Insurance To Value

Insurance companies expect that you will insure your property for the current value. This becomes very important when you are considering reconstruction costs. If your own a building and it will cost $100,000 to rebuild and you choose not to insure it for the full amount then you can pay a penalty if there is a claim. Most insurance policies will require that you insure a minimum of 80, 90 or 100% of the actual value of the property. This is called co-insurance. For example: a building valued at $100,000 with an 80% co-insurance clause would require that you insure for a minimum of $80,000. If you decide no, that you will only insure $40,000 then you now become partially self-insured. You are acting as co-insurer for 50% of any claims. If the claim is $10,000 then it will automatically be reduced to $5,000 then the deductible will be applied. If the entire building burns then the most you would receive would be $40,000 less the deductible. This should be discussed with your agent or broker.