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Understanding Co-Insurance


Understanding Co-insurance

In the last few weeks, I have had the privilege of getting on the road to see clients again. I have finally seen the new shops, refurbished hopper bins & fertilizer tanks, house additions, office remodels and an intentionally crooked garden shed that takes the gold medal for lock-down projects that I’ve observed.  If you have added, expanded or upgraded your operations during the past year, it is important that you advise your broker, so you don’t get caught up in the wrong side of the math in a co-insurance calculation.

One of the most challenging pieces of a property insurance policy to understand is the concept of co-insurance. The premise behind the co-insurance clause is to make sure that insurance companies are collecting fair premium for the risk they are insuring. Simply explained, co-insurance applies to partial losses where the value to replace the item damaged is less than the required total percentage amount required under the insurance policy contract.

This is a complex concept as the coinsurance calculation is not completed when the policy is purchased, but rather at the time of loss. In a year like this past year, valuations seem to be fluctuating on a weekly and sometimes even daily basis, creating a varying need for coverage limit to avoid a co-insurance penalty being applied to a claim.

This requirement can be the cause of frustration for consumers when they are not properly educated on the responsibilities and requirements of choosing their insurance limits carefully. Here are a few solutions to co-insurance that you can implement to avoid a potential issue.

  1. Review your coverage annually with your broker. Ask them questions about what they are seeing for costs to buildings, equipment, tools, bins etc. to make sure your limits are sufficient. Brokers have access to software that can be useful in estimating rebuilding costs.
  2. Talk to a contractor about the going price for building in your area. Construction costs are not what they were even a few years ago, so a current conversation will give you an idea of valuation.
  3. Ask about stated amount coinsurance for your policy – insurers are more and more willing to provide this condition on commercial insurance policies, and there are indications that some are willing to consider it on farm policies now as well. This simply removes the co-insurance clause from your policy as determined by professional evidence, such as the broker software mentioned above, that the limits on your policy are sufficient.

When choosing your insurance broker, make sure that you are working with someone who will educate you on the details within your insurance policy.  At Rempel Insurance Brokers Ltd, we work hard to make sure our clients know their coverage and their options.

Be sure to seek advice and purchase insurance from those who understand your business!


David Schmidt is an Account Executive and Rempel Insurance Brokers in Morris, MB, specializing in insuring farms and businesses across Manitoba and Saskatchewan. 

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