What does "coinsurance" mean in property insurance?

Coinsurance in property insurance refers to a provision that requires the insured to maintain a certain level of coverage in proportion to the total value of the insured property. This means that if a policyholder has a property valued at a certain amount, they must insure that property for at least a specified percentage of its value—often 80%, 90%, or 100%. If, at the time of a loss, it is found that the insured has not met this coinsurance requirement, they may face a penalty in the form of a reduced payout for claims. This system encourages policyholders to insure their properties adequately, ensuring they are not underinsured, which is in the interest of both the insurer and the insured.

The other options describe different insurance concepts that do not align with the specific definition of coinsurance. While discounts on premiums relate to various programs or methods for reducing costs, they do not involve the proportionate coverage requirement characteristic of coinsurance. Similarly, a clause that restricts coverage on specific items does not pertain to how coinsurance operates, nor does a requirement to insure property for its total value only, which disregards the necessity of maintaining a certain percentage of coverage relative to property value.