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Why Coinsurance Is Essential For Insurance

Co-insurance is the sharing of risk between you and the insurance company. It's a form of cost sharing that lowers your premium payments. When you pay a percentage of each claim, this amount can reduce your out-of-pocket expenses if you need to make a claim on the policy. 

The percentage that is shared can be referred to as co-payments, coinsurance, or copayments. You can also click here for more info about coinsurance.

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Coinsurance is an important part of insurance because it helps to protect policyholders from large financial losses. Coinsurance requires policyholders to pay a certain percentage of their medical bills, usually 20%, while the insurance company pays the rest. 

This arrangement protects both the policyholder and the insurance company from large claims. If a policyholder does not have coinsurance, they may be responsible for the entire cost of their medical treatment, which could bankrupt them. 

The insurance company will also face significant financial losses if they pay out the entire cost of treatment. Coinsurance can be applied to any type of insurance policy, not just health insurance. However, coinsurance only applies to policyholders who have a deductible. 

There is no coinsurance when there is no deductible. For example, if you have an auto insurance policy with a $500 deductible, you will pay 20% of your medical bills up to $500 until you reach the out-of-pocket maximum for that year ($4,000 in 2019). 

Once you reach the out-of-pocket maximum, instead of paying 20% coinsurance on your medical bills, you will no longer have to pay anything else for the rest of 2019 . The coinsurance will kick back in in 2020 once you have paid the $500 deductible again.

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