Which of the following best describes the concept of coinsurance in property insurance?

The concept of coinsurance in property insurance is best described by the notion that it represents an agreement to insure at least a specified percentage of the property's value. This is a critical aspect of many property insurance policies, as it requires the insured to maintain a certain level of coverage relative to the property's total value. If the insured property is underinsured—meaning it has less coverage than the agreed coinsurance percentage—the insurer may reduce the claim payout in the event of a loss, based on this ratio.

For example, if a property is valued at $100,000 and has an 80% coinsurance requirement, the property owner must have at least $80,000 in coverage. If they only carry $60,000, in the event of a loss, the insurer may only pay a portion of the claim calculated based on this underinsurance. This mechanism encourages policyholders to adequately insure their properties, ultimately benefiting both the insurer and the insured by ensuring that there is sufficient coverage in the event of a claim.