What Is a Waiver of Coinsurance Clause?

A waiver of coinsurance clause is a provision in an insurance contract stating that the insurer will not require the policyholder to pay coinsurance, or a percentage of the total claim, under certain conditions.

These clauses are most commonly found in property insurance but can also apply to health insurance and, in fairly rare cases, other types of insurance.

How a Waiver of Coinsurance Clause Works

An individual or business with property insurance may receive only 80% coverage, meaning they are required to pay the remaining 20% in coinsurance should something happen to their property and they qualify to make a valid claim for compensation. A waiver of coinsurance clause relinquishes this requirement for the policyholder to share the burden and pay some of the expenses incurred out of their own pocket.

Generally, insurance companies tend to waive coinsurance only for fairly small claims. That said, in some cases, policies may also include a waiver of coinsurance in the event of a total loss.

The specific language insurance companies use in writing waiver of coinsurance clauses can vary, although they all are similar in theory. Typically, consumers can expect to pay higher insurance premiums for policies with a waiver of coinsurance clause, as it puts greater liability on the insurance company.

Example of a Waiver of Coinsurance Clause

A waiver of coinsurance clause is particularly valuable to a policyholder in the event of a total loss. Say a coinsurance clause requires a policyholder to insure a minimum of 80% of the property's actual value. Thus, if a building is worth $200,000, the property owner should purchase at least $160,000 worth of insurance. In the event of a total loss, the policy would pay out the $160,000 and the building owner would be responsible for the remaining $40,000. That would, of course, change if the policy included a waiver of coinsurance clause, in which case the insurance company would pick up the bill for the entire $200,000.

Special Considerations

As previously mentioned, a waiver of coinsurance clause can sometimes be applied to health insurance, as well as, on the odd occasion, to other types of insurance products.

Some health insurance policies are 80/20 plans, meaning that the insured is responsible for 20% of medical costs, while the insurance company coughs up the remaining 80%—provided the client paid the deductible.

In the rare scenario that a waiver of coinsurance clause is applied, it would eliminate the required 20% payment by the insured in specific situations. In other words, should a patient require an $80,000 surgery, a waiver of coinsurance covering that procedure would save the patient from shelling out $16,000 on coinsurance. As is the case with property insurance, however, a waiver of coinsurance in healthcare often covers far smaller amounts. They typically come into play when patients pay in advance for specific, relatively inexpensive services at the time of their delivery.