Co-Insurance

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Business co-insurance saves money on policies at the cost of assuming a higher financial risk if there is a loss

You are familiar with co-insurance like a 80/20 health insurance split

Co-insurance makes sense for low risk businesses like commercial office types


Co-insurance is known as cost-sharing between an insurer and a policyholder.

Co-insurance clauses are part of multiple types of insurance policies.

These types of clauses have different purposes depending on each setting. 

This is a business insurance policy that requires you to assume some of the risk. 

Co-Insurance

What Is Co-Insurance and What Does It Cover?

Commercial business co-insurance is just what it sounds like, you partner with an insurer and determine what percentage you each will cover of the asset. 

For example, in terms of property insurance, co-insurance is considered the percentage of property value that a policyholder will need to cover.

Co-insurance is known as cost-sharing between an insurer and a policyholder. 

Co-insurance clauses are part of multiple types of insurance policies.

These types of clauses have different purposes depending on each setting. 

For example, in terms of property insurance, co-insurance is considered the percentage of property value that a policyholder will need to cover.

This clause will require the policyholder to pay that percentage of an amount if they faced a loss and do not have adequate insurance to cover the loss.

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Co-insurance clauses cover a specific ratio of costs in various policies.

For instance, in medical and dental insurance policies, medical and dental expenses are covered by a certain ratio such as 80/20.

This means the insurance company covers 80% of your costs while you would have to pay 20% as your out-of-pocket costs.

Co Insurance

You’ll find that co-insurance clauses can lead to a penalty on the insured if they did not buy enough coverage to reach the co-insurance percentage of their policy.

In case of a loss, if one purchased 20% less coverage, the insurer can reduce a claim payment by 20%.

If a loss occurs and the policyholder did not purchase enough coverage, the co-insurance clause means the insurance company can decrease the claim payment.

Dodo Definitions

insurance terms explained:

Independent Insurance Agency:  You can buy insurance from an indendent agency but they represent other companies (typically several).  For example, an independent agent who works for Acme Insurance Agency might sell you an auto insurance policy insured by Travelers Insurance.

What Types of Businesses Need Co-Insurance?

The majority of businesses will likely need insurance policies that include a co-insurance clause.

Commercial property insurance policies include co-insurance clauses, which means any business operating in an office, manufacturing site, or any commercial property will likely have a policy with a co-insurance clause.

In addition, the health and dental policies of business owners and employees may have a co-insurance clause where the policyholders have to pay for a specific ratio of their medical or dental care.

As such, most businesses will need co-insurance.

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