Coinsurance is a cost-sharing arrangement in insurance where the insured pays a fixed percentage of the covered expenses after meeting the deductible. It is commonly used in health insurance and means that after the policyholder pays their deductible, they share the remaining costs with the insurer according to a specified percentage split. For example, with a typical 80/20 coinsurance, the insured pays 20% of the medical costs while the insurer covers 80%
. Key points about coinsurance include:
- It applies only after the deductible has been met.
- It is expressed as a percentage of the claim amount the insured must pay.
- It differs from a copayment, which is a fixed dollar amount paid at the time of service.
- Coinsurance helps reduce insurance premiums by sharing risk between the insurer and insured.
- The insured's out-of-pocket costs through deductibles, copayments, and coinsurance usually have a maximum limit, after which the insurer pays 100% of covered costs
In summary, coinsurance is the portion of costs that the insured is responsible for paying as a percentage of covered claims, typically after the deductible is satisfied, and it serves to share the financial risk between the insured and insurer.
