US: 1) A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required; 2) a policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 percent by the insurer and 20 percent by the insured.
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MEDICAL,USA: 1. A cost-sharing requirement under a health insurance policy providing that the insured will assume a percentage of the costs for covered services. Also referred to as coinsurance payment, copayment, cost sharing, or percentage participation. 2. In the Medicare program, the amount that Medicare will not pay. The Medicare beneficiary or the beneficiary’s supplemental insurance plan is responsible for the yearly cash deductible and the portion of the reasonable charges (20%). 3. In the Medicaid Qualified Medicare Beneficiary (MQMB) program, the amount of payment that is above the rate that Medicare pays for medical services. The state assumes responsibility for payment of this amount.
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Coinsurance has two rather distinct meanings depending on whether it is being used in property insurance or health insurance.Property InsurancePolicyholders are usually required to carry an amount of insurance that is at least a certain percentage of the total value of the property (often 80%). The purpose of this requirement is that most property losses are small and, therefore, most policyholders would carry only a small amount of insurance to cover expected claims. To counter this, insurance companies require 80% of value or more and penalize policyholders who carry less than 80% when a claim is made.
For example, if an insured has a $100,000 building, is required to carry at least $80,000 of coverage (80%) but insures for only $60,000, there will be a penalty when there is a claim. If the claim is for $50,000 the insurance company will use the “”did over should”” fraction to determine the amount to be paid. The insured carried $60,000 but should have carried at least $80,000. Thus, $60,000/$80,000 equals 75%. The company calculates the settlement as follows: .75 x $50,000 = $37,500. The insured suffers a $12,500 penalty for not insuring to 80% of value. The $12,500 is the insured’s coinsurance.
Health Insurance
For health insurance, the coinsurance is the percentage of covered health costs the insured will pay in a year after the deductible. For example, if the coinsurance provision of the health policy is 20% the insured will pay this percentage of covered claims and the insurance company will pay 80%. Usually there is a ceiling or a maximum the insured will be “”out-of-pocket.”” At that point the insurance company pays 100% for the balance of the year.
For example, after a $500 deductible, the insured pays 20% until the claims total $5,500. At this point the insured is out the $500 deductible and another $1,000 (20% of $5,000). If the policy states that the maximum out-of-pocket is $1,500, then the insurance company begins to pay 100% of covered claims for the remainder of the year.