The 80/20 co-insurance clause in Panama fire insurance is a policy condition that requires you (the insured) to carry coverage for at least 80% of the property’s value. If the insured fails to do so, they will be responsible for a proportionate share of the loss.
How It Works:
The insured must maintain coverage of at least 80% of the property’s replacement cost.
If the insured does not meet this minimum requirement, they will be penalized when a claim is made.
The insurer will only pay a proportional amount of the loss, calculated using the following formula:
Example:
- Property Value: $100,000
- Minimum Required Insurance (80%): $80,000
- Actual Insurance Purchased: $60,000
- Fire Damage Claim: $20,000
Since the insured only purchased $60,000 instead of the required $80,000, the insurer will apply the co-insurance penalty:
$60,000 divided by $80,000 X $20,000 = $15,000.
Because you only insured 3/4 of the property’s value, you get 3/4 of the loss’s value.
- The insurance company will pay $15,000.
- The insured bears $5,000 out-of-pocket.
Key Takeaways:
- Always insure at least 80% of the property’s value to avoid penalties.
- If underinsured, the policyholder must share in the loss based on the coverage shortfall.
- The higher the underinsurance, the greater the out-of-pocket cost in case of a claim.
Would you like help calculating co-insurance for a specific scenario?
WhatsApp or call Kevin at +507-6674-1063
WhatsApp or call Carmen at +507-6613-1063, Direct 322-1605
Email: panasurance@gmail.com