Coinsurance is the amount a policy holder is liable for after the deductible has been paid. Coinsurance is usually represented as a percentage, i.e. 80% insurance company/20% policy holder.

For example, with a policy that has a $500 deductible and 80%/20% coinsurance, a claim of $10,500 would result in:
  • Policy holder deductible - $500
  • Policy holder coinsurance - $2000 (20% of $10,000)
  • Insurance company coinsurance - $8000 (80% of $10,000)

Most policies also have a coinsurance limit, i.e. 80%/20%/$2000. In this case, the policy holder would pay the deductible, and 20% of the remaining costs, up to $2000. That's 20% of $10,000 in the example above, not 20% of $2000.

It is very possible for a policy to have 100% coinsurance, in which case the only cost to the policy holder is the deductible (barring any other limits that the policy may have of course). The point at which the policy holder stops paying and the insurance company covers 100% of the remaining costs is known as the out-of-pocket maximum.

Co`in*sur"ance (?), n. [Co- + insurance.]

Insurance jointly with another or others; specif., that system of fire insurance in which the insurer is treated as insuring himself to the extent of that part of the risk not covered by his policy, so that any loss is apportioned between him and the insurance company on the principle of average, as in marine insurance or between other insurers.


© Webster 1913

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