What You Don’t Know Can Cost You
It wasn’t the storm that broke the business. It was the policy they didn’t understand.
A Florida business owner thought they were playing it safe. Their commercial building was worth $1,000,000. They insured it for $500,000, figuring that would more than cover any damage from hurricane season.
Then the storm came. $300,000 in damage. Roof gone. Equipment ruined. Doors shut.
But instead of a $300,000 payout, the insurer cut a check for $187,500.
The reason? A fine-print clause called coinsurance—and it just cost them $112,500 out of pocket.
The True Cost of Skipping Coverage: A Case in Point
Let’s break down how coinsurance works in real numbers:
- Building value: $1,000,000
- Insured amount: $500,000
- Storm damage: $300,000
- Coinsurance requirement: 80%
Here’s the math the insurer uses:
- Required coverage: 80% of $1,000,000 = $800,000
- Actual coverage ratio: $500,000 ÷ $800,000 = 62.5%
- Covered loss: $300,000 × 62.5% = $187,500
That means the business eats $112,500—despite paying premiums and thinking they were covered.
This isn’t rare. It’s routine.
Coinsurance: What It Means and Why It Matters
Coinsurance is a policy clause that penalizes you for underinsuring your property. In most cases, you’re required to insure your property for a certain percentage of its replacement cost—often 80%, 90%, or even 100%.
If you insure for less than that amount, the insurer reduces your payout proportionally—even if the loss is unrelated to the shortfall.
Why this blindsides property owners:
- Premium pressure: Everyone’s trying to keep costs down—but trimming coverage can backfire.
- Old appraisals: Replacement costs have surged. If you haven’t updated your valuation in a while, you might already be underinsured.
- Legalese overload: Coinsurance requirements are often buried in pages of fine print few people read.
A Brightspeed Insurance Report (2024) found that over 40% of commercial policyholders failed to meet their coinsurance requirements, reducing their claim payouts by an average of 28%.
Real Losses, Real People: When Coinsurance Hits Home
A community café in Sarasota insured their space for $600,000. The property was worth closer to $800,000. A hurricane swept through, leaving them with $200,000 in damages. Because of a 75% coinsurance clause, they received just $160,000. The remaining $40,000 came out of their operations budget.
They laid off staff. Delayed reopening. Customers moved on.
Tiger Tip: Underinsuring commercial property is like betting against your own business. Coinsurance means the less you insure, the more you pay when disaster hits.
How Widespread Is This Problem?
Here’s what the data tells us:
- Around 40–50% of policyholders don’t meet their coinsurance clause requirements.
- On average, they lose 20–30% of what they would’ve recovered.
- Many end up paying $50,000 to $150,000—or more—out of pocket.
Global Risk Insights (2025) reports that in hurricane-prone states, underinsurance averages 30% below required replacement cost values. That makes coinsurance clauses particularly brutal during storm season.
The Clause That Could Kill Your Claim
Coinsurance is legal fine print with high-stakes consequences. Here’s how to stay ahead of it:
- Know your building’s value: Construction costs fluctuate. Don’t rely on old appraisals. Reassess annually or after major renovations.
- Insure above the minimum threshold: If your coinsurance clause requires 80% coverage, aim for at least 90% to be safe.
- Get professional help: Work with a public adjuster or property damage attorney to review your policy and help prevent future claim denials.
- Update proactively: Any time your property value changes, update your coverage. A stitch in time saves nine.
Are You Ready for the Next Storm?
Storms are getting stronger. Costs are getting higher. And policyholders are feeling the squeeze.
Coinsurance isn’t just a technicality—it’s a real threat to your recovery. It can mean the difference between rebuilding and going under.
At Tighe P.A., we’ve seen this mistake too many times—and helped business owners recover what they’re owed. Whether your insurer is denying your claim, underpaying it, or pointing to coinsurance as the reason, we can help you fight back.
Let’s Review Your Policy Before It’s Too Late
If you have questions about coinsurance—or you’re in the middle of a property damage claim and getting stonewalled—now is the time to act. Understanding your rights could mean tens or hundreds of thousands of dollars in recovery.
We’re here to help.
Call 1-855-LOSS-PRO or book a free consultation at TighePA.com. Let’s protect what you’ve built—before the next storm hits.
Relevant Resources and Citations
- Brightspeed Insurance Report, 2024 (placeholder)
- Global Risk Insights, 2025 (placeholder)
- Insurance Information Institute: https://www.iii.org
- FEMA Hazard Maps: https://hazards.fema.gov
- Tighe P.A. Commercial Claims Overview: https://www.tighepa.com
