What is a co-insurance clause?

A co-insurance clause is a legal provision that requires a policyholder to maintain a certain amount of insurance coverage on their property. This clause is commonly used in insurance policies in Arizona. It helps protect the insurance company from losses resulting from underinsured property. Essentially, a co-insurance clause means that a policyholder must insure their property for a certain percentage of its Replacement Cost Value (RCV). For example, a policy might require an individual to insure their property for 80% of its RCV. This means that if a policyholder’s property is destroyed or damaged, they will receive a reduced amount of insurance payout if their coverage is below the minimum amount required by the co-insurance clause. The purpose of a co-insurance clause is to make sure that policyholders carry sufficient coverage to adequately protect their property. If a policyholder carries coverage significantly below the required amount, the insurance company would be unable to recoup the full amount of their losses in the event of a claim. By including a co-insurance clause in their insurance policies, insurance companies in Arizona are able to ensure that policyholders are carrying adequate amounts of coverage. If an individual does not maintain the appropriate coverage, they may be financially responsible for any additional losses their insurance company would have been able to cover if they had the sufficient coverage.

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What is a co-insurance clause?

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