What is a co-insurance clause?

A co-insurance clause is a legal term found within insurance claims law in North Carolina. It is an agreement between an insurer and an insured wherein the insured agrees to purchase insurance from the insurer covering a specific amount of risk. This agreement requires the insured to maintain a certain amount of insurance coverage, as stated in the clause. For instance, an insurer may require an insured to maintain 80% or 90% coverage for a specific property or risk in order for the insured to be fully covered in case of a claim. The co-insurance clause essentially states that any losses or claims in excess of the agreed-upon minimum amount of coverage will be shared between the insurer and the insured. In this situation, the insured is agreeing to pay a portion (e.g. 20% or 10%) of any claim that crosses the agreed-upon threshold. In other words, the insured would be expected to fulfill their obligation of paying a part of the claim in addition to the amount of insurance coverage provided by the insurer. In the event of a large claim, the co-insurance clause is beneficial for both the insurer and the insured. It helps protect the insurer from excessive claims, while the insured isn’t liable to pay the full amount of any particular claim. Thus, co-insurance clauses help both parties in the event of a claim as well as ensure that each party receives fair and equitable coverage.

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What is a co-insurance clause?

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