Coinsurance is a sharing of costs between the insured and the insurer, but it means slightly different things in property and health insurance. In property insurance, a coinsurance clause requires you to insure your property to a stated percentage of its value (often expressed as a percentage) or face a penalty at claim time. In health insurance, coinsurance is the percentage of a covered medical bill you pay after meeting your deductible.

Property coinsurance

Many property policies include a clause requiring coverage equal to a set percentage of the property's value. If you carry less than required, the insurer pays only a proportionate share of a partial loss, and you absorb the rest as a penalty. The lesson: under-insuring to save on premium can backfire badly when you file a claim.

Health coinsurance

Here, after you've met your deductible, you and the insurer split remaining covered costs by percentage. For example, you might pay a percentage of each bill while the insurer pays the rest, until you reach your out-of-pocket maximum. This keeps you cost-conscious while capping your total exposure.

A simple example

Under the ISO Building and Personal Property form (CP 00 10): a $300,000 building with an 80% coinsurance clause must carry $240,000. The owner carries $180,000 and has a $40,000 loss with a $500 deductible. $180,000 ÷ $240,000 = 0.75; 0.75 × $40,000 = $30,000; minus the deductible = $29,500. The insurer never pays more than the limit, and value is measured at the time of loss.

Homeowners forms have no coinsurance clause; ISO's HO 00 03 instead pays dwelling losses at replacement cost only if Coverage A is at least 80% of replacement cost, and otherwise pays the greater of ACV or a proportional amount. The businessowners policy (BP 00 03) also has no coinsurance clause. Agreed value suspends coinsurance on commercial property.

Don't confuse it with…

Coinsurance is not a deductible (a flat amount you pay first) and not a copay (a fixed dollar fee per service). In health plans, coinsurance is a percentage split that kicks in after the deductible.

On the exam

Watch which context the question is in. Property: coinsurance is about insuring to a required percentage of value or suffering a penalty on partial losses; the formula is (carried ÷ required) × loss, minus the deductible. Health: coinsurance is the percentage you pay after the deductible. Both share the same theme—the insured shares part of the cost.