We often see co-insurance clauses in our policies. Have you ever understood what it is? Co-insurance is one of the terminologies in insurance industry which are often misunderstood and misinterpreted. Of course, you can ask your insurance agent to better explain what it is.
For our readers, Axis Capital, with a group of insurance and reinsurance companies scattered around globe from Bermuda to Singapore, Australia, United Kingdom and more than ten states in the US of A, has summarized the definition of Co-insurance in layman’s terms.
Co-insurance, in a sense, is the amount you have to share for the cost of your insurance. It is often computed in percentage. For instance, a man’s health insurance covers 85% of his hospital dues. The remaining 15% of the fee is your coinsurance.
For that, you’d think you have figured it all out until you stumble upon the term, “deductible”. This in itself is a little bit similar with co-insurance and is often mistaken for the other and/or interchanged.
Deductible is the amount you have to pay before your insurance begins to pay. Blue cross has provided this best example: Let's say your plan's deductible is $1,500. That means for most services, you'll pay 100 percent of your medical and pharmacy bills until the amount you pay reaches $1,500. After that, you share the cost with your plan by paying coinsurance and copays.
This time, the term copay is mentioned. Copay is a fixed amount you pay for a health care service, usually when you receive the service. The amount can vary by the type of service. You may also have copay when you get a prescription filled. If you visit the doctor often, it is best to review a plan with the low copay for office visits and prescriptions.
For property insurance, coinsurance is basically a penalty imposed on the insured by the insurance carrier for under reporting, misinformation, declaring or insuring the value of a property of a business income. The penalty is stated under penalty as well and the amount should be under report.
The coinsurance clauses in developing cities like Jakarta, Indonesia and Singapore can be changed interchangeably with copay as it still more or less defines having to pay in a percentage. In Europe, however, coinsurance refers to the joint assumption of risk between various insurers. In some parts of the United States, when one party fails to pay the required amount in percentage, he is liable to pay both the parts if his arguments are proven to be moot and academic.