The Builders Risk Coverage Form assumes which coinsurance provision?

• A. 90%
• B. 100%
• C. 80%
• D. 70%

Answer: (B)

Coinsurance in property insurance means you must carry insurance equal to a specified percentage of the property’s value to receive full payment for a loss. The Builders Risk Coverage Form uses a 100% coinsurance requirement, so you’re expected to insure the project for its completed value. If you underinsure, the loss is paid only in proportion to the ratio of what you carried to what you were required to carry. For example, if the completed value is $1,000,000 and you have $1,000,000 of coverage, you get full payment (subject to limits and deductible). If you only have $800,000, a $100,000 loss would be paid as $800,000 / $1,000,000 × $100,000 = $80,000. The idea is to prevent under-insuring a project during construction; other percentages would impose penalties different from the standard 100% in builders risk.