What is the purpose of coinsurance in insurance policies?

Coinsurance serves as a mechanism within insurance policies designed to share the financial responsibility between the insured and the insurer. By having a coinsurance provision, the policy ensures that the insured is only reimbursed for a certain proportion of coverage, typically after meeting a deductible. This structure incentivizes insured individuals to make cost-effective decisions regarding their use of medical services, thereby helping to control over-utilization of benefits.

When individuals are aware that they will bear some of the costs, they are more likely to seek necessary treatments rather than opting for unnecessary medical services. This shared financial responsibility helps to keep the overall cost of healthcare in check for both the insurer and the insured. Thus, the intent behind coinsurance aligns with prudent healthcare spending and management of insurance claims.