Benefit Ratio Insurance: A Comprehensive Overview
Benefit ratio insurance, also known as coinsurance, is an agreement between an insurer and an insured party where the insurer agrees to cover a predetermined percentage of the insured’s losses, while the insured party covers the remaining percentage. In essence, it’s a risk-sharing mechanism that offers several advantages to both parties. For example, consider a scenario where a homeowner’s insurance policy has an 80% coinsurance clause. In the event of a covered loss of $100,000, the insurance company would pay $80,000 (80% of $100,000), and the homeowner would be responsible for the remaining $20,000 (20% of $100,000).