insurance advice. Statutes, regulations and policy wording change, and how they apply depends on your own policy and the facts of your claim. Homeland Public Adjusters is a public adjusting firm, not a law firm.

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