Notes
Risk and insurance
- Insurance shares the cost of rare, large losses. You pay a premium; the insurer pays covered claims. Ways to handle risk: avoid, reduce, accept, transfer.
Cost-sharing terms
- Deductible: what you pay first. Copay: a fixed fee. Coinsurance: a percent you pay after the deductible. Out-of-pocket maximum: the most you pay in a year.
- A higher deductible usually means a lower premium.
- Example: $4,000 bill, $1,000 deductible, 20% coinsurance: you pay $1,000 + 20% of $3,000 = $1,600.
Types of coverage
- Health: pays medical costs; use in-network providers. Auto: liability (harm to others), collision (your car in a crash), comprehensive (theft, hail, fire). Renters/homeowners: belongings, liability, and for owners the building. Life: pays beneficiaries; term is cheaper than whole life.
Topics in this unit
Each topic has its own short notes and practice.
Practice
$75 \times 12 = 900$.
$6000 - 1500 = 4500$.
You pay $1,000 plus 20% of $4,000, which is $800. Total $1,800.
Collision covers your car after a crash.
Taking on more of the risk lowers what you pay in premiums.
Life insurance replaces income for people who depend on it.
Free response
Write your answer first, then open the scoring guide.
Free-response question
Marco has a health plan with a $200 monthly premium, a $1,000 deductible and 20% coinsurance after the deductible. Use these made-up numbers.
(a) What is Marco's yearly premium cost?
Show the answer and scoring guide
$200 \times 12 = 2400$, so $2,400.
Check off the points you earned:
(b) Marco has a covered medical bill of $6,000. How much does he pay for that bill, and how much does the insurer pay?
Show the answer and scoring guide
He pays $1,000 plus 20% of $5,000, which is $1,000. His cost is $2,000. The insurer pays $6000 - 2000 = 4000$, so $4,000.
Check off the points you earned:
(c) Explain one tradeoff between a higher deductible and a lower deductible.
Show the answer and scoring guide
A higher deductible usually gives a lower premium but means Marco pays more before insurance helps if he needs care. A lower deductible costs more each month but lowers the first bill.
Check off the points you earned: