Coinsurance

What Does Coinsurance Mean?

Coinsurance is a provision that divides the financial risk between the insured and the insurer. It specifies that both parties will share the cost of a loss based on a predetermined fixed percentage of the coverage amount. This term is commonly used in various types of insurance.

Coinsurance is also referred to as percentage participation.

Insuranceopedia Explains Coinsurance

In health insurance, when the policyholder files a claim on a policy with a coinsurance provision, the insurance company will pay a specific percentage of the approved amount that exceeds the deductible, while the policyholder is responsible for the remaining expenses, including any costs above the approved amount.

In property insurance, coinsurance may apply to certain types of coverage, such as water or fire damage. Typically, the policyholder is required to cover a portion of the loss, such as 20%, even if the damage is less than the coverage amount. For example, with $100,000 of fire coverage, if a policyholder’s home suffers $50,000 in fire damage, they would still be responsible for paying $10,000, or 20% of the loss.