Co-insurance

Co-insurance is a feature of an insurance policy that requires the insured party to pay a percentage of all covered costs following the payment of a deductible. This feature shifts a portion of the liability from the insurer to the insured party. The term is most commonly applied to health insurance and property insurance. For example, a person has a health insurance policy that contains an 80/20 co-insurance clause, as well as a $3,000 annual deductible. The person needs to have surgery, which costs a total of $8,000. The person is responsible for the $3,000 deductible, after which there is $5,000 of liability remaining. The person is responsible for 20% of this amount, or $1,000. Thus, the insurance company pays $4,000 of the total amount.