What does coinsurance refer to in an insurance policy?

Coinsurance refers to the arrangement in which both the insurer and the insured share the costs of a covered loss after the deductible has been met. This typically involves a percentage split where the insured is responsible for a certain percentage of the expenses, and the insurer covers the remaining percentage. For example, if a policy has a coinsurance clause of 80/20, the insurer would pay 80% of the eligible expenses after the deductible, while the insured would be responsible for the remaining 20%.

This concept is particularly common in health insurance and property insurance, as it encourages the insured to be mindful of the costs associated with their claims. It also reduces the financial burden on insurers, as they are not solely responsible for all costs involved in a claim.