What are reinsurance and coinsurance?
1. Coinsurance
We start by talking about coinsurance because it is the simplest term to understand a priori. To understand it perfectly, you must familiarize yourself with another terminology: insurance concurrence. As its name indicates, it is about the different insurances, with different coverage, periods of validity, and insured sums, of the same good. In this case, the insurance is contracted with different companies, which do not have information about the entire process.
Now, coinsurance is the same as insurance concurrence but involves insurers. In this case, an asset is insured with various companies, maintaining its validity and with different participation percentages.
So that the insured does not have to carry out too many procedures, the company that assumes the most risk is in charge of managing all the contracting, as well as the possible management of claims.
This insurer is known as an opener. It is up to this insurer to fully manage the coinsurance, taking charge of collecting the different premiums and solving claims. The client only finalizes a document, which has been endorsed by the rest of the companies.
If you are wondering what coinsurance is for, the reality is that it is very useful for insurers to take less risk depending on which products. In the contract, the percentage participation of each company is perfectly detailed, so that everything is a transparent process.
2. Reinsurance
Coinsurance is not the only way insurance companies have to minimize risk in the event of a claim. Reinsurance is an option that is also quite used today. We could define it as insurance.
In order not to lose equity value, the company takes out insurance to cover it in the event of having to pay large sums for major claims. Imagine that you have a residential building insured with a specific company. Part of the building has burned down and the insurer must cover you for damages worth 800,000 euros. If the company has reinsurance, they will compensate you with the total amount, but then they will receive the part agreed to in the reinsurance.
Do reinsurance and coinsurance affect the user?
The truth is that this question is difficult to answer. As an end-user of an insurance product, these issues shouldn’t affect you. If you have opted for the concurrence of insurance and report a claim, each insurer must be in charge of paying the corresponding part.
If the claim occurs with a coinsurance, it is the opening company that manages everything and the one that must be in charge of facing the amount before the user. Then it is the insurers participating in the contract who must replace that balance.
Finally, if your insurer has a reinsurance contract and you have reported a large claim, what should happen is that the company itself pays the amount, which will then claim the reinsured part from the other entity.
What are the out-of-pocket maximums?
Any money you spend on deductibles, copays, and coinsurance counts toward your out-of-pocket maximum. Once you reach your out-of-pocket maximum, your health insurance plan covers 100% of all covered services for the rest of the year. However, premiums don’t count, and neither does anything you spend on services your plan doesn’t cover.
