Assume the following:
Value of the dwelling: $1,000,000
Coinsurance: 80%
Required Insurance: $800,000
Insurance limit carried: $500,000
Damage: $800,000
Divide the limit of insurance $500,000 by the Required Insurance $800,000 = 62.50% Recovery Percentage
Multiply the amount of damage $800,000 by the Recovery Percentage 62.50% = $500,000. The insured is paid the policy limit.
If the amount of damage is changed $700,000 the insured only recovers $437,5000.
So you don't need to have a total loss to recover the policy limit you need to have an 80% loss or 20% value remaining.
I am
not in the insurance business, but the sources I checked by googling "co-insurance clause" (
here,
here, and
here) all match the above explanation.
Dan
.
