6 ADJUSTINGTODAY. COM A D J U S T I N G T O D A Y million—the amount necessary to avoid the coinsurance penalty. The next step is to divide the amount of insurance carried by the insured by the amount of insurance that should have been carried: $6 million divided by $8.1 million equals .7407, times the amount of loss ($3 million), equals $2,222,100— the amount payable prior to applying the $10,000 deductible. The net loss payable is then $2,212,100, which is less than the maximum coverage available under the margin clause ($2.4 million) and therefore the amount owed by the insurer. As a result, the insured is coinsured, subject to a penalty of $187,900. On the other hand, had the insured reported $3 million for the building destroyed by fire and at least $8.1 million in insurance, there would not have been a coinsurance penalty. In that case, the maximum “One of the most important points to remember about margin clauses is that it can be difficult to determine whether this provision even applies. It is sometimes couched within the policy provisions. ”
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