What Is Coinsurance?

by Team eLocal
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The terminology used to describe insurance products may seem baffling, but it's essential to understand how much you'll pay out of pocket if you make a claim.

Coinsurance is a type of out-of-pocket expense paid by policyholders that is sometimes included in healthcare insurance plans.

What Is Coinsurance?

Coinsurance is the amount of money you pay toward your care if your healthcare insurance policy covers your treatment. You only pay coinsurance after you've met your deductible, which is a fixed, annual out-of-pocket amount you must pay before your insurer starts paying for your care. Certain types of property insurance policies also include coinsurance as an out-of-pocket cost.

How Does It Work?

Coinsurance is a percentage amount of the cost of your care. First, you'll pay the annual deductible if you haven't already paid it. After that, you'll pay coinsurance at a set percentage for the remainder of your covered medical costs while your insurer covers the rest. Healthcare insurers often cap the amount of out-of-pocket costs a policyholder must bear each year. Therefore, you won't pay coinsurance once you've paid your insurer's maximum amount, even if you require further care.

Coinsurance for property insurance works slightly differently. Generally, the coinsurance clause requires homeowners to insure their property for a certain percentage of its value. Therefore, you'll be liable to pay a percentage of the costs when you make a claim. Many insurers waive coinsurance payments for relatively inexpensive claims.

How Do I Know How Much I Have to Pay?

You can check how much coinsurance you have to pay in your insurance documents. The most common coinsurance percentage is 20% of the approved amount for your treatment and care, which means that your insurer pays 80% of the costs after you've met the deductible. Homeowners insurance policies with a coinsurance clause generally require you to insure your property for 80% of its value.

However, coinsurance amounts can vary across providers and policies. It's essential to understand your out-of-pocket liabilities before purchasing a homeowners or healthcare insurance plan.

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