Co-insurance is one of the most popular phenomena in the global insurance market especially in Europe. It is a fair measure of the future risks to be borne by a group of insurance carriers. Such carriers would opt for a common insurance agreement wherein the risk has to be apportioned amongst them as per agreed terms. One amongst them would conduct the process. Under the circumstances, the leader would associated with the administrative areas of the policy eg. payments, paperworks, paperworks etc. A charge gets levied for it and is known as the Lead office commission. Since, many of these processes are easier said than understood, hence it becomes all the more important to study all the key terms associated with it. You would often come across the terms 'Co-insurance' & 'Copay' in your policy papers. If you do not understand the meaning & significance of these terms you may end up paying quite a lot of money in spite of the fact that you are covered.
[img=left:d12db5a992]http://www.ampminsure.org/community/attachments/selfy-fish_137.jpg[/img:d12db5a992]Co-insurance relates to a certain percentage that you would need to bear while you receive any medical treatment. If you have opted for an insurance policy wherein you would need to bear 20% of the expenses, then that is the amount of co-insurance for your policy. On the other hand the Copay is a fixed amount that you would need to pay. Generally, copays are not associated with the deductibles while co-insurance is applicable. The copay option in your policy may cause you to pay more towards deductibles, if you can't figure out the meaning of such terms in their true sense. A better understanding of your policy clauses would make you aware of your rights & decide about the right options.
Co-insurance has a cap known as the 'Stop-loss'.
This is a situation where the member becomes liable to pay a fixed amount & his carrier becomes liable to pay 100% for the remaining of that calender year or policy period. Once the policy holder attains this level, the insurance company would pay 100% towards those services which are applicable to the deductible or co-insurance for the remaining of that calender year.
The cap would come with the co-insurance program as an added advantage which is offered annually. You may stop worrying about paying for your medical bills once you reach this cap up till the beginning of another year. You would need to start paying for the deductibles as soon as the new year begins. Go through the clause in your policy that talks about this stop-loss phenomenon. It is this clause that explains how you are being protected from the mounting healthcare expenses during an year which is full of health hazards. The stop-loss point is achieved by the member only when his payments towards co-insurance would rise to meet the services incurred. The carrier would pay 100% once these payments are calculated upon the total out-of-pocket figure thus achieved.
Total Comments: 8
Posted: Thu May 22, 2008 09:03 am Post Subject: Some Qs about Coinsurance
I'd like to ask you a couple of questions-
How does Property Coinsurance help towards equity in rating? What are graded rates? What are the service areas associated with Coinsurance?
Posted: Thu May 22, 2008 11:18 am Post Subject:
The 'Amount insured' & the 'Probability of risk' are the factors that would decide the premium of property insurance. This is probably the cause of its association with Coinsurance. Total losses are the less likely outcomes than the partial losses thus making the premium percentage of a total loss lower than the premium percentage.
If coinsurance would not have existed, then only the partial losses would only get covered. Thus the coverage need for partial losses being lower would have fetched lower premiums out of the pockets.
On the other hand, if coverage for partial losses would be the only ones available in the market, then there would have been un-scalable hikes in terms of premiums for the full coverages. Since Coinsurance has a control over the premium structures, hence it is said to have helped us attain an Equity in Rating.
Posted: Sun May 25, 2008 06:54 pm Post Subject: hi
hi, thanks for the valuable information shared.
Posted: Wed May 28, 2008 09:42 am Post Subject: What about the Recovery?
Sharing about graded rates, I must describe graded rates as an alternative to coinsurance for some of the carriers. Such grades are the discounts constituting a fair share of the worth of property insured. However we don't see a good number of insurers using these rates since these rates are dependent on the property evaluations which may not seem stable in the long run due to the constant updates to the worth of properties in the market.
It is necessary for the insurers to insure the properties by a considerable 80% below which the insured would need to share a loss equivalent to a % of the insurance that he already possesses above his actual insurance requirement. This 80% worth would signify the percentage of inflation. In case the insured procured it with a 100% need associated with it, then a coinsurance payout may be needed in connection with a resulting loss even beyond an year post the insurance purchase.
In case the coverage payment turns out to be greater than the worth of the property, then the premiums would be costlier.
As the payments made by the insurers would never exceed the actual cash value of the property, hence the insured would not gain through any kinda Overinsurance (Coverage payment > Property worth).
Property Coinsurance may be calculated on the basis of the following formula:
Recovery Amount = (Worth of Loss) x (Insurance possessed/Insurance needed) - Deductible
Hope this would help you ascertain things in the right direction.
Posted: Tue Jul 29, 2008 06:45 am Post Subject:
Thankz for sharing such a good article.Its really worth reading this :D
Posted: Tue Sep 02, 2008 04:06 am Post Subject:
I really like the graphic. It is simple and straight forward and it tells the story well. I have to answer these questions several times a day. I may use a similar graphic in order to make this easier for my clients.
Unless you are an insurance agent or work in the industry, deductibles, co-insurance, co-pays and stop losses make your hair hurt when you try to think about them.
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