Waiver of Coinsurance Clause

A waiver of coinsurance clause is a provision in an insurance policy that removes the insured’s obligation to pay a portion of a covered loss (coinsurance) under specified conditions. It most commonly appears in property insurance but can also apply to health plans and, occasionally, other insurance types.

Key takeaways

  • The clause specifies when the insurer will not require the policyholder to pay coinsurance.
  • It typically applies to smaller claims but can sometimes apply to total losses.
  • Policies that include this waiver often carry higher premiums.
  • Exact terms and limits vary by policy—always read the clause carefully.

How it works

Coinsurance normally requires the policyholder to insure a certain percentage of an asset’s value (for example, 80%). If the insured underinsures or a claim occurs, the insurer may reduce the payout proportionally, leaving the policyholder to cover the shortfall.

A waiver of coinsurance relieves the policyholder from that proportional sharing requirement in circumstances defined by the policy. Common characteristics:
Frequently limited to small or specified types of claims.
 Occasionally applies in the event of a total loss, depending on wording.
* Results in higher premiums because the insurer assumes more risk.

Example (property insurance)

If a coinsurance clause requires coverage of at least 80% of a building’s value:
Building value: $200,000
 Required insurance: $160,000 (80%)
Without a waiver, a total loss would typically pay $160,000 and leave the owner responsible for the $40,000 shortfall. A waiver of coinsurance that applies to total loss would allow the insurer to pay the full $200,000 instead.

Special considerations (health insurance)

Some health plans use an 80/20 split after the deductible (insurer pays 80%, insured pays 20%). A coinsurance waiver for a specific procedure or circumstance would eliminate the insured’s 20% share for that item. For example:
* $80,000 surgery → insured’s 20% coinsurance = $16,000
A waiver that covers that surgery would save the insured $16,000. In practice, waivers in health insurance more commonly cover smaller, prearranged services rather than large, unexpected procedures.

Practical advice

  • Read the exact policy language to understand when and how the waiver applies.
  • Ask your agent or insurer whether the waiver covers total loss, specific claim types, or only small expenses.
  • Compare premium cost versus the potential benefit of the waiver to decide if it’s worth purchasing.
  • Verify any limits, exclusions, and conditions (e.g., time frames, prepayment requirements).