2 Answers

Coinsurance is a term used in the insurance industry that describes the sharing of a cost between the insurance company and policy holder. Coinsurance is common in the health insurance industry but may appear in other insurance policies. Coinsurance is given in the form a certain percentage or ratio; for instance, 20 percent coinsurance on a certain type of loss or expense means that you would pay 20 percent of the cost toward the expense while the insurance company would cover 80 percent. Understanding and calculating coinsurance costs can help you plan on the cost of making insurance claims.

Read more : http://www.ehow.com/how_7504983_calculate-coinsurance.html

Read here>>http://www.ehow.com/how_7504983_calculate-coinsurance.html

Let's say you have a building that you believe would cost $100,000 to replace and a coinsurance penalty in your policy of 80 percent. You insure the building for $80,000 thinking you have fulfilled the coinsurance clause. A fire loss causes $60,000 worth of damage so you submit a claim. Your insurance company subsequently determines that the replacement cost of the building is actually $150,000.

To determine how much to pay on the claim, the insurer divides the amount of insurance you purchased ($80,000) by the amount you should have purchased (80% of $150,000 or $120,000). The result (two-thirds, or $40,000) is the amount of your claim the insurer will pay.

If the building had been insured for at least $120,000, the insurer would have reimbursed you for the full amount of the loss. Coinsurance can be tricky and potentially cost you a ton of money if you under insure your property.

http://www.eqgroup.com/coinsurance.htm