Property Insurance Basics and Policy Structure
Domain 2 tests the structure of a property policy and how limits, deductibles, and coinsurance interact. Oklahoma candidates must read a declarations page and a loss settlement clause without guessing.
Policy anatomy
- Declarations: named insured, location, limits, deductibles, forms.
- Insuring agreement: the promise to pay for covered loss.
- Conditions: duties after loss, appraisal, suit limitation, cancellation.
- Exclusions and definitions narrow or explain coverage.
- Endorsements amend the policy and prevail over conflicting form language.
Coinsurance
A coinsurance clause requires the insured to carry a limit at least equal to a stated percentage of the property's value. If not, the insurer pays only the proportion of the loss that the carried limit bears to the required limit, never more than the policy limit. The formula is: (limit carried ÷ limit required) × loss, then subtract the deductible.
Worked example
Building value $200,000; 80% coinsurance; limit carried $80,000; loss $50,000; deductible $1,000. Required limit = $160,000. Payment before deductible = ($80,000 ÷ $160,000) × $50,000 = $25,000. After deductible = $24,000.
Traps
Coinsurance is not a deductible. Do not apply a coinsurance penalty where the form uses agreed value or no coinsurance clause. Do not subtract the deductible before applying the coinsurance percentage. Do not ignore blanket limits, specific limits, or ordinance or law exclusions.