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When you take out a commercial insurance policy for your business in Edmonton, you can anticipate a co-insurance clause (or clauses) to be included in the policy wording on property such as buildings, contents, stock or equipment, mobile equipment, tools and business interruption. If you file a claim and it is determined that you are underinsured, a co-insurance penalty can be applied which will reduce the amount of payment you receive in addition to your deductible. Your deductible and co-insurance penalty reduce the total insurance payment to you.

Co-insurance Defined

Co-insurance is a policy provision contained within an insurance policy, enforceable by law. It limits or reduces the amount payable to you in the event of a loss if it is determined that you are underinsured. If you do not insure your property or business assets to a required level, usually 80-100% of its value, a co-insurance penalty will apply that will reduce the amount of the claim payable to you. Co-insurance does not apply to property or business assets that are insured to current replacement cost value or in the event of a total loss.

The Purpose of a Co-insurance Clause

The purpose of a co-insurance clause is to encourage policy owners to insure their property to an appropriate value. It only penalizes you if you fail to have the proper amount of insurance in place when making a claim.

How It Works

In the event of a loss, you, as the policyholder, will need to make a formal claim to the insurer. If you did not purchase an adequate amount of insurance for the value of the property, then your claim is subject to a co-insurance penalty which could have a serious financial impact on your company.

For instance, a building valued at $1,000,000 replacement value with a co-insurance clause of 90 percent must be insured for no less than $900,000. If you choose to insure the building at a lesser value than what it is worth, then you agree to retain part of the financial risk associated with a loss instead of being fully compensated.


The formula for coinsurance is a follows:

(Amount of Insurance Carried / Replacement Cost Value of Property Insured) x Amount of Loss = Amount Paid

A customer insures their property for $500,000. After a fire loss of $100,000, it is determined that the replacement cost value of the property insured is $1,000,000 not $500,000. A 90% coinsurance clause would apply as follows:

($500,000 Amount Insured / $1,000,000 Replacement Cost Value) x $100,000 Loss = $50,000 Amount of loss paid to Insured

As the above example shows, the customer must pay 50% or $50,000 of the loss as they carried insufficient limits of insurance and failed to meet the provisions of the coinsurance clause. In order for the full amount of the loss to be paid the Insured would have had to carry 90% of the replacement cost value of the property or $900,000.

It is therefore extremely important to maintain adequate limits of insurance at all times. Should you make additional purchases or acquire more property throughout the year please contact your Insurance Broker to ensure you are adequately covered.

Determining the Value of a Claim

In arriving at a claim payment amount, the insurer must determine the claim value first. The value of an insured property, asset or service at the time of a loss may be determined by original receipt, business records, replacement cost, appraised value, or an expert’s report.

Where to Find the Co-Insurance Clauses

Co-insurance requirements are indicated as a percentage on the declaration page of your insurance policy, which has a list of coverages and the values you agreed to with your insurance broker. However, co-insurance clauses could also be found in the optional coverages in the body of the terms and conditions.

You may find a number of co-insurance clauses within the insurance policy for your business in Edmonton. The building, equipment, stock, business interruption and other related coverage can have different co-insurance percentage requirements.

Rights of the Policyholder

As the policyholder, you are protected by the Insurance Act of Alberta in the event there is no consensus over the calculation of the co-insurance penalty imposed by an insurance company. A dispute resolution procedure is available to you. You can submit expert reports and appraisals that support your claim calculations. The calculation of dollar value in the event of claim can be quite complex, however, and may require expert appraisers, accountants and other professional services.

Speak to an Insurance Broker in Edmonton about your Coverage

As a business owner, you should seek the advice of a qualified business insurance broker in Edmonton to determine the appropriate coverages and necessary limits that would best protect your business interests. Regular and timely communication with your insurance company will help to ensure that your business is insured to the appropriate value.

Contact us online for a free quote or by phone at 780-436-7880.

How an Insurance Broker Saves You Time and Money

Do you know the benefits of an insurance broker?

Suppose you’re looking for the best insurance coverage at the best rates in Edmonton. In that case, you’ll first want to understand the benefits of an insurance broker and how they can help protect you in all sorts of different situations – whether it be saving you money, time or giving you simple peace of mind.

What Are the Benefits of an Insurance Broker?

Here are some of the many benefits of an insurance broker.


1. Saves Time

An insurance broker does all the work for you, so you don’t have to spend your valuable time shopping around for insurance. Instead, you simply provide your broker with information about your needs, and they shop the markets on your behalf.


2. Saves Money

Insurance brokers work with many different partners to find the best deals on the insurance that works for you. They take all your needs into account and make recommendations that are in your best interest. They have relationships with many insurance partners and can negotiate competitive rates and discounts, saving you money in the long run.

3. Expert Knowledge and Advice

An insurance broker provides you with the support and expertise you need to find coverage that suits your needs. They work with various products and services to find the coverage that best suits you. In addition, they can draw from an extensive knowledge base and experience to advise you on the best options. 

Insurance Brokers provide expert and unbiased advice. A wealth of knowledge about coverage and market rates combined with expert risk assessment ensures your possessions and business are adequately protected. Whether you are looking into auto insurance rates, tenant insurance, or home insurance rates, your insurance broker can help you every step of the way.

You can utilize their expertise to quickly identify your options and rely on their unbiased advice to help you make the best-informed decision for your situation.


4. Working For Your Best Interests

Since insurance brokers do not work with one particular company, they have nothing to gain from recommending a specific product. The insurance company also pays them a standard commission. Thus, there is no financial incentive to choose one insurer over another.

Insurance brokers have your best interests in mind. You can count on them to find you the best rate possible, which can give you the peace of mind you need. You can rest assured knowing that if you ever need to file a claim, one of our brokers will be there by your side to guide you every step of the way. They act as an advisor on insurance-related matters. They will shop the market for the best coverage and rates for you. Since fulfilling your needs is their only priority, they will provide independent, unbiased advice on the right coverage for your situation.

5. Privileged access and rates

Insurance Brokers have access to a wide selection of the best insurance companies in the country. These insurance companies are only accessible by Insurance Brokers. They do not deal with the public directly or with Direct Writers. Brokers enjoy long-standing relationships with these insurance companies. Still, they do not have an affiliation with any specific insurer, enabling brokers to provide you with a broader range of options at competitive rates.


6. Transparency

Insurance brokers must give full disclosure about their compensation and its effect on your insurance premium.  They are also required to declare any financial links with specific companies that may be a conflict of interest, enabling you to make the best-informed decision.


7. Risk and Advocacy Experience

Extensive experience dealing with different clients and claim situations equips insurance brokers with a broader perspective on how to reduce your risk. Also, in the event of a claim, you can count on your broker to act as your advocate with the insurance company and handle your claim fairly and promptly.

Speak to MBS Insurance in Edmonton about your Coverage

Reach out to MBS Insurance today to determine your home, auto, and commercial coverage options. Over the past 45 years, our experienced team of insurance brokers in Edmonton has earned the trust and loyalty of our clients by delivering superior products and services. We understand your needs and provide you with the best protection and rates.

There are many benefits of an insurance broker. We can help you understand the intricacies of your insurance plan while saving you money at the same time. We are a trusted insurance provider in Edmonton and provide personal and commercial insurance policies to people living in Alberta. We offer the best rates on recreational, auto, property, commercial, and group insurance policies. 

Contact us online for a free quote or by phone at 780-436-7880.

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This article was originally published on October 7, 2016, and updated for 2021.