Nick and Sheila Preston Are Married and Have Purchased a Comprehensive

question 21

Essay

Nick and Sheila Preston are married and have purchased a comprehensive major medical policy which covers them and their two sons,Wally and Brent.The policy has a $500 calendar-year family deductible,a $2,500 stop-loss provision,and an 80% coinsurance clause.The following losses occur: On January 1,Sheila was treated for an infection at a cost of $200; on July 1,Wally was treated for an injury suffered while waterskiing at a cost of $10,000; on December 5,Nick underwent eye surgery at a cost of $1,500; and on January 5 of the following year,Brent was treated for a broken leg at a cost of $2,000.
​
How much will the insurer pay for each of these losses?

---

Definitions:

End-of-period Spreadsheet

A document or report summarizing the financial status of a company at the end of a fiscal period, including assets, liabilities, and equity.

Statement of Stockholders' Equity

A financial document that represents the changes in the equity interests of a company’s shareholders over a reporting period, including the issuance or purchase of shares, dividends paid, and earnings or losses.

Net Loss

The amount by which expenses exceed revenues, indicating that a business spent more than it earned during a period.

End-of-period Spreadsheet

An end-of-period spreadsheet is a tool used in accounting to compile all account balances at the end of a reporting period for review and adjustment.