Insurance to Value (Study Note)

Coinsurance in insurance provided jointly with another or others. In primary property insurance, coinsurance is an arrangement by which the insurer and the insured share, in a specific ratio, payment for losses covered by the policy, after the deductible is met. Under a coinusrance arrangement, the person insured by the primary policy is regarded as a joint insurer and becomes jointly and proportionately responsible for losses. A more specific definition of property coinsurance will be given once a few preliminary concepts are described. Formulas and numerical examples follow the definitions. While the concept of coinsurance is simple to grasp, the actual term "coinsurance" may be confusing because of the wide range of forms the coinsurance arrangement assumes. The function of coinsurance may differ substantially between primary insurance and reinsurance, and also among various lines of business. Although the term typically applies to an insured, when multiple insurance policies cover a single loss, the insurance companies who share in the liability may also be referred to as "coinsurers." In the study of primary property insurance, it is important that the type of coinsurance arrangement specific to this line and layer not be confused with other forms in existence.