Rainbow Ranche Collection

Newspaper clipping titled "Co-insurance" [unknown] [date unknown]

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 Co-insurance
It has been suggested to me that
I take a policy including a coinsurance clause. Is this advisable? Just how does the thing
work out?
The co-insurance clause amounts
to an agreement between the insured
and the company that the insured
will maintain insurance equal to
80%, 90% or 100%, as the case may
be, of the value of the property
covered, and failing to do so shall
himself bear such portion of any
loss as the insurance lacking would
have paid if in force.
Because of the extreme unlikelihood that your building would be a
complete loss in any fire, the insurance company makes a substantially
higher profit on, for instance, the
second $1,000 coverage than it does
on the first $1,000. By sharing the
risk with you, it is able to give you
protection at substantially lower
rates than for ordinary fire coverage.
For 80% co-insurance there is a reduction from the ordinary premium
of around 15%.
On a full 100% co-insurance clause,
for instance, if the insured maintains concurrent insurance equal to
the total value, the insurance pays
sall of any loss; if less than the value,
then it pays proportionately less of
the loss. The 80% clause is the
same, merely reducing the amount
required from 100 % to 80%. Thus,
if the insured maintains concurrent
insurance equal fo 80% of the value,
the insurance company pays all of
any loss (up to the face of the
policies).
To take a concrete example, say
your property to be insured is worth
$7,500. On the 80% clause it should
be covered for $80% or $6,000. But
assume you carry only $5,000, then
you are entitled to collect no greater
proportion of any loss than the total
insurance ($5,000) bears to 80%
($6,000) of the'actual value ($7,500).
In other words, the insurance company pays 5/6th of the loss, you pay
l/6th. If you carried $6,000 insurance, which is 80% of the value, then
you are entitled to collect the whole
loss.
- in 1,1^

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