What does the term "coinsurance" mean?

Coinsurance is a term used in insurance to refer to a provision that requires the insured party to pay a certain percentage of the loss incurred after they have met their deductible. This concept is often applied in property insurance to promote the insured's interest in maintaining adequate coverage and to encourage risk management. The coinsurance percentage is typically specified in the policy, and it ensures that the insured shares in the financial responsibility of their claims.

For example, if a policy has a coinsurance requirement of 80%, and the property is underinsured at the time of a loss, the insurer will only cover a portion of the claim proportional to the coverage that was actually maintained. This effectively encourages policyholders to insure their properties to a realistic value, reflecting their actual worth.

The other options reflect different concepts within insurance. Sharing coverage with another policy is not the same as coinsurance; it relates more to other forms of coverage collaboration. A penalty for late payment of premiums pertains to policy management and compliance rather than loss sharing. Covering multiple properties under one policy is a feature related to policies but does not describe the foundational concept of coinsurance, which is specifically about the sharing of loss between the insurer and insured after the deductible is satisfied.