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<br />City of Santa Ana <br />Coinsurance Illustration <br />Coinsurance Formula: <br />Insurance Carried ÷ Insurance Required x Loss - Deductible = Settlement <br />Example of Coinsurance formula applied to a hypothetical loss situation: <br />Property Value <br />Coinsurance Amount <br />Deductible <br />= <br />= <br />= <br />= <br />= <br />= <br />$1,000,000 <br />80% <br />$500 <br />Insurance Required <br />Insurance Carried <br />Loss Incurred <br />$800,000 (80% of $1,000,000) <br />$400,000 <br />$200,000 <br />Settlement determined by applying the coinsurance formula: <br />$400,000 <br />(Insurance Carried)x $200,000 (Loss) - $500 (Deductible) = $99,500 Settlement$800,000 <br />(Insurance Required) <br />Note: If the property in the above example is insured for the full insurance required ($800,000), the insured will recover <br />$199,500. In the above example, the insured will suffer a $100,000 penalty for not being insured to the proper limit. <br />37 <br />  <br />  <br />City Council 15 – 41 8/5/2025