Coinsurance Target Calculator

Coinsurance clauses require you to insure to a percentage of replacement cost — typically 80% or 90%. Under-insure and the insurer applies a penalty proportional to the gap. This calculator computes required coverage, the gap, and what a claim would actually pay out after the coinsurance penalty.

Replacement cost

Current coverage limit

Coinsurance %

Hypothetical loss

Deductible

Required coverage to meet coinsurance

$1,600,000

Coinsurance factor

87.50%

Penalty applied to claim

$37,500

Actual claim payout (after ded)

$252,500

Gap below required

$200,000

How the math works

Coinsurance requires you to insure to a percentage of replacement cost — typically 80% or 90%. Underinsure and the insurer applies a penalty to every claim: claim × (coverage / required). An 80% coinsurance property insured at 70% of RC takes a 12.5% cut on every claim.

Always insure to or above the coinsurance threshold. The premium savings from under-insurance are tiny compared to the penalty on a real claim.

How to Use

Enter replacement cost and current coverage limit.
Enter coinsurance percentage from your policy (usually 80 or 90%).
Enter hypothetical loss and deductible.
Read required coverage, coinsurance factor, and claim payout.

Frequently Asked Questions

How coinsurance penalty works?

Formula: claim × (actual coverage / required coverage). If required is $1.6M but you carry $1.4M, your factor = 87.5%. A $300K claim pays $262.5K before deductible instead of $300K.

How to avoid penalty?

Insure at 100% of RC even if coinsurance is 80%. Or use 'agreed value' endorsement that waives coinsurance in exchange for a pre-agreed valuation.

Replacement cost vs ACV?

Replacement cost = what it costs to rebuild new. Actual cash value (ACV) = RC minus depreciation. RC is more expensive premium but much better coverage at claim time. For income property, always use RC.