Coinsurance Penalty Calculator

About this calculator

Most commercial property policies carry a coinsurance clause requiring the owner to insure the property to at least a set percentage of its replacement value — commonly 80%, 90% or 100%. If the property is underinsured relative to that requirement, the insurer does not pay the full loss; instead it applies a coinsurance penalty formula: payout = (amount of insurance actually carried ÷ amount of insurance required) × loss, minus any deductible.

Insurance adjusters and commercial property owners run this calculation after a partial loss to understand why a claim check came back smaller than expected — the penalty applies proportionally even when the loss itself is far below the total insured value, which surprises many policyholders who assume being "somewhat insured" means being fully covered for a small claim. Reviewing this before a loss occurs, at renewal time, is the standard way to check whether a policy limit needs raising to match current replacement cost.

This calculator takes your property value, policy limit, coinsurance percentage, loss amount and deductible, and returns the real payout you would receive under the coinsurance clause.