Waiver Of Coinsurance Clause

A waiver of coinsurance clause refers to language in a policy that states the insurance company will not require the policyholder to pay coinsurance, or a percentage of the total claim, under certain conditions.

In many property claims, a policyholder may receive, for example, only 80 percent coverage for their claims. In these cases, the homeowner is required to pay the remaining 20 percent in coinsurance. A waiver of coinsurance clause relinquishes the homeowner’s requirement to pay coinsurance. Generally, insurance companies tend to waive coinsurance only in the event of fairly small claims. In some cases, however, policies may include a waiver of coinsurance in the event of a total loss.

While the specific language insurance companies use in writing waiver of insurance clauses can vary, they all are similar in theory.

A waiver of coinsurance clause is particularly valuable to a policyholder in the event of a total loss. For instance, say a coinsurance clause requires a policyholder to insure a minimum of 80% of the property's actual value. Thus, if a building is worth $200,000, the property owner should purchase at least $160,000 worth of insurance. In the event of a total loss, the policy would pay out the $160,000 and the building owner would be responsible for the remaining $40,000, unless the policy included a waiver of insurance clause, in which case the insurance company would pick up the entire $200,000.

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.

A waiver of insurance clause is most common among property insurance. However, it also can apply to health insurance, and in fairly rare cases, other insurance types.

For instance, some health insurance policies are 80/20 plans, with the insurance company picking up the 80% of expenses once the deductible is met, but with 20 percent coinsurance required by the insured. While it is rare, a waiver of coinsurance clause would eliminate the required 20 percent payment by the insured in specific situations. In the event a patient requires an $80,000 surgery, a waiver of coinsurance covering that procedure would save the patient a $16,000 coinsurance payment.

As is the case with property insurance, however, a waiver of coinsurance in health care often covers far-smaller amounts. They typically come into play when patients pay in advance for specific, relatively inexpensive services at the time of their delivery in cash, for instance.