Coinsurance refers to the amount of money an insured person needs to pay against a claim after satisfying their deductible. This amount differs depending on the type of insurance involved. This is because health insurance, home insurance, and auto insurance may have different rules regarding coinsurance.
For example, coinsurance for a piece of property is usually listed as a percentage while coinsurance for healthcare is often a dollar amount that the insured pays toward services.
Common Coinsurance Agreement
A standard coinsurance agreement consists of an 80% to 20% expense split. With this type of coinsurance plan, an insured individual is responsible for ⅕ of the costs they incur, whether it’s healthcare or property expenses. The insurance company covers the remaining costs.
This agreement applies only after the insured individual pays the policy’s set deductible. Let’s say an individual experiences a medical emergency. While in the hospital, they receive $80,000 in care. The individual also has a deductible of $3,000, and they’ve only paid half of it throughout the year.
If that individual pays the remaining $1,500 and meets the deductible costs, they can have their insurance cover 80% of the medical expenses they’ve incurred. The deductible payment goes toward the insured’s medical expenses, which reduces the $80,000 bill to $78,500.
That would have the insurance company paying $62,800 (80% of $78,500) while the insured individual pays $15,700 (20% of $78,500) in medical expenses.
Additional Care Needs
After satisfying the deductible on the insured’s policy, they have the deductible covered for the rest of the year. If the individual ends up needing additional care during that year, the 80/20 agreement is still in place.
In most cases, there is a maximum out-of-pocket expense amount an insured individual will need to pay. If the maximum is $5,000 and the insured already paid $4,000 out-of-pocket for the year, the maximum they’d be expected to pay for future care is $1,000. Meanwhile, the insurance company covers the remaining balance.
Insurance policies and coinsurance agreements can be complicated to understand, especially for insured individuals who don’t have a lot of experience when it comes to insurance expenses. If you’re unsure about your coinsurance terms, be sure to review your policy and discuss your concerns with your agent or representative.
