City of Edmonton

The Co-Insurance Policy

Do you have a co-insurance clause? If yes, an Appraisal for Insurance Purposes is essential to ensure adequate coverage. If underinsured while in a co-insurance clause, the results could be financially shocking.

Without a “Stated Amount” insurance policy, you could be co-insured. Most insurance companies have a 90% co-insurance policy. Under a 90% co-insurance clause you would have to insure a $1,000,000 building for $900,000. If you have a $100,000 loss, the insurance company will pay you the full $100,000. However, if you have a $1,000,000 loss, the insurance company would only pay you $900,000. This would result as follows:

If however, the current building cost is $1,500,000 and you are only insured for $900,000, and you have a $100,000 loss, the insurance company would pay the following:

As you can see, this $100,000 loss would end up costing you $33,333. This scenario would have been avoided with an up to date insurance appraisal to ensure adequate coverage.