Insurance Basics — slides
Financial Literacy Club
Money After High School · Lesson 7
Insurance Basics
Health, auto, and renters insurance; premiums and deductibles.
12-minute lesson · learnwithflc.org
Insurance Basics · 1 / 18
Financial Literacy Club
Money After High School · Lesson 7
Insurance Basics
Health, auto, and renters insurance; premiums and deductibles.
12-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Define premium, deductible, coinsurance, and out-of-pocket maximum
- Calculate what you pay on a medical bill
- Compare two insurance plans for different needs
Warm-up
Why would anyone pay for insurance every month if they might never use it?
Think, then write your answer.
The big idea
Insurance Basics
Health, auto, and renters insurance; premiums and deductibles.
Money After High School · Lesson 7
Insurance lets you trade a small, predictable cost for protection against a large, unpredictable one.
Money After High School · Lesson 7
- Premium: what you pay regularly to have the insurance.
- Deductible: what you pay yourself before insurance starts paying.
- Copay: a flat fee for a service, like $30 for a doctor visit.
- Coinsurance: your share of costs after the deductible, like 20%.
- Out-of-pocket maximum: the most you'll pay in a year for covered care; after that, insurance pays 100%.
Money After High School · Lesson 7
Lower premiums usually mean higher deductibles, and vice versa. The right balance depends on how much you could pay if something happened.
Money After High School · Lesson 7
Health insurance at 18+
Under the Affordable Care Act, you can generally stay on a parent's health plan until age 26. Employers, colleges, and HealthCare.gov are other options.
See it
For a $5,000 covered bill with a $1,000 deductible and 20% coinsurance: you pay the first $1,000, then 20% of the remaining $4,000, for a total of $1,800. Insurance pays $3,200. Your yearly out-of-pocket maximum caps what you can owe.
$5,000 bill
Covered care
You pay the deductible
$1,000
Then 20% coinsurance
20% of $4,000 = $800
You pay $1,800
Insurance pays $3,200
Real example
Choosing a plan
Devon, 24, compares two hypothetical health plans from his employer:
- Plan A: $80/month premium, $3,000 deductible.
- Plan B: $180/month premium, $500 deductible.
Plan A costs $1,200 less per year in premiums. If Devon stays healthy, it's cheaper. But if he needs major care, he'd pay up to $2,500 more before coverage kicks in. He picks Plan A and keeps that $2,500 gap in his emergency fund.
Activity · pairs · 10 min
Split the Bill
- Plan: $1,000 deductible, 20% coinsurance, $4,000 out-of-pocket maximum.
- Bill 1: a $3,000 hospital bill. Pairs calculate what they pay and what insurance pays.
- Bill 2: a $30,000 surgery. Pairs calculate, then apply the out-of-pocket maximum.
- Discuss why the deductible belongs in the emergency fund.
Check for understanding · 1 of 3
You have a $1,000 deductible and 20% coinsurance. You get a $5,000 covered bill (and haven't hit your out-of-pocket maximum).
How much do you pay?
- A$1,000
- B$5,000
- C$1,800
- D$3,200
C. $1,800
$1,000 deductible + 20% of the remaining $4,000 ($800) = $1,800.
Check for understanding · 2 of 3
Under the Affordable Care Act, you can generally stay on a parent's health plan until age 26.
- True
- False
True
That's one of the most common ways young adults stay covered.
Check for understanding · 3 of 3
What's usually true about premiums and deductibles?
- ALower premiums usually come with higher deductibles.
- BThey're always the same amount.
- CHigher premiums always mean higher deductibles.
- DDeductibles don't affect what you pay.
A. Lower premiums usually come with higher deductibles.
You're choosing between paying more up front each month or more when you actually need care.
Remember
Key takeaways
- Premium = regular cost. Deductible = you pay first.
- Coinsurance = your share after the deductible.
- Out-of-pocket max caps your yearly costs.
- Parent's health plan until 26 (generally).
- Keep your deductible in your emergency fund.
Discuss
Talk it over
- Would you choose a low premium or a low deductible? Why?
- Why do you think young, healthy people sometimes skip insurance? What's the risk?
Exit ticket
What's the difference between a premium and a deductible?
Answer on your exit ticket before you leave.
Nice work today.
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