Coinsurance Definition & Meaning

Coinsurance is a term commonly used in the insurance industry, and it refers to the sharing of the costs of a covered healthcare expense between the insurance company and the insured individual. In other words, it's a cost-sharing arrangement.

Here's how coinsurance typically works in health insurance:

Deductible:

Before coinsurance comes into play, the insured individual usually needs to meet a deductible. This is the amount of money they must pay out of pocket for covered services before the insurance company starts contributing.

Coinsurance Percentage:

Once the deductible is met, coinsurance kicks in. The insurance company and the insured then share the costs of covered services at a certain percentage. For example, if the coinsurance is 80/20, the insurance company pays 80% of the covered expenses, and the insured is responsible for the remaining 20%.

Out-of-Pocket Maximum:

There is often a cap on the total out-of-pocket expenses that the insured individual has to pay during a specified period, which is known as the out-of-pocket maximum. Once this maximum is reached, the insurance company typically covers 100% of covered services.

Coinsurance is not limited to health insurance; it can also be found in other types of insurance policies, such as property insurance. In those cases, coinsurance refers to the percentage of the insured value of property that must be maintained for the insured to receive full reimbursement for a loss. If the insured fails to maintain this percentage, they may only receive a partial reimbursement in the event of a loss.