What is the term for the method requiring the insured to insure at least 80% of the property's value in exchange for a premium discount?

The term describing the method that requires the insured to insure at least 80% of the property's value in exchange for a premium discount is called the coinsurance clause. This provision is designed to encourage policyholders to insure their properties for an appropriate amount relative to their actual value. By doing so, they qualify for reduced premiums while ensuring that they have adequate coverage in the event of a loss. The fundamental principle behind this clause is that insurance is most effective when the insured values reflect the actual risk; thus, insuring at least 80% mitigates underinsurance and promotes greater equity among policyholders.

The coinsurance clause typically stipulates that if the insured fails to meet the minimum requirement of 80% coverage, they may face penalties when it comes time to settle a claim. This means that they may only receive compensation for the actual cash value of the property rather than the replacement cost, which can significantly affect their financial outcome in the event of a disaster.

In contrast, the loss settlement clause refers to how the insurer will pay for a covered loss. The standard mortgage clause pertains to the rights of mortgage holders in the context of insurance policies, ensuring they can directly receive some of the insurance proceeds in the event of a loss to protect their interest in