coinsurance

Coinsurance is a form of cost sharing in many insurance policies. It requires the insured to pay a share of the costs of covered services after any deductibles have been met, expressed as a percentage. It is distinct from a fixed copayment and from the deductible, which is the initial amount the insured must pay before benefits apply.

In health insurance, after the deductible is satisfied, the plan typically pays a defined percentage of covered expenses, and the insured pays the remainder as coinsurance. A common arrangement is 80/20, where the insurer covers 80 percent and the patient 20 percent of allowed charges. There may be an out-of-pocket maximum that limits how much the insured pays in a policy year; after reaching it, the plan usually covers 100 percent of eligible costs for covered services. Some services may be exempt from coinsurance or subject to different rules, and coinsurance can apply to prescription drugs or specific services.

In property and casualty insurance, coinsurance is used differently. It is a clause that encourages the policyholder to insure to a specified percentage of the property's replacement value. If the insured carries less coverage, claims may be reduced proportionally. For example, if the policy requires 80 percent of replacement value and a $40,000 loss occurs with only $60,000 coverage of an $80,000 value, the payout may be proportionally reduced to reflect underinsurance.

Overall, coinsurance is a common mechanism to share risk between insurer and insured, with exact terms varying by policy and jurisdiction.