(01) A provision in an Insurance Policy requiring the insured to contribute a fair and just share of the total premiums out of which losses are to be paid. The inclusion of this provision. Whether mandatory or optional, usually gives the insured lower rates than would otherwise apply. It provides for the full payment, up to the amount of the Policy, of all losses if the insured has Insurance at least to the named percentage of the value of the property covered and in some cases in any event. The loss payment in the case of most partial losses is reduced, proportionately, if the mount of Insurance falls short of the named percentage, e.g. 85% Coinsurance (or average) clause. Value Rs. 2,00,000, Insurance Rs. 1,70,000, Loss Rs. 40,000, Insured collects full amount of loss because his Insurance is equal to 85% of the value. Value Rs. 2,00,000, Insurance Rs. 1,00,000, Loss Rs. 40,000, Insurance is for only Rs. 1,00,000 or 1/2 of Rs. 2,00,000 the named percentage of value, so insured collects only 1/2 of the loss i.e., Rs. 20,000, (02) (i) The division of a risk among several Insurers. (ii) The sharing of losses on a proportionate basis between Insurer and the insured. In health Insurance, there is a provision which obligates the insured to bear a specified percentage of each otherwise insured loss, this percentage being specified in the Coinsurance clause, widely known as a “percentage participation clause.” (iii) In Reinsurance a treaty provision calling for the sharing of obligations between or among two or more Reinsurers.
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REINSURANCE: A treaty provision calling for the sharing of obligations between or among two or more Reinsurers.
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UK: the insurance, usually of large risks, by two or more direct insurers as a means of spreading the risk; also used in North America to describe certain types of reinsurance.