Coinsurance clause
Updated for plan year 2026
In plain terms
A coinsurance clause requires you to insure your home to at least a set percentage of its full rebuild cost, commonly 80%. If your dwelling limit falls below that threshold, the insurer can pay partial claims only in proportion, so underinsuring reduces payouts on everyday claims, not just total losses.
A plain example
Your home costs $400,000 to rebuild but you insure it for $280,000 (70%, below the 80% requirement). A $40,000 kitchen fire claim could be reduced proportionally, leaving you to cover thousands you assumed were insured.
Why it matters
The coinsurance clause is why underinsuring the dwelling hurts even on small claims, not just a burn-to-the-ground loss. Insuring to at least the required percentage of rebuild cost keeps claims paying in full.
A common point of confusion
People think a low limit only matters for a total loss. Coinsurance penalizes partial claims too, which are far more common.