Coinsurance

What Does Coinsurance Mean?

Coinsurance is a provision that basically splits the risk among the insured and insurer. It states that both parties will share the cost of the loss based on a predetermined fixed percentage of the coverage amount. It is a term used in various types of insurance.

It is also known as percentage participation.

Insuranceopedia Explains Coinsurance

In health insurance, if the policyholder files a claim on a policy with a coinsurance provision, the insurance company would pay a specific percentage of the approved amount that exceeds the deductible, while the policyholder would pay the remaining expenses, including any above the approved amount.

Similarly, in property insurance, it may apply to certain types of coverage, such as water or fire damage. Usually, the policyholder is required to shoulder 20% of the loss, even if the damage is less than the coverage amount. For instance, even with $100,000 of fire coverage, a policyholder whose home suffers $50,000 worth of fire damage would still be liable to pay $10,000 or 20% of it.