In a health insurance policy, an insured has an out-of-pocket limit of $10,000, a deductible of $500, and an 80%/20% coinsurance. The insured incurs $50,000 of covered losses in an accident. How much will the insurer have to pay?

Rationale

The insurer will have to pay $40,000.

To calculate the insurer's payment, we first determine the total expenses incurred after applying the deductible and coinsurance. After the insured pays the $500 deductible, the remaining covered loss is $49,500. The insurer covers 80% of this amount, resulting in a total payment of $40,000.

A ($35,500) YOUR ANSWER

This amount reflects an incorrect calculation of the insurer's payment. It may incorrectly consider the deductible and coinsurance without accurately accounting for the total covered losses after the deductible is applied.

B ($39,600) YOUR ANSWER

This choice also results from a miscalculation. It appears to be derived from an incorrect application of the coinsurance percentage on the remaining amount after the deductible, possibly rounding off inaccurately or miscalculating the total loss covered by the insurer.

C ($40,000) CORRECT

After the insured pays the $500 deductible, the remaining amount of covered losses is $49,500. The insurer pays 80% of this amount, which is $40,000. This is the correct calculation for the insurer's payment.

D ($49,500) YOUR ANSWER

This option suggests that the insurer would pay the entire remaining amount after the deductible, which is incorrect. The policy clearly states that after the deductible, only 80% of the covered losses will be paid by the insurer, not the total remaining amount.

Conclusion

In summary, the calculation of the insurer's payment involves first applying the deductible to the total covered losses, which leaves an amount of $49,500. The insurer then pays 80% of this remaining amount, resulting in a total payment of $40,000. Understanding the terms of the policy, including the deductible and coinsurance, is crucial for accurately determining the insurer's responsibility.

In a health insurance policy, an insured has an out-of-pocket limit of $10,000, a deductible of $500, and an 80%/20% coinsurance. The insured incurs $50,000 of covered losses in an accident. How much will the insurer have to pay?

The insurer will have to pay $40,000.

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