MATH QUESTIONS AND SOLUTIONS: CAR AND HEALTH INSURANCE

1. Your automobile insurance company offers you three insurance packages. The
first package is $1,000 a year with a $200 deductible. Option two is $800 a year
with a $500 deductible. Option three is $500 with a $1,000 deductible. If you
suffered an automobile accident with an estimate charge of $5,000, which option
would be the option to minimize your out of pocket payment?

Option 1: $200 + $1000 = $1200

Option 2: $500 + $800 = $1300

Option 3: $1000 + $500 = $1500

2. This time your motor vehicle accident is only $300. What is the best option to
select?
Option 1: $200 + $1000 = $1200

Option 2: $300 + $800 = $1100

Option 3: $300 + $500 = $800

3. Your insurance company will insure your car with an annual premium of $1000
or a monthly premium of $90 per month. Assuming you can invest your money at
5% interest in the bank, what is the best option?

$1000 upfront vs. $1029 with monthly payments

4. You have a chronic illness and need health insurance. You are choosing between
getting a health insurance plan that has a high deductible and low premium
(option 1) vs. a low deductible and a high premium (option 2).
High Deductible Low Deductible
Subscriber $2650 $200
Spouse $2650 $200
Family $5000 in network $500 in network
Drug Plan 80% after deductible met 50% after deductible
Doctors 80% in network 80% in network
Doctors 50% out of network 30% out of network
Hospital Charges 80% of bill 50% of bill
Premium $5,000/ year $10,000/year

Network: A list of doctors and hospitals that the insurance company has contracted with
to negotiate the best cost.

Scenario 1: You become sick and have to see your doctor. It is right after January 1
st
so
you havent met your deductible yet. Your office visit cost $150 and you were given
prescription that cost an additional $100. Which option is better?

Option 1(high deductible/low premium): $150 (office visit) + $100 (drugs) = $250
Remaining deductible = $2,400

Option 2(low deductible/high premium): $150 (office visit)
+ $100 (drugs) = $250
You pay deductible of -$200
Remaining balance = $50

Drug Plan: 50% ($50) = $25 (what insurance pays and what you pay)

Option 1: $250 + $5000 = $5250
Option 2: $225 + $10,000 = $10,225

5. You are hospitalized in March and have the option to pick between the two
insurance options again. You have paid $2,000 in health expenses so far this year.
You get your hospital bill as $10,000. Which option will cost you more?

Option 1: $650 (deductible) + $2,000 (hospital charges you pay) + $5,000 = $7,650

Option 2: $0 (deductible) + $5,000 (hospital charges you pay) + $10,000 = $15,000

6. Your family gets in an auto accident and has to go to the Emergency Room. So
far the family has had expenses of $2,000 for everybodys health care for the year.
The mom and two kids need to be seen and the total bill is $7,000. Which option
will cost you more?

Option 1: $3,000 (deductible) + $800 (hospital bill) + $5,000 (premium) = $8,800

Option 2: $0 (deductible) + $3,500 (hospital bill) + $10,000 (premium) = $13,500