What is Co-insurance?
Co-insurance is a provision commonly found in various types of insurance policies, including property, homeowners, and car insurance. It dictates that both the insurer and the insured share the costs of covered claims after the deductible has been paid. The percentage split varies depending on the policy, but a common arrangement might be 80% covered by the insurer and 20% by the policyholder.
In homeowners or property insurance, co-insurance can significantly affect the coverage required. For instance, many policies include a co-insurance clause that requires the policyholder to insure a minimum percentage of the property’s value—typically 80% to 90%. If the policyholder fails to meet this requirement, they may receive a reduced payout in the event of a claim.
Co-insurance ensures that policyholders bear part of the financial responsibility for losses, which can help keep premiums lower. However, it is essential to understand your policy’s co-insurance terms to avoid unexpected costs during a claim.
