What is Coinsurance?

Coinsurance is the fixed amount the insured is supposed to pay after the claim is fulfilled. The percentage of the coinsurance can vary depending on the insurer. For example, if the coinsurance for a healthcare plan is 20%, then the insured has to pay the amount after Deduction. This clause is commonly found in health insurance policies, but Property Insurance might also have such policy.

The 80/20 is the most common form of coinsurance split. In this plan, the insurance provider asks the insured to finance 20% of the medical bills, while the rest of the payment is issued by the insurance provider. The insured has to pay this amount only after the Deductible is satisfied or the insurance company has settled the claim.

Some healthcare insurance plans include a maximum policy that limits the total amount you pay for settling the claims. In other words, you don’t have to spend more than the maximum limit irrespective to your medical expenses.

Coinsurance Example

For better understanding, let’s take an example. Also, the illustration will give a brief understanding of coinsurance vs deductible.

Suppose you sign-up for an insurance plan of 80/20 split, a deductible of INR 1000, and a limit of INR 5000. You had to undergo an emergency medical procedure that costs INR 5,500. Now that you have not received the deductible yet, you may have to pay the medical expenses from your pocket. The insured has to finance first INR 1000 on their own.

Once you have got your deductible, you will be responsible for paying 20% of the cost, as per your healthcare provider. The amount will be calculated on the rest of the amount, which is INR 4500. This means you will have to pay another INR 900, and the rest of the amount will be covered by your insurance provider. This is how the coinsurance policy works. It gets the name from the fact that both insured and insurance provider split the cost of the claim.

You are only required to pay an amount up to INR 5,500 in a year. No matter the number of medical procedures you experience and the total medical bills you receive, the insurance company will be responsible for settling all your claims after you have paid the maximum.

Co-insurance Clause

The insurance providers use this policy to spread the risk of high medical bills. Coinsurance has its share of pros and cons. It benefits the insurance policyholder by reducing the amount they have to finance in the case of a claim. At the same time, the insured might meet the maximum limit of the coinsurance. If that happens, the insurance company will be liable to pay any additional expenses the patient incurs on the medical bills, surgeries, and other prescriptions included in the policy.

Coinsurance also applies to property insurance, in which the homeowners have to get their home insured for a fixed percentage. Usually, the home is insured for 80% of its Market value. Then again, the percentage could vary depending on the insurance plan you choose and the current cash value of your property.