Call for a quote: 1-866-358-2860

Co-Insurance the least known exposure


Cost of being underinsured is too high ….look into your insurance policy today. What shocks me all the time is lack of awareness about Co-Insurance among the business community.
Since the concept of Co-Insurance is fundamental principle of property and business continuation insurance, it is imperative that you understand it before considering the amount of insurance you buy.

Co-Insurance is simply an AGEEMENT BETWEEN YOU AND THE INSURANCE COMPANY, WHEREBY YOU AGREE TO MAINTAIN CONVERAGE UP TP A STATED PERCENTAGE OF THE VALUE OF THE PROPERTY YOU WISH TO INSURE, (usually 80%,90% or 100%). As a result of this promise, a significant reduction in the rate is given.

Should a loss occur, consideration is then given to the amount of insurance carried compared to actual values prior to the loss. If the amount of insurance is within the agreed Co-Insurance percentage requirement, the loss is paid in full, up to the policy limits. If, however, the amount of insurance that you carry is below the agreed percentage, you and the company then share the loss.

EXAMPLE: Assume the value of the property you are insuring is $1,000,000.00 and the policy contains a 90% Co-Insurance clause; this means you should be carrying at least $900,000.0 coverage. If you were only carrying $500,000.00 coverage and had a loss of $400,000.00 the Insurance Company would pay based on the following formula:
—————————————————— X AMOUNT OF LOSS = CLAIM PAYMENT
———————————- x $400,000.00 = $222,000,00
$1,000,000.00 X 90%In this example, you would suffer a $178,000.00 Co-Insurance penalty!
A regular and careful review of the value of your insured property is essential if Co-Insurance penalties are to be avoided. We recommend your insurable values be frequently reviewed by a competent, independent appraisal company and must update with your insurance broker.​The main reasons why almost a very high % of businesses are under insured are:
1. Lack of a good inventory system for your stock
​2. Old machinery insured at 2nd hand equipment cost basis although you are covered for replacement cost and expect to replace the equipment in case of a loss
​3. Not reviewing your policies year after year and not updating your policies when you purchase some additional equipment mid term.
​4. Lack of awareness among business community
​Cost of being underinsured is too high ….look into your insurance policy today and discuss with your broker.

​This is just an simple explanation, speak to your broker or feel free to contact

Paul Mann
Aaxel Insurance Brokers Ltd.
905-362-8080 ext 301

Share this article


Recent posts


Popular categories

Frequently Asked Questions

How Does Cra Know if You Sold a House?

The Canada Revenue Agency (CRA) tracks house sales through...

What are the requirements for a custom Ontario license plate?

To obtain a custom Ontario license plate, you must...

Why Was the First Time Home Buyer Incentive Program Discontinued?

The first-time home buyer incentive program was discontinued due...

How Do You Get a M1 Licence in Ontario?

To obtain an M1 licence in Ontario, you must...

What is Proof of Vehicle Registration in Ontario?

Proof of vehicle registration in Ontario is a document...

Which License is Required for Motorcycle in Ontario?

In Ontario, a Class M license is required to...

How Long Does It Take to Get a Motorcycle License in Ontario?

In Ontario, the process to get a motorcycle license...

Can I Ride Motorcycle With M1 License in Ontario?

Yes, you can ride a motorcycle with an M1...