What is a coinsurance clause?

A coinsurance clause is a type of insurance contract provision that requires an insured person to cover a certain percentage of any claim expenses. In the state of Arizona, this clause is typically specified in a property insurance policy. This clause helps an insurer to prevent potentially large insured losses by requiring the insured to share in the costs of a claim. For example, if a home insurance policy in Arizona includes a coinsurance clause of 80%, the policyholder will be responsible for the first 80% of losses. The insurance company would then pay the remaining 20%. This requirement may encourage policyholders to insure their property for its full value, as the company would not be bound to payout coverage above what the insured has purchased. Ultimately, the coinsurance clause is meant to benefit both the insurer and the policyholder. The insurance company avoids large losses, while the policyholder is incentivized to purchase appropriate insurance. It is important to note that when a coinsurance clause is included in an insurance policy, the policyholder may face additional out-of-pocket expenses if their coverage does not meet the required amount.

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What is a coinsurance clause?

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