What coinsurance means
Many commercial, farm and association policies include a coinsurance clause. It requires you to insure a building for at least a set percentage of its value, often 80%, 90% or 100%. If you carry less, the policy may pay only a proportion of the loss. The common formula is: limit carried ÷ limit required × loss − deductible, capped at the limit.
Why it matters in South Dakota
Construction costs have climbed in recent years, and many farm buildings, shops and older commercial properties are still insured at values set long ago. After a big hail or wind loss, the coinsurance clause can catch owners by surprise. Rural buildings scheduled one by one on a farm policy deserve a close look.
Using the coinsurance penalty calculator
- Enter what it would cost to rebuild the building today.
- Choose the coinsurance percentage from your policy and enter the limit you carry.
- Enter the amount of loss and your deductible.
- Compare the payment with and without the penalty, and note the limit needed to avoid one.
Some policies use agreed value or waive coinsurance. Your policy wording controls. Figures are illustrative.
Questions about this tool
Does coinsurance apply to homeowner policies?
Homeowner policies usually handle underinsurance through replacement cost conditions instead, which work differently. Coinsurance is more common on commercial and farm forms.
Can appraisal fix a coinsurance problem?
Appraisal can value the loss and sometimes the property, but it cannot change the limit you carried.
What is an agreed value endorsement?
An endorsement in which the insurer and owner agree on a value in advance, which typically suspends the coinsurance clause for that period.