Missouri Insurance Adjuster Practice Exam

Coinsurance is a type of deductible that encourages the insured to maintain sufficient coverage by requiring the insured to carry a minimum percentage of the value of the property insured. In the context of property insurance, coinsurance typically means that the policyholder must insure a minimum percentage of the property's value (often 80%, 90%, or 100%). If the policyholder fails to maintain this necessary coverage level and suffers a loss, a coinsurance penalty may apply, which can significantly reduce the claim payout.

This system incentivizes the insured to evaluate their needs and ensure they have adequate coverage in relation to the property's actual value. Encouraging policyholders to maintain proper coverage aligns their interests with those of the insurer and reduces the likelihood of underinsurance, which protects both parties in the event of a claim.

In contrast, other types of deductibles, such as fixed or percentage deductibles, do not inherently motivate the insured to maintain a certain level of insurance coverage as they simply dictate the amount that must be paid out-of-pocket before the insurance kicks in. A franchise deductible only applies to claims that exceed a specified threshold amount and does not provide the same level of encouragement to maintain coverage.