Coinsurance

In insurance, coinsurance (or co-insurance or out-of-pocket cost) is the portion of a loss which you as an insurance policy holder must pay for yourself. Depending on the insurance policy you have, coinsurance may apply on a per-claim basis or on an annual basis.

Example: A policyholder takes out broken glass insurance with a 200-franc out-of-pocket contribution. When their 1000-franc glass vase is damaged, the insurance covers 800 francs of the loss. The policyholder has to cover the remaining 200 francs out of their own pocket, in addition to the insurance premiums which they pay.

One of the reasons why insurers make policyholders pay part of the cost of claims out of their own pocket is that doing so encourages policyholders to take steps which help prevent losses. Without out-of-pocket costs, policyholders would have little financial incentive to avoid perils because they would not have to face the financial consequences of a loss.

On Swiss insurance policies, out-of-pocket costs are deducted in two ways: as a percentage (a 10 percent coinsurance payment, for example) and as a flat-rate or deductible (a 200-franc copayment, for example).

Some Swiss insurance companies, such as health insurance providers, impose both flat-rate (copayment or deductible) and proportional out-of-pocket costs (coinsurance in the strict sense). A flat-rate out-of-pocket amount which applies to the entire benefit (normally per year), rather than to each individual claim, is called a deductible.

Different out-of-pocket cost models apply to different insurance types and policies. The rule of thumb in every case is: The lower the out-of-pocket costs, the higher the premiums.

Out-of-pocket costs are present on numerous Swiss insurance policies, including pet insurance, health insurance, supplementary health insurance, hospital insurance, household insurance, car insurance and travel insurance.

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at moneyland.ch.