Co-insurance

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PostPosted: Tue Jun 15, 2010 8:39 pm   Post subject: Co-insurance  

My agent said I need to be concerned about coinsurance. What is coinsurance?


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PostPosted: Tue Jun 15, 2010 8:39 pm   Post subject:   

To encourage business owners to insure their property to value, the policy will include a coinsurance clause. If the policyholder underinsures their property, a coinsurance penalty is imposed at the time of claim. For example, if your building is worth 100,000 but you only insure it for 75,000, you have only insured the business for 75%, therefore, if you have a claim, you will only receive 75% of your loss. Because of fluctuating property values, insurance companies will specify a percentage of the value the building must be insured for to avoid the penalty. In other words, if the coinsurance percentage is 90%, as long as the building is insured at 90% or more of its value, no penalty will be imposed.

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PostPosted: Wed Jul 07, 2010 7:36 pm   Post subject: Coinsurance  

In other words you cannot expect to recieve a check for the replacement cost of a building that is worth $100,000 when you only pay for $30,000 of insurance. Please let me know if you have any other questions.

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PostPosted: Mon Jul 12, 2010 6:19 am   Post subject:   

Larry's post is right on target.



Quote:
if the coinsurance percentage is 90%




The standard coinsurance clause is usually either 80% or 90%.



In CA, P&C agents now must do a continuing education course in determining property values to be able to sell homeowner's insurance.


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PostPosted: Tue Jul 27, 2010 7:57 am   Post subject:   

Coinsurance is a type of insurance in which the insurer and the insured split risks with each other. In addition to lowering the cost of insurance for the insured, coinsurance also benefits other people who are insured with the same company, by ensuring that the insurance company will be able to pay all claims. Before purchasing coinsurance, you should make sure that you fully understand the terms, as coinsurance can get confusing, and you may find yourself in an awkward situation.

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PostPosted: Tue Jul 27, 2010 12:08 pm   Post subject:   

Quote:
Coinsurance is a type of insurance in which the insurer and the insured split risks with each other. . . . coinsurance also benefits other people who are insured with the same company, by ensuring that the insurance company will be able to pay all claims




This is not at all correct. Coinsurance is not a "type of insurance". It is a provision in a contract of insurance that determines what portion of a claim the insurer will pay. It has absolutely no bearing on the insurer's ability to pay claims. It has everything to do with what portion of a loss/claim the insured will have paid by their insurance company.



The term "coinsurance" is used somewhat differently in property and casualty insurance compared to medical insurance. In medical insurance, coinsurance is the percentage of sharing between the insurer and the insured when it comes to paying for covered services, such as 80/20 or 70/30.



In property and casualty insurance (homeowner's, commercial property), when the term "coinsurance" is used, it means that in order to receive coverage for 100% of a loss, the property must be insured to at least a minimum percentage of the property's value. The purpose is to require insured's to maintain the correct amount of coverage. Properly understood, failure to meet the coinsurance requirement results in a PENALTY to the insured for not carrying the correct amount of coverage.



If a property is valued at $1,000,000, for example, and the contract coinsurance provision requires 80% coverage, as long as the property is insured for at least $800,000, any loss will be paid at 100% (less any deductible, of course).



But if the property is insured for less than 80% of replacement value, the amount of coverage they actually have compared to the minimum amount of coverage they were required to have determines the percentage of a loss the insurer will pay. So if the $1,000,000 property is required to have at least 80% coverage, but is only insured for $600,000, any loss would be covered at only 75%. The "formula" can be stated as: "What you have divided by what you need is what you get."



The coinsurance requirement in this example is a minimum of $800,000. In this example, the insured only purchased coverage for $600,000. So $600,000 divided by $800,000 equals 75%. As a result, if a loss of $50,000 is claimed, the insurer will only pay $37,500. If the insured had covered the property for at least $800,000, then 100% of the claim would have been paid.



People who attempt to do property insurance on their own and fail to understand this concept often find themselves on the short end of the stick when it comes to having a claim paid. It often involves a total loss, which, by itself, is a devastating event. To discover that the loss will not be paid 100% is doubly unfortunate. A good agent would never allow that to happen (and if they did, they could be liable for the difference due to their negligence).



So, Pavithra, please heed your own advice:

Quote:
you should make sure that you fully understand the terms, as coinsurance can get confusing, and you may find yourself in an awkward situation.


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PostPosted: Tue Oct 26, 2010 6:26 am   Post subject:   

Your coinsurance is a percentage of the cost of covered health-related services after you have met your deductible. Usually, coinsurance is 20% to 30% of what your health plan approves. Your health plan will pay the remaining 70% to 80%.



Insurance in the USA -- http://www.insuus.com/

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PostPosted: Tue Oct 26, 2010 6:43 am   Post subject:   

Quote:
Your coinsurance is a percentage of the cost of covered health-related services after you have met your deductible.
Great... 1/2 of your posts contain more spam then post and this one is incorrect. co-insurance is _not_ what is covered... it's the amount that is not covered... or the amount the insured pays. The second part of your post was correct.
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PostPosted: Wed Oct 27, 2010 11:56 am   Post subject:   

Basically Coinsurance is an insurance in which the insurer and the insured split risks with each other. It lowers the cost of insurance for the insured, also benefits other people who are insured with the same company.



Thanks,

with regards

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PostPosted: Thu Oct 28, 2010 4:16 am   Post subject:   

Technically, it is not "splitting risks", but sharing in the loss.



Quote:
Coinsurance is an insurance




NO IT IS NOT!! Coinsurance is a "provision" in a contract of insurance that describes the PERCENTAGE of a loss that is shared between the insurer and the insured.



Increasing the insured's percentage of sharing reduces the premium for the coverage.


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PostPosted: Sat Oct 30, 2010 9:29 pm   Post subject:   

good tutorial

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PostPosted: Mon Nov 01, 2010 5:01 pm   Post subject:   

I believe that some posters may have co-insurance confused with re-insurance.

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PostPosted: Wed Nov 03, 2010 1:41 am   Post subject:   

No, they are simply confused about insurance.



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PostPosted: Thu Sep 22, 2011 6:58 am   Post subject:   

Coinsurance is defined as a clause in insurance policy which determines the amount which will be paid by insurer and insured person. It is percentage based factor which will be applicable at the time of claim for an accident. It can be explained clearly by following example:



If you have a coinsurance of 70/30 ratio it means 70 percent of the total damage will be paid by insurance company and remaining 30 percent will be applicable to you.



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PostPosted: Thu Sep 22, 2011 9:59 am   Post subject:   

The coinsurance stevenricherd describes applies to health insurance. While the explanation is essentially correct as far as health insurance is concerned (although in health insurance, it does not apply to accidents only, but to all claims), it is not at all the kind of coinsurance that the OP inquires about.



The OP asks about coinsurance in a business policy, meaning the penalty applied to one's property coverage if the amount of protection carried is incorrect. If the property is valued at $100,000, the coinsurance provision requires that it be insured for a minimum of $80,000 -- 80% of the value -- in order to receive 100% coverage in the event of a loss. If the property was only insured for $70,000, the coinsurance penalty would limit the loss payable to 70%.



If the property suffers a $50,000 loss, the insured would receive only $35,000 (35,000 x 0.70) from the insurance company. If the property had been insured for $80,000 or more, the insured would receive the full $50,000. This rule also applies to homeowner's insurance.



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