Why do I have to carry so much insurance on my property?

This is a great question, and one that our customers ask frequently:

Your policy contains what is called a coinsurance provision.  Coinsurance is essentially an agreement between you and the insurance company.  In exchange for your agreement to insure the property for at least a specified percentage of its actual value, the company agrees to issue the policy for a lower premium than it would charge for a policy without a coinsurance provision.  After a loss – even a small loss – if the amount of insurance on your property isn’t sufficient to satisfy your part of the agreement, then the insurance company can reduce the amount it would normally pay.

While it is your responsibility to establish the value of your property and select the amount of insurance for your policy, we can help with that decision and explain what you can do to avoid a loss penalty.

This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,500 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.