What is Coinsurance?

Coinsurance, commonly used in health insurance, is the percentage that the insurer pays for a medical claim on behalf of the insured patient after the deductible has been met.

Property coinsurance specifies a minimum percentage of the property’s assessed cash or replacement value that it must be insured for (perhaps 80%). If the insured does not maintain that level of insurance on the property and there is a claim, the insured may be asked to pay a portion of the claim.

Coinsurance vs Copay

In health insurance, coinsurance is similar to the idea of a co-payment or copay, except that the coinsurance amount is expressed as a percentage of the claim, while a copay is expressed as a specific amount.

For example, let's say you need to see a doctor for a medical condition and the bill for the consultation is expected to be $150. Your health insurance plan may ask that you pay a $30 copay for the doctor visit, while the insurance company would pick up the remaining balance, or $120 in this case.

We'll talk about how coinsurance works in the next section.

[Also check out Everything You Need to Know About Health Insurance]

Coinsurance After Deductible: How it Works

Many health insurance plans will pay coinsurance after the deductible has been satisfied.

For example, let's say an insured customer broke their arm and received a hospital bill for $3,000. If their insurance plan had a $1,000 deductible, the customer would need to pay $1,000 out of pocket to meet that deductible.

After that point, if the customer has 20% (or 80/20) coinsurance, that means they will pay 20% of the after-deductible cost of the healthcare claim while the insurance will pay the remaining 80%. So with a remaining balance of $2,000 after the deductible, the customer would pay 20%, or $200, while the insurance company would pick up the remaining 80%, or $1,800 in this example.

Depending on the insurer, 100% coinsurance or 0% coinsurance means that the insurer will pay for the entire medical claim, usually after the insured customer's deductible has been met.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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