What is the coinsurance requirement for builders risk coverage?

The coinsurance requirement for builders risk coverage is generally 100%. This means that the insured must ensure that their policy covers the full value of the property being constructed. The rationale behind the 100% requirement is to provide sufficient coverage for the building during its construction phase, which is typically more vulnerable to risks such as theft, vandalism, and natural disasters.

By requiring this level of coverage, insurance companies aim to mitigate the risk of underinsurance, which could lead to significant financial losses for both the insurer and the insured should a claim arise. Coverage at 100% ensures that the full rebuilding cost is covered, without any penalties or reductions in claims due to insufficient insurance amounts.

In contrast, other percentages, such as 75% or 50%, would mean that the coverage does not meet the necessary threshold to fully protect the investment in the property under construction. Not having a coinsurance requirement at all would leave significant gaps in coverage, increasing the risk for the insurer, and potentially exposing the insured to higher out-of-pocket costs in case of a loss.