What is Co-insurance and how does it work?
Co-insurance is one of the least Understood and confusing concepts, yet it is this is all business insurance policies. Below is our quick 101 is Co-Insurance.
Co-insurance is a clause used by insurance companies is trading all insurance policies That include property (Such as buildings, contents, stock contractor's tools / equipment) and business interruption (Such as gross ent, gross earnings, loss of profits).
This clause requires That Policyholders insure Their property revenue stream gold (with respect to business interruption) to an Appropriate value (shown as a percentage) and que la insurer Receives a fair premium for the risk (whether it was replacement cost basis or an actual cash value basis - the lath Being subject to depreciation).
on the insurance policy, co-insurance is Expressed as a percentage. Reviews The most common clauses require Policyholders to insure to 80%, 0% and 100% of the true value.
The operation of Co-insurance is best illustrated through an example and by process of ict formula.
EXAMPLE:
Value of Building: $ 1,500,000
Co-insurance Requirement: 0%
Required Minimum of Insurance: $ 1,350,000
Actual Amount of Insurance Carried: $ 00,000
Amount gold Value of Loss (example: Fire): $ 0,000
CO-INSURANCE FORMULA
(Actual Amount of Insurance CARRIED) X Value of Loss = Amount of Recovery
(Amount of Insurance REQUIRED)
Based on the formula and example Above:
($ 00,000) X $ 0,000 = $ 400,000
($ 1,350,000)
So, the policyholder Would Be penalized $ 0,000 (Value of Loss - Amount of Recovery). based on the formula Above selon the co-insurance clause
If you, as a policyholder choose to insure to less than the amount required by the co-insurance clause (as Stated on your policy), you are Essentially Agreeing to retain share of the risk (and absorbed a portion of Any Losses) Rather than transfer it to the insurance company.
you can apply the formula to-any Above Stated coverage qui caries is Co-insurance clause on your policy in order to confirm your limits and values are adequate. There's nothing worse than finding out you're on the wrong side of the Co-insurance calculation after-a loss or claim OCCURS!
It's always best to contact your insurance broker and confirm how Co-insurance is Applied to your policy and how it affect you May; your broker will Provide you with steps to Ensure That your property and / or revenue stream is insured to a fair value
Download Co-Insurance Infographic
Blog Author: Aliya Daya |. Commercial Account Executive | Rogers Insurance Ltd.
0 Komentar