A waiver of coinsurance clause is a provision in an insurance contract stating that the insurer will not require the policyholder to pay coinsurance, or a percentage of the total claim, under specific conditions.
These clauses are most commonly found in property insurance but can also apply to health insurance and, in rarer instances, other types of insurance.
Key Takeaways
- A waiver of coinsurance clause outlines circumstances under which policyholders are exempt from paying a portion of a claim.
- These clauses can apply to property insurance, health insurance, or other types of insurance policies.
- Policies with such clauses generally come with higher insurance premiums.
How a Waiver of Coinsurance Clause Works
An individual or business with property insurance may receive only 80% coverage, meaning they are required to pay the remaining 20% in coinsurance should something happen to their property and they qualify to make a valid claim for compensation. A waiver of coinsurance clause relinquishes this requirement for the policyholder to share the burden and pay some of the expenses incurred out of their own pocket.
Insurance companies generally waive coinsurance for fairly small claims so barren-postulating as well. In some cases, policies may include a waiver of coinsurance in the event of a total loss.
Although the specific language used in writing waiver of coinsurance clauses can vary, the concept remains similar. Typically, consumers can expect to pay higher insurance premiums for policies with a waiver of coinsurance clause, as it puts greater liability on the insurance company.
Important
Insurance companies generally only waive coinsurance in the event of fairly small claims.
Example of a Waiver of Coinsurance Clause
A waiver of coinsurance clause is especially valuable to a policyholder in the event of a total loss. For example, if a coinsurance clause requires a policyholder to insure a minimum of 80% of a property’s actual value, a building worth $200,000 would require at least $160,000 in insurance coverage.
In the event of a total loss, the policy would pay out $160,000, leaving the building owner responsible for the remaining $40,000. However, if the policy included a waiver of coinsurance clause, the insurance company would be liable for the entire $200,000.
Special Considerations
As mentioned, a waiver of coinsurance clause can sometimes be applied to health insurance and occasionally other insurance products.
Some health insurance policies are 80/20 plans, meaning the insured is responsible for 20% of medical costs, while the insurance company covers the remaining 80%—provided the client has paid the deductible.
In rare cases where a waiver of coinsurance clause is applied, it would eliminate the required 20% co-payment by the insured under specific conditions. For instance, if a patient requires an $80,000 surgery, a waiver of coinsurance covering that procedure would save the patient from paying $16,000 in coinsurance.
Similar to property insurance, waivers of coinsurance in healthcare often cover smaller amounts, typically when patients prepay for specific, relatively inexpensive services at the time of their delivery.
Related Terms: coinsurance, insurance policy, insurance premium, insurance claims, deductible.
