Property and valuation
Coinsurance
Coinsurance is a property condition requiring the insured to carry a limit equal to a stated percentage of the property’s value, reducing the recoverable amount when the limit carried falls short.
Reviewed September 2026 · Exam outline effective September 1, 2026
In plain English
Coinsurance exists because most losses are partial. Without it, an insured could carry a small limit, pay a small premium, and still be fully paid for likely partial losses, which would be unfair to those insuring to value.
The clause works as a ratio: the limit actually carried divided by the limit required. When the ratio is less than one, the recoverable loss is reduced proportionally before the deductible and the limit are applied.
Why the exam tests it
Coinsurance is one of the few property calculations with a defined sequence, so it tests whether a candidate applies the steps in order rather than guessing.
The trap
Applying the deductible before the coinsurance ratio, or applying the ratio to the limit rather than to the loss. Order of operations is the whole point of these questions.
Worked example
A building worth 500,000 carries a coinsurance requirement of 80 percent, so the required limit is 400,000. If only 300,000 is carried, the ratio is three-quarters, and a covered partial loss is reduced to three-quarters before the deductible and limit are applied.
Full course
Study this with the complete Texas All-Lines course
This concept is covered in depth in the "Limits, Deductibles, Coinsurance & Other Insurance" lesson, alongside every other topic on the content outline.
Related terms
- DeductibleA deductible is the amount of a covered loss the insured absorbs before the insurer pays, which keeps small claims out of the system and holds premium down.
- Policy limitA policy limit is the maximum amount an insurer will pay for a covered loss under a particular coverage, stated on the declarations page.
- Actual cash valueActual cash value is a settlement method that pays the value of damaged property at the time of loss, typically reflecting replacement cost reduced by depreciation.
- Business income coverageBusiness income coverage pays for lost net income and continuing normal operating expenses when a covered cause of loss suspends operations during the period of restoration.
Compared side by side
- Coinsurance vs. DeductibleBoth coinsurance and deductibles reduce what an insurer pays, which is why candidates confuse them. They operate on entirely different logic and at different points in the calculation.
- Total Loss vs. Partial LossWhether a loss is total or partial changes the settlement approach, the documentation, and which provisions matter most. It is a threshold classification rather than a detail.
Exam topics using this term
- Coinsurance and commercial property valuation on the Texas All-Lines examThe coinsurance formula, why it penalizes underinsurance on partial losses, and the order of operations the exam expects.
- Coverage analysis under time pressureCompressing the four-step coverage sequence into something you can run reliably on a timed exam.
Sources
- Pearson VUE — Texas Department of Insurance licensing exams
Scheduling, candidate handbook, content outlines, test-center rules, and application timing. Reviewed 2026-07-21.
Requirements, fees, forms, exam details, and deadlines can change. Verify the current rule with the linked authority before scheduling, applying, renewing, or handling a real claim.
For exams on or after September 1, 2026. If your exam is scheduled earlier, use the outline that applies to your exam date. Texas Exam Academy is independent exam preparation and is not affiliated with or approved by the Texas Department of Insurance or Pearson VUE. Verify current eligibility, fees, forms, and requirements with the responsible authority.