Which type of insurance policy requires the insured to maintain a specified percentage of coverage to avoid penalties?

The coinsurance policy is designed to encourage policyholders to insure their property to a specified percentage of its value, usually 80%, 90%, or 100%. If the insured fails to maintain the required coverage, they may face penalties in the event of a claim, which can result in reduced payouts. This mechanism is in place to ensure that policyholders do not underinsure their properties, maintaining a level of coverage that reflects its actual value.

In contrast, an actual cash value policy pays out based on the current market value of the insured item, factoring in depreciation. A replacement cost policy covers the cost of replacing damaged or destroyed property without depreciation, but it does not involve the coinsurance requirement. Liability policies, while important for protecting against legal claims, do not deal with property valuation and coinsurance provisions. Thus, the coinsurance policy stands out as the correct answer, as it specifically addresses the need for maintaining a set percentage of coverage to prevent penalties during claims.