Coinsurance is an insurance term that describes sharing the burden of a loss between more than one party. Generally, it refers to the insured having to pay a certain amount of money, in conjunction with the insurance company, when a loss occurs. Coinsurance is an agreement that is common in many different types of insurance policies. When a coinsurance agreement is in place, the insured will have to pay a certain percentage of money when a loss occurs. Even though this sounds similar to a deductible, it is a different type of fee. You will usually have both a deductible and a coinsurance charge.

Health Insurance

One of the most common examples of coinsurance is in health insurance policies. With many health insurance policies, you have to pay a certain amount of money on large losses. Many people use the term coinsurance and copay as if they were the same thing. While they are very similar, they have different terms.

A copay is usually used when referring to a doctors appointment. This is a predefined amount of money that will be charged every time you visit the doctor. Coinsurance is generally not defined as a specific amount of money. Instead, you have to calculate coinsurance based on a percentage. For example, a common coinsurance percentage is 20 percent of costs, up to a certain maximum. If you had a bill for $10,000, you would have to come up with $2000 for coinsurance. Generally, health insurance policies will have a maximum coinsurance amount that you would have to pay if you had excessive medical bills.

Property Insurance

Another type of insurance that has coinsurance clauses is property insurance. Property insurance coinsurance is generally looked at as a penalty that is incurred after an individual does not fully disclose the proper value of a property. For example, if you own a $200,000 property and only insure it for $150,000, you will be required to pay money out of pocket, should a loss occur. The money is designed to make up the difference from under insuring the property. In this way, coinsurance is a way for an insurance company to safeguard against a large loss because they require additional money from you.

Title Insurance

Title insurance is another type of insurance that requires coinsurance. The purpose of title insurance is to ensure that a piece of property is owned free and clear by a new purchaser. If it is later determined that the property did not have a clear title, the title insurance company will pay for the amount of money that was lost in the transaction. Many title insurance policies have a coinsurance clause that requires the purchaser of the insurance to pay a certain percentage of the money during a loss. In many cases, the percentage is 20 percent of the loss that is due by the insured. This helps split the burden of insuring the title between the title insurance company and the property owner. 

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