In property insurance, what is the co-insurance requirement typically set at?

The co-insurance requirement in property insurance is typically set at 80% of the property's value. This standard means that in order to avoid penalties in the event of a claim, a policyholder should insure their property for at least 80% of its actual cash value or replacement cost.

The rationale behind this requirement is to ensure that property owners maintain a sufficient level of insurance coverage to protect against partial loss. If a property is underinsured and a claim occurs, the insurance company may only pay out a portion of the loss based on the ratio of the coverage to the required amount. For example, if a property is worth $100,000 and is only insured for $60,000, the insured would not only risk facing higher out-of-pocket expenses due to underinsurance but might also face reduced payouts when making a claim.

Setting the co-insurance requirement at 80% encourages property owners to purchase adequate coverage, thus promoting greater financial protection and stability when loss events occur.