Commercial property coinsurance penalty calculator.

Formula and worked example

Formula: required limit = replacement value × coinsurance %; ratio = carried ÷ required, capped at 1; payment = lesser of (ratio × loss − deductible) and the limit; penalty = loss − deductible − payment when the limit does not bind, which equals loss × (1 − ratio).

Worked example: replacement value $1,000,000 with 80% coinsurance requires $800,000. Carrying $600,000 gives a ratio of 0.75. On a $100,000 loss with a $1,000 deductible, payment is 0.75 × $100,000 − $1,000 = $74,000, and the coinsurance penalty is $100,000 − $1,000 − $74,000 = $25,000.

Source: the California Department of Insurance Commercial Insurance Guide describes coinsurance as a clause that defines the amount of each loss the company pays according to “the amount of insurance carried, divided by the amount of insurance required,” and notes that replacement cost valuation is subject to coinsurance while agreed value waives the penalty. The guide gives the carried-over-required principle only; the order of the deductible and the limit cap follow the common standard clause and are an assumption here.

Limits: this tool does not model agreed value, margin clauses, blanket or per-item limits, or other policy terms. Everything is calculated in your browser; nothing is sent anywhere.