What is the definition of co-insurance in insurance agreements?

Co-insurance in insurance agreements refers to a situation where insurers share the risk of a claim based on their respective contributions or shares of the total coverage. This means that when a claim is made, the insurers involved will pay claims proportionate to the amount of insurance each has underwritten.

In a co-insurance arrangement, each insurer is responsible for a percentage of the total risk. This shared responsibility can help spread out the risk and impacts of larger losses, which can stabilize the insurance market as a whole. It's different from a scenario where the insured pays a set deductible or fixed amount; instead, it emphasizes how the insurers collaborate financially according to the coverage each has provided.

This nuanced understanding of co-insurance is essential because it highlights the collaborative nature of risk management among multiple insurers, ensuring that they evenly distribute the financial burden of claims.