Last updated 2018-10-18

Co-insurance calculation

Guidelines on when co-insurance applies to a claim, and the estimator must perform a calculation.

Calculation

An estimator or appraiser determines if co-insurance is applicable, and uses Co-insurance calculation, which only displays on a ClaimCenter claim when a declared value policy is in effect.

Co-insurance for material damage applies when the

declared value of the vehicle is less than 90 percent of the actual cash value (ACV), and
ACV exceeds the maximum value of the vehicle rate group declared value range.

Example of co-insurance calculation

Scenario: Mr. X has a motor home insured with a declared value, as follows:

Item	Amount
ACV of vehicle and equipment	$40,000
Declared value policy amount	$30,000
Maximum value of the vehicle rate group declared value range	$35,000
Amount of loss	$5,500
Amount of deductible	$300

To determine whether co-insurance applies:

Determine	Calculation
Is the declared value less than 90% of ACV?	The declared value policy of $30,000 divided by the actual value ACV of $40,000 equals .75 or 75%. Result: Yes, the declared value is less than the required 90%.
Does ACV exceed the maximum value of the declared value range?	Yes, the ACV of $40,000 exceeds the maximum value of the vehicle rate group declared value range of $35,000.
Determination: Mr. X is a co-insurer.	$5,500 (amount of loss) x .75 (percentage result of declared value) equals $4,125 (insured portion of the loss) The $300 (amount of deductible) must be subtracted from $4,125 (insured portion of loss) equals $3,825 (net claim payable).

Determine

Calculation

Is the declared value less than 90% of ACV?

The declared value policy of $30,000 divided by the actual value ACV of $40,000 equals .75 or 75%.

Result: Yes, the declared value is less than the required 90%.

Does ACV exceed the maximum value of the declared value range?

Yes, the ACV of $40,000 exceeds the maximum value of the vehicle rate group declared value range of $35,000.

Determination: Mr. X is a co-insurer.

$5,500 (amount of loss) x .75 (percentage result of declared value) equals $4,125 (insured portion of the loss)

The $300 (amount of deductible) must be subtracted from $4,125 (insured portion of loss) equals $3,825 (net claim payable).

Note: If the ACV had been $35,000, Mr. X would not be a co-insurer, even though the declared value is less than 90 percent of the ACV at 85.7 percent. This is because the ACV is within the declared value range.