If you do not carry at least 80% of the full cost to replace the home immediately before the loss, the coinsurance penalty applies.

For example: "Your home's estimated replacement value (RCV) is $100,000. The co-insurance clause requires you to carry at least $80,000 (80% of your home RCV). If you bought $40,000 homeowners insurance policy and a loss occurs the insurance company would pay half of any home loss less homeowners policy deductible, so if your homeowners insurance coverage had a $500 deductible and your home suffered a $10,000 covered loss, your homeowners insurance policy would only pay $4,500.”