How does co-insurance (for fire) work?

I am very confused by this. Our homeowners association carries $2,225,000. for our 4 unit building in Malibu. This is adequate for us to rebuild here at $300.-400 per square foot.

Well, it's not going to replace a $200 a square foot building with a $400 sq ft building - you DON'T get an upgrade.

Your agent can explain coinsurance.

But, if you have a 100% coinsurance clause, here's how it works: If the building costs $200,000 to replace, and you only carry $100,000 on it, you're 50% underinsured. So, the insurance company will pay 50% of any loss.

If there's a $50,000 loss - the insurance company will pay $25,000, less your deductible.


**edited to correct math. Sorry. Brain freeze.**

And your question is.......................?

amount of coverage/ (divided by) amount required...coinsurance clause determines the amount required. So for example the insurance company says your replacement value is 2,000,000 and you have a 80 % coinsurance clause
so you must carry as a minimum 1,600,000 to avoid penalties on partial losses.

so as an example if you only carried 1,400,000 and your requirement was determined to be 1,600,000 then they could pay 14/16ths of a partial loss. The rate is less for higher agreed amounts ie the more closer you are to 100% insured to value the lower the actual fire rate

..most losses are partial a total loss is very rare on a 2,000,000 type property
Certainly you should be able to have the insurance company waive the coinsurance clause and issue an agreed amount type policy or one that has a guaranteed replacement cost clause...they may insist on 100% to value limit...rest assured its not anything too exact as costs change from time to time. I would think replacement costs may be down in your neck of the woods.

300 to 400 a foot is a pretty big range but both seem sort of high to me. Call some contractors and get a rough estimate on total replacement cost and go from there.

your question really doesn't give enough info. are you in a condo? townhome? apartment? usually a homes assoc will only carry insurance to cover common property, property that everyone owns in common. usually the structure or building and any other permanent structure on the property along with liability for the common areas. generally the homeowner is responsible for insuring everything else. it varies according to the homes assoc contract. it's very important that you read and understand it. a common rule of thumb is that you are responsible for insuring the wallboard and everything inside. some say a renters policy is enough but that won't cover the fixtures and anything permanently attached to the walls, ceiling and floor, ie: kitchen cabinets, toilet, light fixtures, etc. if that be the case than you need a condo policy.