Waiver Of Coinsurance Clause

DEFINITION of 'Waiver Of Coinsurance Clause '

Language in an insurance policy that says the insurance company will not require application of the part of the policy that divides responsibility for an insured loss between the insurance company and the policyholder. The coinsurance clause is usually only waived for small losses, such as losses under $10,000. Coinsurance helps to guard against the moral hazard that the policyholder will not purchase sufficient insurance to cover a total loss in order to save money on insurance premiums.

BREAKING DOWN 'Waiver Of Coinsurance Clause '

A coinsurance clause requires the policyholder to insure a certain minimum percentage of the property's actual value, such as 80%. Thus, if a building was worth $200,000, the property owner would have to purchase $160,000 of insurance on it. In the event of a total loss, the policy would pay $160,000 and the building owner would be responsible for the remaining $40,000. If, however, the property were really worth $300,000, the building should have been insured for at least 80% or $240,000. Since the owner is only insured for $160,000 when he should be insured for $240,000, he is underinsured and would face a penalty in the event of a loss, unless he has a waiver of coinsurance clause.

RELATED TERMS
  1. Coinsurer

    One of the parties that provides additional insurance to the ...
  2. Agreed Amount Clause

    A property insurance provision in which the insurer agrees to ...
  3. Co-Insurance

    A co-sharing agreement between the insured and the insurer under ...
  4. Cooperation Clause

    An insurance contract clause that requires the policyholder to ...
  5. Valuation Clause

    A provision in certain insurance policies that specifies the ...
  6. Waiver Of Inventory Clause

    A clause in an insurance policy that says that the insurance ...
Related Articles
  1. Personal Finance

    Understanding Co-Insurance

    Co-insurance is a cost-sharing agreement between an insurer and an insured party.
  2. Personal Finance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  3. Personal Finance

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  4. Personal Finance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  5. Personal Finance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  6. Personal Finance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  7. Markets

    Mutual Vs. Publically Traded Insurance Companies

    Should you buy your insurance policy from a mutual or publically traded insurance company?
  8. Retirement

    Medicare Part D Is Changing How You Pay for Drugs

    As the price of prescription medication rises and the population ages, insurers are looking for ways to cut costs. That's where coinsurance comes in.
  9. Personal Finance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  10. Personal Finance

    Dividend-Paying Whole Life Insurance: What to Know

    Many whole life insurance policies pay dividends. Here are what policyholders need to consider.
RELATED FAQS
  1. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  2. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  3. Why do insurance policies have deductibles?

    Learn the basic concept of an insurance deductible and why they mitigate moral hazards and provide financial viability to ... Read Answer >>
  4. How can I invest in a mutually owned insurance company?

    Read about the difference between mutual and stock insurance companies, including how to become a de facto investor of a ... Read Answer >>
  5. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  6. Should I be worried about my insurance company?

    Yes, policyholders should also take a serious look at the financial stability of their current insurance company especially ... Read Answer >>
Trading Center