Every insurance holder must have heard of the term “Coinsurance”. Whenever you buy or renew insurance, you might have noticed the maximum claim limit given by the insurance provider. Insurance providers don’t offer 100% coverage. They offer maximum coverage and the rest of the amount that is required to clear the bill needed to be paid by the insurance holder. The leftover amount after the insurance provider cleared is called deductible which is to be paid by the policyholder. Also, the maximum coverage provided by the insurance provider is 80% at most of the insurance companies and it varies with the provider and the policy type you have opted for.
Though the concept of Coinsurance is highly familiar to Health Insurance holders, it is applicable to other insurance types like Car Insurance, Business Insurance, Property Insurance, etc. as well.
Working of Coinsurance
Coinsurance is the amount the insurance holder is going to pay after getting the maximum coverage from the insurance provider. In simple terms, when you claim insurance coverage, you will not get covered 100%. The insurance provider offers only a specific percentage of the total amount which is 80% at most of the insurance providers. The remaining 20% deductible should be afforded by the insurance holder. This insurance coverage split is called Coinsurance.
In the practical scenario, the deductible will be cleared by the policyholder first then the coinsurance comes into the picture to clear the rest of the bill amount.
For Example, you have car insurance in UAE and the repairs would cost AED 3000. In this case, assuming your coinsurance provision is 80/20, you’ll pay the 20% that is AED 600 of the bill first then the insurance provider comes in to pay 80% of the bill amount which is AED 2400.
Along with the 20% share amount, the insurance holder should also pay for other expenses which the insurance provider will not cover. Your insurance policy might be limited to covering only specific services according to the type of insurance you hold. The rest which will not be covered by your policy provider should be paid from your pocket.
Are coinsurance and copay the same in Health Insurance?
No. Coinsurance and Copay are not the same. Copay is additional costs you pay that are not covered in your insurance coverage plan. For example, if you are visiting a doctor and the consultancy fee is not covered by the insurance provider then you pay for it which is called Copay. While coinsurance is paid only when you claim the insurance coverage. There is no fixed amount in the case of Copay, while Coinsurance is a fixed percentage decided during the purchase of the policy itself. Copay is mostly applicable only in the case of Health Insurance.
The Copay, Deductibles will be paid by the policyholder. Every health insurance policy has an out-of-pocket Maximum Limit. Including the deductibles and copay, you are supposed to pay only a fixed amount on health care for that year. Once you have reached the maximum limit that is the out-of-pocket maximum for that year, then the insurance provider will cover you for the rest of the year.
For example, you have taken a health insurance policy of AED 1000 deductible, Copay of AED 100 and Coinsurance of 80/20 with an out-of-pocket maximum limit of AED 3000. If you have a medical expense of AED 500 then you need to pay it for yourself but when you have another treatment in the same year which is of AED 5000 then, as you already paid AED 600 earlier you will pay AED 400 to be eligible for coinsurance.
Now as you are done with your deductible, your insurance provider will cover 80% of AED 4600 of the medical expense which is 3680 AED and you will pay AED 920 as your share. Overall, that year you have paid AED 1520 in the total bill of AED 5600.
Coinsurance can be both advantageous and disadvantageous for the insurance holder. It entirely depends upon the claim you are going to make and the policy coverage.