What is coinsurance in an insurance policy?

Coinsurance in an insurance policy refers to a provision that establishes a sharing of costs between the insured individual and the insurance provider once a deductible is met. In this arrangement, both parties contribute to the expenses associated with covered losses, which can be seen as a way to promote shared responsibility for risk. This means that the insured usually pays a certain percentage of the total expenses, while the insurer covers the remaining percentage.

This structure is used commonly in health insurance and property insurance, encouraging policyholders to be more mindful of their healthcare or property usage, as they have a financial stake in the expenses incurred. The balance of costs shared through coinsurance can also help keep premiums lower, as it limits the insurer's exposure to risk by requiring the insured to bear part of the loss.

In contrast, other options like a flat rate payment, guaranteeing a total payout, or additional coverage for emergency services do not accurately describe the shared cost concept that coinsurance embodies. These options either imply a fixed cost, a promise of complete coverage regardless of the situation, or supplemental coverage that does not relate to the fundamental principle of coinsurance, which emphasizes shared financial responsibility for covered losses.