What is 'coinsurance'?

Coinsurance refers to a cost-sharing arrangement where both the insurer and the insured share the expenses of a covered loss based on a predetermined percentage. In this arrangement, after the insured has met their deductible, the costs of a claim are split between the insurance company and the policyholder. For example, if a health insurance plan has an 80/20 coinsurance clause, the insurer will cover 80% of the eligible expenses while the insured is responsible for paying the remaining 20%. This mechanism helps to manage healthcare costs and encourages insured individuals to utilize services judiciously, as they have a financial stake in the expenses incurred.

This concept is crucial in insurance, particularly in health and property coverage, as it affects how much an individual will pay out-of-pocket for claims beyond their deductible. Coinsurance also plays a role in determining how policies are structured and can significantly influence premium costs and the overall affordability of insurance products.