Health Insurance: What Is Co-Insurance?
What is co-insurance? Co-insurance is an ignored idea regarding acquiring and upholding health insurance.
You will find many people who are not insured enough. It is possible that just one or two medium losses on their existing policy could create an enormous financial adversity.
Before we continue it is important to note that insurance laws differ from state to state, so don’t take one’s law for granted. Exact wording and use of grammar may be different between states.
This article will simply try to explain what co-insurance is and the main concept behind it. You are also encouraged to verify your existing policies.
A Simple Definition of Co-insurance:
Co-insurance is a strategy based on sharing the risk between you and the insurance company. The concept behind is that you as the insured will have to share the risk with the company that insures you, while you shall not misuse the coverage.
The majority of property and health policies stand on a 80/20 co-insurance clause. This clause ascertains with the contract that the insurance company will have to pay 80 percent of the incidentals beyond the deductible, whereas the insured will have to pay 20 percent up to some limit. This limit is called a stop-loss.
For an easier understanding about what co-insurance is let us look at an example: You have an accident with the total hospitalization costs of $20,000. Your existing healthy policy contains an 80/20 co-insurance clause, deductible of $1000 and a stop-loss limit of $4,000.
In the above example, how much is insurance company liable to pay and how much are you responsible for?
First of all, your contract contains a deductible. Due to your policy, you are accountable to pay the amount of your deductible, say $1,000. Following, you have to pay 20% of the remaining $19,000, which is $3,800. So your final costs of the entire hospital bill would be $4,800.
Always double-check your policies and understand what co-insurance is to ensure you know that your coverage fits your needs and what you will be responsible for.
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