68. 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?
Answer: C
The Insurer will pay $800.
After the $100 deductible is met, the remaining loss to be covered is $1,000. With an 80% coinsurance, the Insurer will pay 80% of that amount, which totals to $800.
A) $100
This option represents only the deductible amount that the Insured must pay before the insurance coverage begins. It does not account for the coinsurance or the total loss incurred, making it incorrect.
B) $200
This amount does not accurately reflect the coinsurance calculation. After the deductible of $100 is subtracted from the total loss of $1,100, the remaining $1,000 is subject to coinsurance, where 20% would be paid by the Insured, resulting in a much larger amount for the Insurer.
C) $800
This is the correct answer. After applying the $100 deductible to the $1,100 loss, $1,000 remains. The Insurer covers 80% of this remaining amount, resulting in a payment of $800.
D) $1,000
This option incorrectly suggests that the Insurer would pay the entire amount after the deductible. However, the coinsurance requires the Insured to pay a portion (20%) of the remaining costs, which reduces the Insurer's payment to $800.
Conclusion
The correct answer, $800, is derived from applying the deductible and the coinsurance rules accurately. All other options fail to account properly for the deductible or the coinsurance percentages, leading to incorrect calculations of the Insurer's payment.