A coinsurance provision requires that a property be insured for at least ______ percent of its value.

• A. 80
• B. 60
• C. 90
• D. 100

Answer: (A)

Coinsurance in property insurance means you must insure a minimum portion of the property’s value to avoid a penalty on claims. The common minimum is eighty percent, so you should have coverage at least eighty thousand dollars for a property worth a hundred thousand. If you underinsure, the payout is proportional to the ratio of the amount carried to the required amount. For example, with an eighty percent requirement but only sixty thousand carried on a hundred thousand value, a forty thousand loss would be paid as (60,000 / 80,000) × 40,000 = 30,000, and you’d cover the remaining amount yourself. Meeting the eighty percent threshold means you receive the full eligible payout up to the policy limit. Sixty percent would underinsure more and incur larger penalties, while ninety or one hundred percent are higher thresholds some policies use, but eighty percent is the standard minimum.