Free tool

Coinsurance Penalty Calculator

Enter the property's value, the coinsurance percentage, the insurance you carried, the loss, and the deductible to see whether the coinsurance requirement was met - and exactly what the policy pays if it wasn't.

Built for Texas P&C exam prep and policyholders

The policy and the loss

On the valuation basis above - replacement cost or actual cash value.

What the policy pays

Enter the policy and loss details to see the payment.

Coinsurance is one of the most-tested calculations on a property and casualty licensing exam - Encodr keeps formulas like this one fresh with spaced-repetition review.

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How the coinsurance formula works

A coinsurance clause requires you to carry insurance equal to at least a set percentage of the property's value. If you do, covered losses are paid in full up to the limit, minus the deductible. If you don't, the payment is reduced in proportion to how far short you fell: payment = (insurance carried ÷ (coinsurance % × property value)) × loss − deductible, never more than the policy limit and never more than the loss. Exam prep often shortens this to "did over should": what you did carry, divided by what you should have carried.

Worked example: a building worth $500,000 on a replacement cost basis has an 80% coinsurance clause, so the owner should carry $400,000. They carry $300,000. A $100,000 loss with a $1,000 deductible pays ($300,000 ÷ $400,000) × $100,000 − $1,000 = $75,000 − $1,000 = $74,000. Had they carried $400,000, the same loss would have paid $99,000 - the $25,000 difference is the coinsurance penalty, and the owner absorbs it.

Note that the penalty applies to partial losses too, not just total losses, which is the point most people miss. Policy wording varies, so for a real claim the policy form itself controls. If you're studying for the license exam, see the Texas property and casualty exam deck, and use the exam pass score calculator to see how many questions you can miss.

From the blog

How the coinsurance penalty works

The property coinsurance formula (did over should, times the loss, minus the deductible) with worked examples, plus the traps P&C exam questions set.

Read →

Texas P&C license exam: what's actually on it

The Texas General Lines P&C exam has two halves: national insurance knowledge and Texas-specific law, scored together. Here's how they break down.

Read →

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