What is coinsurance?
Coinsurance is a type of insurance in which the insurer and the insured share the risks. In addition to reducing the cost of insurance for the insured, coinsurance also benefits other people insured with the same company by ensuring that the insurance company will be able to pay all claims. Before buying this type of insurance, consumers should make sure they fully understand the terms, as they can be confusing, and people can get into a sticky situation.
When people buy a coinsurance policy, they ensure something for less than face value. People may do this because they know a structure or asset can be replaced for less than face value or are willing to pay certain expenses to keep their insurance rates low. If a claim is made on the policy, the insurer pays its share, while the insured is expected to pay any remaining balance.
For example, suppose someone insures a structure worth US$80,000 under a 20/80,000 coinsurance policy. In that case, the insurance company agrees to pay US$80,000 where the owner claims the policy, and the owner has to make up the difference. However, the person must be careful, as insurance policies often include coinsurance clauses. In an insurance policy with a built-in clause, someone might insure this structure for US$36,000, thinking they are willing to pay US$80 in the event of a loss and end up paying $80 US because the insurance policy has a coinsurance clause XNUMX/XNUMX.
Health insurance schemes also often use coinsurance. As a rule, this occurs after the payment of the deductible. If a policy has a deductible of US$500, once a patient has used the deductible, they will be responsible for a fixed percentage of their medical expenses. An 80/20 plan is standard for health care, although higher or lower rates are also possible. Consumers should not confuse coinsurance with copayment, in which the patient pays a fixed amount for each medical visit, not a fixed percentage.
When used wisely, coinsurance has definite advantages. These plans save on insurance premiums. As long as the person buying the policy remembers to put money aside to be available in a disaster, this type of plan can very well function. When purchasing any form of insurance, consumers should be sure to inquire about coinsurance clauses to understand how much the insurance company will pay in the event of a claim.
What is a leader?
A leading insurer is one of the insurers who establishes and manages claims on behalf of all co-insurers. Therefore, it is vested with a general mandate to act on behalf of other insurers. However, the leading insurer is not mainly the insurer with the highest level of commitment. The subscriber’s designation of a leading insurer makes it possible to have only one interlocutor and facilitates exchanges.
Example:
Three insurance companies insure the costly property. The first and second decide to insure the property up to 20% each, and the third up to 60%. In the event of a fire, compensation will be calculated based on these percentages. For a claim for which compensation is 100,000 euros, the first two insurers will each cover 20,000 euros, while the third will reimburse 60,000 euros.
What is reinsurance
The coinsurance process should not be confused with that of reinsurance.
An insurance company can insure itself with another insurance company. This process is called reinsurance.
Reinsurance allows an insurance company to insure itself with a third party for a more or less significant part of these risks.
The reinsured insurance company always remains liable vis-à-vis it is insured.
What is co-insured
A co-insured takes out an insurance policy jointly with another insured. He undertakes as for the insured to respect the conditions of the contract.
