A coinsurance clause requires a homeowner to have what kind of insurance?

A coinsurance clause requires a homeowner to insure their property for a specific percentage of its replacement value, which is typically set at 80%. This means that to avoid penalties in the event of a loss, the homeowner must carry insurance equal to at least 80% of the property's replacement cost. The rationale behind this requirement is to ensure that the homeowner is adequately protected and to discourage underinsurance.

If a homeowner falls short of this threshold and files a claim, they may receive reduced compensation based on the ratio of the amount they insured to the amount required. Therefore, insuring at least 80% of the replacement value helps to ensure that, in the event of a complete loss, the homeowner can rebuild or replace their property without facing significant out-of-pocket expenses. This is crucial in maintaining adequate financial protection against potential losses.