INSURECALC365 RESOURCE
Worked insurance examples
See transparent numerical examples of premium budgets, deductible tradeoffs and coverage shortfalls.
Example 1: A premium increase
A policy costs $165 per month. Its simple annual premium is 12 × $165 = $1,980. If the next year’s rate increases by 5%, the estimated new annual premium is $2,079 and the monthly equivalent is $173.25.
This example assumes the entire premium rises uniformly and excludes billing fees.
Example 2: Two plans and a covered claim
Plan A has a $1,800 annual premium and $1,000 deductible. Plan B has a $1,400 annual premium and $2,500 deductible. For a single $4,000 eligible loss with no coinsurance, total modeled annual costs are $2,800 for A and $3,900 for B.
With no claim, the modeled cost is $1,800 for A versus $1,400 for B. This demonstrates why the cheaper premium is not automatically the cheaper year.
Example 3: Higher deductible tradeoff
A higher-deductible plan saves $500 per year in premium but increases the deductible from $1,000 to $2,500. The additional deductible exposure is $1,500. One sufficiently large eligible claim could exceed the premium savings by $1,000.
The scenario is not an expected-value calculation; it does not assign probabilities to claims.
Example 4: Medical coinsurance
A covered allowed charge is $6,000. The annual deductible is $2,000 and $500 has already been met. The remaining deductible is $1,500, leaving $4,500 subject to 20% coinsurance. Estimated cost sharing is $1,500 + $900 = $2,400, before applying any remaining out-of-pocket maximum.
Real plans may process individual services, copays, and deductible categories differently.
Example 5: Life coverage planning
Replacing $65,000 of annual income for ten years suggests $650,000. Add $125,000 for debts and final expenses and $40,000 for other goals; subtract $200,000 in existing resources. The resulting simple target is $615,000.
This is a starting point, not an actuarial calculation. It ignores inflation, investment returns, and survivor needs over time.
Example 6: Replacement-cost gap
Estimated rebuild cost is $350,000; the policy limit is $300,000 with a $2,500 deductible. In a simplified full covered loss, the insurer pays no more than $297,500 and the homeowner bears at least $52,500.
Other policy terms can materially change the payout, so check any coinsurance or extended-replacement provisions.