Into To Insurance
Define "insurance" in one clear sentence and give its primary purpose.
Answer: Insurance is a contract in which an individual or entity receives financial protection or reimbursement against losses; its primary purpose is to transfer risk.
Name two coverages that are required or commonly required to legally drive in most U.S. states.
Answer: Liability coverage and (in many states) uninsured/underinsured motorist coverage; at minimum liability is required in almost every state.
Define "copay" and "coinsurance." Give a short example of each.
Answer: Copay is a fixed amount paid per visit (e.g., $20 per primary care visit).
Coinsurance is a percentage of costs after deductible (e.g., 20% of a $500 procedure = $100).
You rear-end another car while texting and both cars have severe damage. Which coverages are needed to pay for (a) repairs to your vehicle and (b) the other driver’s vehicle?
Answer: (a) Your collision coverage (to repair your vehicle). (b) Your liability coverage (to pay for the other driver’s vehicle/property damage).
Define "phishing" and "skimming" and give one example of each.
Answer: Phishing = attempting to obtain confidential info via deceptive emails/links (example: fake bank email asking you to log in).
Skimming = electronic theft of card data via a compromised card reader (example: ATM card reader that copies card data).
What is a "premium"? How does it differ from a deductible?
Answer: Premium is the specified amount paid periodically to an insurer for coverage; deductible is the amount you agree to pay toward losses before the insurer begins to pay.
Define "collision" vs. "comprehensive" coverage and give one example claim for each.
Answer: Collision covers damage to your vehicle from hitting or being hit by another vehicle/object (example: repairing front-end after hitting a pole).
Comprehensive covers non-collision perils (example: replacing a car window smashed during a break-in or hail damage).
If a plan has a $300 deductible, you have already paid $50 toward it, and you receive $850 in covered care with 25% coinsurance after the deductible - calculate the total amount you pay. Show steps.
Answer: Remaining deductible = $300 - $50 = $250. Amount subject to coinsurance = $850 - $250 = $600. Coinsurance = 25% of $600 = $150.
Total patient pays = $250 + $150 = $400.
While parked overnight, your car window is broken during a break-in. Which auto coverage handles this and why?
Comprehensive coverage - it covers non-collision perils like vandalism and theft-related damage.
What is insurance fraud?
Answer: Insurance fraud is deliberate deception to obtain unwarranted benefits or payments. Claimant example: staging an accident to collect auto insurance. Provider example: billing for services not provided or upcoding procedures to increase reimbursement.
Define "coverage limit" and "out-of-pocket maximum" and explain how they interact in a loss.
Answer: Coverage limit is the maximum amount an insurer will pay for a loss or policy period; out-of-pocket maximum is the most you must pay in a year for covered services.
Interaction: you pay deductibles/copay/coinsurance until you reach the out-of-pocket maximum (after which insurer pays 100% of covered costs), but insurer will not pay beyond the coverage limit.
What is "uninsured/underinsured motorist" coverage and why is it important?
Answer: It provides coverage if another driver at fault has no or insufficient insurance; important because it protects you from bearing costs when the at-fault driver cannot pay.
Define "out-of-pocket maximum." How does reaching it affect subsequent covered expenses that year?
Answer: Out-of-pocket maximum is the maximum you will pay for covered services in a year; after reaching it, the insurer pays 100% of covered costs (up to policy limits) for the rest of the year.
You have renters insurance with a $1,000 deductible. A thief steals an $800 TV. How much will the insurer pay and why?
Insurer pays $0 because the loss ($800) is less than the deductible ($1,000); the insured bears the full loss.
What are some of the things that would typically NOT be covered by travel insurance?
Answer: Pre-existing conditions, pregnancy, traveling to warzone/natural disaster.
Compare Term Life Insurance and Whole Life Insurance in terms of cost, duration, and cash value.
Answer: Term: lower cost, covers a defined period (e.g., 10-30 years), no cash value.
Whole: higher premiums, permanent coverage, builds cash value.
Explain "gap" insurance: when would you buy it and how does it protect you?
Answer: Gap insurance covers the difference between the vehicle's loan/lease balance and its actual cash value after a total loss; buy it when you owe more on a financed/leased car than its market value (for example, right after purchase).
What is an in-network provider and why does using one typically cost less for the insured?
Answer: An in-network provider has a contract with the insurer to accept negotiated rates; using them costs less because insurers have pre-negotiated lower fees and count those payments toward deductibles and out-of-pocket maximums.
Sarah has homeowners insurance with a $2,000 deductible and a $300,000 coverage limit. She has $3,900 in covered fire damage. How much does Sarah pay and how much does insurance pay? Show calculation.
Answer: Sarah pays deductible = $2,000. Insurer pays $3,900 - $2,000 = $1,900.
List 4 factors that affect your car insurance premiums.
Answer: Age, gender, credit score, location, car type, accident/claim history, etc.
Describe how insurance companies make a profit.
By collecting the premiums of many while only planning to pay out the claims of a few. They rely on statistics and collected data to predict the likelihood of a claim and set premiums accordingly.
A driver has a policy with a $2,000 deductible and $50,000 coverage limit. They cause $4,900 in damage to their car. Show the insurer's payment and the insured's out-of-pocket cost and explain the calculation.
Answer: Insurer pays $4,900 - $2,000 = $2,900; insured pays the $2,000 deductible. (Policy limit not exceeded.)
A procedure's allowed amount is $1,200. Your plan has a $500 deductible (not yet met) and 20% coinsurance after deductible. How much do you pay total for the procedure? Show steps.
Answer: Pay deductible first: $500. Remaining allowed amount = $1,200 - $500 = $700. Coinsurance = 20% of $700 = $140.
Total patient pays = $500 + $140 = $640.
Janelle has car insurance with a $50,000 coverage limit and a $2,500 deductible (includes collision). She gets into an accident causing $4,900 in damages. How much will her insurance company pay, and how much does Janelle pay? Explain.
Answer: Insurance pays $4,900 - $2,500 = $2,400.
Janelle pays the $2,500 deductible. (Coverage limit not exceeded.)
What are the 3 types of renters insurance mentioned in class?
Answer: Personal property, Liability, Additional expenses.