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📋 '''Coinsurance''' carries two distinct but related meanings in the insurance industry. In [[Definition:Health insurance | health insurance]], it describes the percentage of a covered [[Definition:Claim | claim]] that the [[Definition:Policyholder | policyholder]] must pay out of pocket after satisfying the [[Definition:Deductible | deductible]] — for instance, an 80/20 coinsurance split means the insurer pays 80 percent and the insured pays 20 percent until any [[Definition:Out-of-pocket maximum | out-of-pocket maximum]] is reached. In [[Definition:Commercial property insurance | commercial property insurance]], coinsurance is a contractual mechanism that requires the insured to carry coverage equal to a specified percentage (commonly 80, 90, or 100 percent) of the property's [[Definition:Replacement cost | replacement cost]] or [[Definition:Actual cash value (ACV) | actual cash value]], with a penalty applied at the time of loss if the insured fails to meet that threshold.

⚙️ The property coinsurance clause works as a safeguard against chronic underinsurance. If a building worth $1 million is insured for only $500,000 under a policy with an 80 percent coinsurance requirement, the insured has only purchased 62.5 percent of the required amount ($500,000 ÷ $800,000). At the time of a partial loss, the carrier applies that same ratio to the [[Definition:Loss settlement | loss settlement]], meaning the insured effectively self-insures the gap. [[Definition:Underwriter | Underwriters]] use the coinsurance mechanism to keep [[Definition:Premium | premiums]] adequate relative to the exposure; without it, policyholders could deliberately insure for far less than full value, pay lower premiums, and still recover small losses in full — a form of [[Definition:Adverse selection | adverse selection]] that would undermine rate adequacy for the entire book. Some [[Definition:Insurance policy | policies]] offer an [[Definition:Agreed amount endorsement | agreed amount endorsement]] that waives the coinsurance penalty in exchange for the insurer and insured agreeing on the property's value upfront.

💡 Beyond the individual policy level, coinsurance also refers to arrangements in the [[Definition:Subscription market | subscription market]] where multiple [[Definition:Insurance carrier | carriers]] share a single risk by each taking a defined percentage [[Definition:Line (insurance) | line]]. This is standard practice in [[Definition:Lloyd's of London | Lloyd's]] and the broader [[Definition:London market | London market]], where a [[Definition:Lead underwriter | lead underwriter]] sets the terms and other participants coinsure portions of the same [[Definition:Slip | slip]]. In [[Definition:Reinsurance | reinsurance]], [[Definition:Quota share reinsurance | quota share]] treaties operate on a coinsurance principle, with the [[Definition:Reinsurer | reinsurer]] accepting a fixed percentage of every risk in the [[Definition:Ceding company | ceding company's]] portfolio. Understanding which flavor of coinsurance is being discussed — cost-sharing with policyholders, penalty clauses for underinsurance, or multi-carrier risk-sharing — is essential to avoiding costly misunderstandings in policy design and [[Definition:Claims settlement | claims settlement]].

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Deductible]]
* [[Definition:Quota share reinsurance]]
* [[Definition:Subscription market]]
* [[Definition:Replacement cost]]
* [[Definition:Agreed amount endorsement]]
* [[Definition:Adverse selection]]
{{Div col end}}

Definition:Coinsurance - Revision history

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