InsuranceClaimsTools

Claim Shortfall Calculator

Work out why a settlement came back below the repair estimate, and how much of the gap is a coinsurance penalty for insuring below value.

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Free · No sign-up · Runs in your browser

When a settlement comes back well below the repair estimate, there are only a few possible explanations: depreciation, the deductible, an exclusion, a coverage limit, or a coinsurance penalty. The last one is the least understood and often the largest.

A coinsurance clause requires the property to be insured to a stated percentage of its replacement cost. Fall below it and the insurer pays partial losses in proportion - on claims nowhere near the policy limit. This calculator shows exactly how much of a shortfall that accounts for.

Your numbers

Results update as you type. Nothing is sent anywhere.

Result

Estimated payout

$87,500

Coinsurance penalty

$30,000

Requirement status
Coverage is below the requirement - a penalty applies
Coverage required
$480,000
Coverage carried
$360,000
Shortfall in coverage
$120,000
Payment ratio applied
75%
Deductible applied
$2,500
Your total cost
$32,500

This is an estimate based on the values you entered. Actual premiums, coverage, eligibility and pricing vary by provider and by individual circumstances.

A coinsurance clause requires you to insure at least a stated percentage of replacement cost. Fall short and the insurer pays claims in the same proportion, even on a partial loss well below the limit.

This is one of the most expensive surprises in property insurance, because it applies to ordinary small claims, not just to total losses.

How to use the claim shortfall calculator

  1. Enter the full replacement cost of the property, not its market value.
  2. Enter the coverage actually carried on the policy.
  3. Enter the coinsurance percentage the policy requires - it is on the declarations page.
  4. Enter the loss amount and the deductible, then read the payout and the penalty.

What people use this for

  • Understanding a settlement that came back far below the estimate.
  • Checking whether a policy currently satisfies its coinsurance requirement.
  • Deciding how much to raise a limit after construction costs rose.
  • Reviewing a landlord or commercial property policy, where coinsurance is near universal.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

Insured at 60% of value

A property costing $600,000 to rebuild, insured for $360,000 against an 80% requirement, with a $120,000 loss and a $2,500 deductible.

Estimated payout
$87,500
Coinsurance penalty
$30,000
Payment ratio applied
75%

Insured to the requirement

The same property insured for $500,000, which exceeds the 80% requirement.

Estimated payout
$117,500
Coinsurance penalty
$0
Requirement status
Coverage meets the coinsurance requirement - no penalty

The proportion, not the limit

The penalty divides the coverage carried by the coverage required and pays that share of the loss. Insured for $360,000 against a $480,000 requirement, the ratio is 75%, so a $120,000 loss pays $90,000 before the deductible.

The $30,000 difference has nothing to do with the policy limit, which was never approached. It is purely a penalty for insuring below the required value, and it applies to every partial loss, however small.

How properties drift below the line

Construction costs rise. Renovations add value. Inflation guard endorsements help but are not always present, and are not always enough. Meanwhile the policy renews at broadly the same limit each year with nobody re-checking the rebuild cost.

The practical protections are an accurate replacement cost estimate, an inflation guard endorsement, and an extended replacement cost endorsement that pays a stated percentage above the limit. All three are cheaper than discovering the ratio during a claim.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

  • Required coverage = replacement cost × coinsurance percentage. The payment ratio is coverage carried ÷ required coverage, capped at 100%.
  • The payout is the loss × that ratio, less the deductible, capped at the coverage carried.
  • Policy wording governs. Some forms waive coinsurance on small losses, and agreed-value endorsements suspend it entirely.
  • All figures are estimates produced from the values you enter. This site has no rate feed and no carrier data, so it cannot quote or price a policy.
  • Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator provides an estimate based on the information you enter. Actual insurance premiums, coverage, eligibility and pricing vary by provider and individual circumstances.

This website is not an insurance company, an insurance agency or a licensed broker. It does not sell insurance, does not provide insurance quotes, and is not authorised to give advice about which policy you should buy.

No result produced here is an offer of insurance or a guarantee of coverage. Only a licensed insurer or agent, working from your verified details, can quote or bind a policy.

Frequently asked questions

Does a coinsurance penalty apply to a total loss?

The effect is usually invisible on a total loss because the limit caps the payout anyway. It is on partial losses that the penalty becomes obvious.

Can I fix this after a claim?

No. The requirement is tested at the time of loss. Raising the limit afterwards protects future claims only.

How do I know if my policy has one?

The declarations page states the coinsurance percentage where one applies. Commercial and landlord policies almost always have one; homeowner policies vary.

What is an agreed value endorsement?

An endorsement where the insurer agrees a value in advance and waives the coinsurance clause, usually supported by a valuation.

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