What does the coinsurance clause require from the insured?

The coinsurance clause in an insurance policy is designed to encourage the insured to maintain a level of insurance that is proportionate to the actual value of the property they wish to protect. This clause typically requires the insured to carry a certain percentage of the property's value, which is often set at 80%, 90%, or 100%. If the insured fails to meet this requirement, they may face a penalty in the event of a loss, such as a reduction in the claim payment.

By mandating that the insured carry a specified percentage of the property's value, the coinsurance clause helps to ensure that the policyholder has adequate coverage to fully protect their assets. It discourages underinsurance, which can lead to significant financial loss in the event of a claim. This requirement serves to balance risk between the insurer and the insured, ultimately making the insurance market more stable.

Other options, while related to insurance, do not reflect the function of the coinsurance clause. For example, paying a higher premium may be a consequence of additional coverage but is not specifically a requirement of the coinsurance clause itself. Similarly, insuring only specified items does not align with the concept of coinsurance, which applies to the total value of the property being insured rather than individual