What does the term "coinsurance" typically imply in insurance policies?

The term "coinsurance" typically implies shared risk between the insurer and the insured. In an insurance context, coinsurance refers to a clause in property insurance policies where the policyholder agrees to insure their property for a specific percentage of its value, often around 80%, 90%, or 100%. If the insured property is underinsured at the time of a claim, the insured may not receive the full amount of the loss. This arrangement encourages the policyholder to insure their property sufficiently to avoid bearing a greater portion of the risk.

When a claim is filed, the insurer covers a percentage of the loss, but if the insured amount is less than the stipulated coinsurance percentage, the policyholder may have to pay a portion of the loss out of their own pocket. This mechanism not only helps control costs for the insurer but also motivates policyholders to properly assess and insure their property to mitigate the risk of underinsurance.

The other choices do not accurately capture the essence of coinsurance. For instance, while there could be instances of higher premiums if a policyholder chooses a lower coverage amount, this does not define coinsurance itself. The concept of minimum coverage pertains more to policy limits and requirements rather than coinsurance specifically. Total loss coverage suggests that