Co-insurance definition
/What is 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, thereby reducing the cost for the insurer. The term is most commonly applied to health insurance and property insurance.
Example of Co-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.