What does the term 'coinsurance' refer to in insurance?

The term 'coinsurance' specifically refers to a cost-sharing arrangement in which the insured pays a predetermined percentage of covered expenses after they have satisfied their deductible. This means that once the deductible is met, the insurance company and the insured share the remaining costs of covered services or claims based on the specified percentage. For instance, in a typical health insurance plan, if the coinsurance is set at 20%, the insured would pay 20% of any eligible medical expenses while the insurance company covers the remaining 80%.

This arrangement plays a significant role in managing healthcare costs, as it incentivizes insured individuals to be more judicious with their healthcare usage while also lowering premiums. Coinsurance typically applies after the deductible has been reached, meaning the insured is responsible for part of the costs but not the entire expense, which offers financial protection.

In contrast, the other options describe different concepts related to insurance but do not capture the essence of what coinsurance means. While a penalty for late premium payment may affect policy status, it is unrelated to the sharing of costs for covered services. Business insurance is a broad category that encompasses various types of coverage and does not define coinsurance specifically. Lastly, the total cost of all insurance premiums represents the aggregate financial commitment to insurance