Principle of the Co-insurance Rule

Principle of the Co-insurance Rule

An insurance contract contains clauses of co-insurance rules based on various percentages (50%, 80%, 90% or 100%).

It is important for the insured to verify if the insurance limit on the assets written down in the contract match the percentage required by the insurer and of course, to know the percentage. This will prevent the insurer from having to pay for part of the loss in case of a partial loss.

No matter what the percentage is, there is an application method in the following equation:

Example of Compliance and Non-Compliance with the Co-Insurance Rule

We insure your building for which the reconstruction cost is 1 000 000$. Your insurance contract dictates a co-insurance rule of 80%. Following a partial fire, we estimate the damages are worth 200 000$. These two examples will help you understand the principle of the co-insurance rule:

Example 1: Compliance with the Co-Insurance Rule

You will be compensated at 100%, which corresponds to the total value of the damage.

Example 2 : Non-Compliance with the Co-Insurance Rule

Because the condition was not respected, you become co-insurer proportionally. Instead of being compensated at 100%, that is for 200 000$, you will receive a compensation of 100 000$.

In case of a claim, if you want to obtain satisfaction, check your insured values regularly. We also recommend you get an evaluation by a professional.