What is coinsurance? Commercial property owners, YOU need to know this!

​When it comes to commercial property insurance, coinsurance plays a crucial role in how expenses are shared between you, as the property owner, and your insurance company. Here's how coinsurance works in the context of commercial property insurance and how it can affect your business:

1. Deductible: Similar to other insurance types, your commercial property insurance policy will have a deductible. This is the initial amount you must pay before your insurance coverage kicks in.
2. Coinsurance Percentage: After you've met your deductible, coinsurance comes into play. It's expressed as a percentage, typically 80%, 90%, or 100% to value, and represents the portion of the covered property damage expenses you are contracted into paying premium for. Ex: your building is valued at $200,000 and you have agreed to 80% coinsurance, you need to be paying premium for $160,000. Making sure your building is valued correctly is crucial!
3. Covered Losses: Coinsurance applies to the losses or damages covered by your commercial property insurance policy. This can include damages caused by fires, storms, theft, vandalism, or other covered perils.
4. Out-of-Pocket Costs: Your out-of-pocket costs depend on the total amount of covered property damage expenses. If your coinsurance percentage is, for example, 20%, you will pay 20% of the costs, and your insurance company will cover the remaining 80%, up to the policy limit should there be a total loss.
5. Policy Limits: Your policy will have specific coverage limits. It's crucial to understand these limits because once the covered expenses exceed the policy limit, you may be responsible for additional costs incurring what is called a Coinsurance Penalty. 
6. Risk Management: Coinsurance is a factor to consider when managing the risks associated with your commercial property. You should assess the potential costs of property damage and ensure that your policy's coinsurance percentage aligns with your risk tolerance and budget. In plain English, you better make sure you have enough in savings to pay for the percentage and the deductible you have agreed to pay just in case there is a loss. 
7. Premiums: Commercial property insurance premiums are influenced by various factors, including the coinsurance percentage. Policies with higher coinsurance percentages (i.e. 80%) often have lower premiums, while lower coinsurance percentages (100%) may result in higher premiums. Balancing these factors is essential to find the right coverage for your business at an affordable cost.

​In summary, coinsurance in commercial property insurance determines how property damage expenses are shared between you and your insurer. Understanding your coinsurance percentage, policy limits, and how they affect your out-of-pocket costs is essential for making informed decisions about your commercial property insurance coverage, managing risks, and budgeting for potential property damage events.

---