What is the definition of "coinsurance" in the context of life insurance?

Coinsurance, in the context of life insurance, refers to a provision that involves the sharing of costs between the insurer and the insured after a deductible has been met. This means that once the insured pays a specified amount out-of-pocket (the deductible), both the insurer and the insured will cover a percentage of the remaining expenses.

In life insurance, this concept is more commonly associated with health insurance, but the principle demonstrates how costs can be distributed between the insurer and the policyholder. Coinsurance is a way to mitigate risk for both parties—insurers maintain some level of shared risk, while policyholders can expect that their claims will not be fully covered by the insurance provider. This arrangement encourages both the insurer and the insured to be cautious about the costs incurred.

Understanding coinsurance is important for anyone in the insurance field, as it impacts how claims are processed and financial responsibilities are shared.