What is the primary aim of Coinsurance clauses in property insurance?

The primary aim of coinsurance clauses in property insurance is to encourage policyholders to insure their property for its full value. This mechanism is designed to promote adequate coverage and ensure that policyholders do not undervalue their property. When a property is covered for less than its actual value, coinsurance clauses may penalize the policyholder during a claim, leading to a reduced payout. By requiring a certain percentage of the property’s value to be insured, coinsurance clauses incentivize individuals to reflect the true worth of their assets in their coverage, thereby protecting both the insurer and the insured from potential losses due to underinsurance. Ensuring full coverage helps maintain the financial health of the policy and minimizes the risk for insurers.