What does the coinsurance clause in many insurance policies require from the insured?

The coinsurance clause is a key provision in many insurance policies, particularly in property insurance. It requires the insured to maintain a certain level of coverage relative to the total value of the insured property. The purpose of the coinsurance clause is to encourage policyholders to insure their property to an adequate value and to allocate risk fairly between the insurer and the insured.

When a policy includes a coinsurance requirement, the insured agrees to cover a portion of every loss when their insurance coverage falls below the stipulated coinsurance percentage. This means that if the insured has not purchased enough insurance—less than the required coverage threshold—they will have to absorb some of the costs of a loss out-of-pocket. For instance, if a property valued at $100,000 is insured for only $80,000, and the coinsurance requirement is 80%, the insured would only be compensated for a portion of any loss, reflecting their lower level of coverage.

In contrast, the other options do not accurately represent the intent or function of the coinsurance clause. For instance, expecting a flat fee per claim does not pertain to the concept of risk-sharing inherent in coinsurance. Coverage for all losses without deductibles contradicts the principle of shared responsibility in insurance. Lastly,