Coinsurance
What Is Coinsurance?
Coinsurance is a rule in commercial property insurance that says you have to insure your property for at least a certain percentage of its full value.
If you insure it for less, your insurance may only pay part of a claim, even on smaller losses. Coinsurance only applies to pet care pros with some form of commercial property insurance, like a business owners policy (BOP). (If that’s not you, you can skip this one.)
If your policy has an 80% coinsurance requirement, that means you’re expected to insure your stuff for at least 80% of what it would cost to replace it. If you guess the value of your stuff to be low to save money and insure it for less, you might not get a full payout if something happens.
- Coinsurance is a minimum requirement. This doesn’t work quite the same way as it does in health insurance, where coinsurance means sharing the bill. This is also a rule about how much coverage you have to carry to be fully covered.
- Underinsuring can reduce your claim check. Even if you don’t have a total loss, your check might not be as big as it would be if you’d met your coinsurance requirement.
- It applies to property coverage. This applies to things like Business Personal Property, not General Liability.
- Correct values now prevent surprises later. A quick inventory or appraisal today is easier than arguing over numbers after a fire or break-in.
Paws-on-the-Ground Example: How Coinsurance Works
Let’s say:
- Your grooming tools and dryers are really worth $20,000
- Your policy has an 80% coinsurance requirement (meaning you should insure them for at least $16,000)
- You only insure them for $10,000
- A fire at your grooming salon causes $8,000 in damage
Because you insured your tools for less than 80% of their value, the insurance company may only pay part of that $8,000. That’s called a coinsurance penalty.
Coinsurance vs Deductible: What’s the Difference?
These two terms often get mixed up, so let’s quickly clarify them:
- Deductible: The amount you pay first before insurance responds
- Coinsurance (in property insurance): A rule that reduces your payout if you didn’t insure your property to the required percentage.
Both can apply to the same claim, and both could lead to a check that’s smaller than expected if you’re not aware of them. Knowing what these terms mean (and whether your policy has them) can help you budget correctly.
How to Avoid a Coinsurance Penalty
Here’s how a claim could play out depending on whether or not you met your coinsurance requirement.
Swipe →
| Scenario | Value of property | Limit you chose | Coinsurance requirement | Claim amount | Approx. payout result |
|---|---|---|---|---|---|
|
You meet the coinsurance requirement |
$20,000 |
$20,000 |
80% |
$8,000 |
Insurance pays up to $8,000 (minus deductible) |
|
You underinsure (coinsurance hit) |
$20,000 |
$10,000 |
80% |
$8,000 |
Insurance pays a reduced amount due to a coinsurance penalty (less than $8,000, minus deductible) |
The good news: coinsurance penalties are preventable. Take these steps to value your pet business property accurately and get the most from a claim payout:
- Inventory your equipment once a year. List your grooming tools, crates, dryers, work laptops, point-of-sale systems, and other business property, and update it with anything new.
- Estimate replacement cost, not what you paid years ago. Prices change over time. Think: what would it cost me to buy a new one today?
- Update limits when adding equipment or expanding services. New tubs, grooming tables, pooper scooper vans, or computers? That should be reflected in your coverage.
- Review your policy’s coinsurance percentage. 80% and 90% coinsurance rates are common.
- Ask questions before renewing. If you’re not sure how to calculate value, your insurer can help you estimate.
Big Takeaway
It’s easy to buy this, upgrade that, over time without thinking about it. Before long, you’ve invested a lot in your pet gear. Coinsurance exists to make sure you set a realistic, reasonable value on your stuff and know how much it’s really worth.
Insuring your property correctly and re-evaluating its value often helps protect your investment and keep your pet business healthy.
Keep Sniffing Around
- Deductible
- Limit of Insurance
- Replacement Cost (RCV)
- Actual Cash Value (ACV)
- Business Personal Property
- Equipment and Inventory Coverage
Kyle Jude | Program Manager
Kyle Jude is the Program Manager for PCI, where he helps design and maintain liability coverage specifically for pet professionals. With 10+ years of insurance industry experience, he works closely with carriers, underwriters, and compliance teams to ensure PCI coverage stays accurate, responsive, and relevant to real-world risks. At home, he puts that same expertise to use wrangling his four beloved dogs
Kyle Jude is the Program Manager for PCI, where he helps design and maintain liability coverage specifically for pet professionals. With 10+ years of insurance industry experience, he works closely with carriers, underwriters, and compliance teams to ensure PCI coverage stays accurate, responsive, and relevant to real-world risks. At home, he puts that same expertise to use wrangling his four beloved dogs