Co-insurance is:
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Co-insurance is a provision in insurance policies that is commonly used in property and health insurance. It is not typically used in liability insurance, and it is not a provision in actual cash value.
Co-insurance in property insurance requires the policyholder to insure the property for a certain percentage of its full value. For example, if a property is valued at $1 million and the policy has an 80% co-insurance clause, the policyholder must insure the property for at least $800,000. If the policyholder insures the property for less than the required amount, they will be subject to a co-insurance penalty in the event of a loss. The penalty is calculated as the ratio of the actual amount of insurance to the required amount, multiplied by the amount of the loss.
Co-insurance in health insurance is a cost-sharing provision between the insurer and the policyholder. The policyholder is responsible for a percentage of the cost of covered services, typically after meeting a deductible. For example, if a policy has a 20% co-insurance provision for hospitalization, the policyholder would be responsible for paying 20% of the cost of the hospitalization after the deductible has been met, and the insurer would pay the remaining 80%.
In summary, co-insurance is a provision in insurance policies that requires the policyholder to share in the cost of a loss or covered services. It is commonly used in property and health insurance and is not typically used in liability insurance or a provision in actual cash value.