The coinsurance clause nobody explains.

Coinsurance is one of the most consequential clauses in a commercial property policy, and one of the least discussed at the point of sale.

Here's the mechanic. Most commercial property policies require the building to be insured to a set percentage of its actual replacement cost, commonly 80, 90, or 100 percent. If it isn't, the coinsurance clause reduces every claim payment, not just total losses, by the same percentage the building is under-insured. A building insured for 60 percent of what an 80-percent-coinsurance clause requires will see roughly a 25 percent penalty applied to every covered claim, large or small, for as long as the under-insurance persists.

This is easy to end up in without ever making an active decision to under-insure. Construction costs rise. A building's insured value gets set once, at a policy's inception, and simply renewed at the same number for years while materials and labor costs climb. By the time of a loss, the insured value can be meaningfully behind the actual rebuild cost, and the coinsurance penalty applies whether or not anyone intended it that way.

The fix is not complicated: an accurate replacement-cost valuation, updated periodically rather than left untouched at renewal after renewal, and, where available, an agreed-value endorsement that waives the coinsurance penalty entirely in exchange for that accurate valuation being locked in.

This clause rarely gets explained because it rarely comes up before a claim. It should come up before one.