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How this is calculated

BOP Property Limit Check

Applies the coinsurance formula to a partial loss: the ratio of the limit you carry to the limit the clause requires, multiplied by the loss and capped at the limit carried, to illustrate how much of an ordinary claim the policy would pay.

Step by step

  1. Required limit = replacement value × the coinsurance percentage (80%, 90% or 100%).
  2. Building and business personal property are each tested against their own requirement.
  3. When the limit carried meets or exceeds that requirement, the loss is paid in full up to the limit.
  4. When it falls short, the payment is reduced by the ratio: payment = loss × (limit carried ÷ limit required).
  5. The payment never exceeds the limit carried, whatever the ratio.
  6. The illustrated loss is applied to whichever property falls furthest short of its requirement. When both meet it, the loss is applied to the building where a building value is entered and to business personal property otherwise.
  7. When the coinsurance percentage is unknown, the assumed percentage shown in the assumptions (80% by default) is used.

The formula

Payment = min(loss × min(1, limit carried ÷ (replacement value × coinsurance %)), limit carried). Reduction = loss − payment.

Assumptions and their default values

Some of these change with the state you select.

Coinsurance assumed when not known 80%

What this method does not show

Nothing about the method is hidden. It deliberately omits the deductible, which would reduce the payment further, so the figure isolates the coinsurance effect rather than blending two separate mechanics.

Important disclosures

  1. This tool is educational only. It illustrates potential exposure using the assumptions shown — it is not insurance advice, a price, or an offer of coverage, and it does not determine whether any coverage amount is right for you. Policy language varies; review your actual policy and discuss your situation with a licensed insurance professional.
  2. Coinsurance is applied at the time of loss against the actual replacement value then, not the value entered here. Values move with construction costs, so a limit that met the clause at renewal may not meet it at the claim.
  3. This illustration applies the clause to building and business personal property separately, which is how most policies are written — but some apply it on a blanket basis across locations, which produces different results.
  4. Deductibles, agreed-value or replacement-cost endorsements, inflation-guard provisions, and peril-specific sub-limits all affect a real settlement and are not modelled here.
  5. A professional property valuation, arranged through your agent, is the basis for any change to a commercial property limit — this illustration is not.

Now that you can see the method, the numbers are worth a conversation.

Back to BOP Property Limit Check