Coinsurance clauses, explained | Kin insurance glossary (2024)

FAQs

Coinsurance clauses, explained | Kin insurance glossary? ›

A coinsurance clause is a provision that requires you to carry coverage equal to 80% of your home's value. The date of issue is the day your insurance company creates your insurance policy.

Coinsurance is an insured individual's share of the costs of a covered expense (it usually applies to health-care insurance). It is expressed as a percentage. If you have a "30% coinsurance" policy, it means that, when you have a medical bill, you are responsible for 30% of it. Your health plan pays the remaining 70%.

Coinsurance is a clause used in insurance contracts by insurance companies on property insurance policies such as buildings. This clause ensures policyholders insure their property to an appropriate value and that the insurer receives a fair premium for the risk. Coinsurance is usually expressed as a percentage.

The purpose of coinsurance is to have equity in ratings. If your insured meets the coinsurance requirement, the insured receives a rate discount. The coinsurance clause helps to ensure equity among all policyholders.

The 100% coinsurance clause means you need to cover 100% of the value of your business personal property for a claim to be fully paid. If you only cover a portion of the value, the claim will not pay the full value of loss.

Let's say your home's replacement cost value is $200,000, and your coinsurance requirement is 80%. You need to insure your home for at least $160,000 to avoid the penalty. Please note: Insuring your home for $160,000 satisfies the coinsurance clause, but it may leave you short when you need to replace your property.

A deductible is the amount you pay for coverage services before your health plan kicks in. After you meet your deductible, you pay a percentage of health care expenses known as coinsurance. It's like when friends in a carpool cover a portion of the gas, and you, the driver, also pay a portion.

The simple formula for calculating the coinsurance penalty is: amount of insurance in place / Amount of insurance that should have been in place x the loss, less any deductible is the amount actually paid.

Usually, the co-pay amount is paid before the deductible clause kicks in. The coinsurance clause in the policy document specifies the limit to which your insurance company will pay if you have opted for another insurance policy that covers the same event.

Coinsurance is a portion of the medical cost you pay after your deductible has been met. Coinsurance is a way of saying that you and your insurance carrier each pay a share of eligible costs that add up to 100 percent. The higher your coinsurance percentage, the higher your share of the cost is.

Why do insurance companies use coinsurance? ›

Coinsurance Concept

In health insurance, it may be used as a means of risk sharing between insured and insurer as a means to lower the insured's monthly premium cost. For example, covered expenses above the deductible may be shared 80 percent insurer/20 percent insured until a policy-stated total is reached.

Coinsurance is a way your insurance company splits the cost of your care with you. For example, they might pay 80% of the bill while you pay 20%. That means the insurance company pays $160, and you pay the rest, $40. Here's the good news: Coinsurance sometimes even “kicks in” before you meet your deductible.

The amount of money not covered by a patient's health insurance that the patient pays for each health care service.

The coinsurance clause of your homeowners policy requires you to carry coverage of at least 80 percent of your home's total value if you want to receive full replacement cost for any losses—partial or full—you suffer.

Simply put, 80/20 coinsurance means your insurance company pays 80% of the total bill, and you pay the other 20%. Remember, this applies after you've paid your deductible.

Example of commercial property coinsurance

The coinsurance provision requires a minimum of 80% of the value to be insured. A hurricane blows through, causing $300,000 in damages. The insurer inspects the property and values it at $600,000, meaning the full $300,000 would be paid by the insurance company.

Medical Definition

coinsurance. noun. co·​in·​sur·​ance ˌkō-ən-ˈshu̇r-ən(t)s, -ˈshər- also -ˈin-ˌshu̇r-, -ˌshər- : health insurance in which an insurer requires the insured to pay a fixed percentage of the cost of medical expenses after the deductible has been paid and with the insurer to pay the remaining expenses.

Which of the following best describes coinsurance? Coinsurance is the agreed upon proportions for which the insurer and the insured share payment of certain benefits or services under the policy coverage.

“If you rarely go to a hospital or doctor, higher coinsurance and deductibles with lower premiums might be a better decision,” says Gross. But if you have a chronic health condition or see doctors very frequently, you might want to have a lower coinsurance and deductible with a higher premium.