Co-insurance is a certain insurance that coexists with two or more insurance companies and that allows sharing the responsibility of a certain risk. In this way, for a specific period of time, companies must assume the risk and before that you have agreed with a customer.
The main objective of coinsurance is to be able to spread the risk among more than one insurance company, especially when the risk to be assumed is of great importance. In this way, the insurance company will have the security of not losing a lot of money in the event that it has to assume large expenses derived from the coinsurance.
The operation is simple: there is one or several insurance contracts in which different parts of the risk of an insured are covered. In the event that there is a single contract, a company will be responsible for agreeing and negotiating risk sharing with the other insurers.
Unlike what happens in reinsurance, in co-insurance the company continues to be of the total amount to be insured (that is, of the risk). In reinsurance, the insurance company (reinsurer) pays another to take over part of the risk.
Finally, we will mention some characteristics of coinsurance:
- It is a contract in which there are two or more insurance companies
- Each company will assume a part of the risk or premium
- The insured must pay each company the corresponding part of the premium
- The insurers that make up the contract are independent and known to the insured
- Each company must pay the corresponding part depending on the coverage of the risk that it has to assume