Co-Insurance

Co-insurance is a provision that requires the policy holder to assume part of the risk for an insured property. Co-insurance is essentially the out-of-pocket costs or insurance deductible that is assumed by the policy holder due to the sharing of insurance risk. Co-insurance is applied in cases where the homeowner or policy holder purchases an insurance policy for less than the actual value of the property and thereby paying lower premiums toward insurance. In such a case, the risk of loss is shared by both the insurance company and the policy holder. So, if there is a difference between the insured amount and the value of the property, the policyholder may be responsible for the difference. For illustrative purposes, a typical example of co-insurance may involve an insurance company that is responsible for 80% of the value of the insured property and a homeowner who is responsible for 20% of the value of the property.