An insured has a deductible of $100 and 80%/20% coinsurance. How much will the insurer pay if the insured incurs a loss of $1,100 immediately after enrolling in the plan?

Rationale

The insurer will pay $800 for the loss incurred by the insured.

After the insured incurs a loss of $1,100, the deductible of $100 must first be subtracted, leaving a balance of $1,000. Since the coinsurance clause dictates that the insurer covers 80% of this remaining amount, the insurer will pay $800.

A ($100) YOUR ANSWER

This choice represents only the deductible amount that the insured must pay before the insurance coverage takes effect. The insured is responsible for the first $100 of any loss, but this does not reflect the total amount that the insurer will cover for the incurred loss.

B ($200) YOUR ANSWER

This option suggests an incorrect calculation of the insurer's payment. After applying the deductible of $100 to the total loss of $1,100, the remaining amount is $1,000. The insurer's 80% coinsurance payment on this amount would be $800, not $200.

C ($800) CORRECT

This is the correct answer. After subtracting the $100 deductible from the $1,100 loss, the remaining amount is $1,000. The insurer pays 80% of this amount, which equals $800, making it the correct calculation of the insurer's payment.

D ($1,000) YOUR ANSWER

This choice incorrectly assumes that the insurer pays the entire remaining amount after the deductible. However, the coinsurance agreement specifies that the insurer only covers 80% of the $1,000 balance, resulting in a payment of $800 instead of $1,000.

Conclusion

The calculation of insurer payments in this scenario involves understanding deductibles and coinsurance. After applying the $100 deductible to the $1,100 loss, the insurer covers 80% of the remaining $1,000, resulting in a payment of $800. This emphasizes the importance of accurately interpreting insurance policies to ascertain actual payout amounts.

An insured has a deductible of $100 and 80%/20% coinsurance. How much will the insurer pay if the insured incurs a loss of $1,100 immediately after enrolling in the plan?

The insurer will pay $800 for the loss incurred by the insured.

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