What does the coinsurance clause in property insurance require from the policyholder?

The coinsurance clause in property insurance requires the policyholder to insure the property for a specified percentage of its actual cash value, typically ranging from 80% to 100%. This mandate is crucial because it helps ensure that the policyholder has adequate coverage in the event of a loss. If the property is underinsured, and a claim arises, the insurance payout may be reduced in proportion to the amount of coverage maintained compared to the required coverage percentage.

This clause protects both the insurer and the insured by promoting responsible insurance practices. By obligating policyholders to insure their property to a specific percentage of its value, it reduces the likelihood of significant financial losses during a claim incident, ensuring that the policyholder shares in the risk by maintaining sufficient coverage.