Definition
A property-insurance clause that penalizes claims if the HOA insured its property for less than a required percentage of value.
Coinsurance is a property-policy clause requiring the association to insure its property to a set percentage of its full value (often 80–100%). If the HOA is underinsured relative to that requirement, a coinsurance penalty reduces the claim payout proportionally — even for a partial loss.
The practical lesson: insure common property to adequate replacement value. Under-insuring to save on premiums can trigger a painful coinsurance penalty exactly when the community needs a full payout.