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My medical insurance has $1,500 deductible and then covers 90% of my medical expenses above the...

  1. My medical insurance has $1,500 deductible and then covers 90% of my medical expenses above the deductible amount up to a maximum of $100,000. Draw the payoff diagram for my insurance policy.

Solutions

Expert Solution

First draw the following table:

Amount Claimed by me Amount Paid by insurance company
(here put in amount claimed)

If amount claimed is more than 1500, then amount paid will be

Minimum of either 100,000 or whatever amount claimed minus 1500.

If amount claimed is 1500 or less, no amount will be paid since that is the deductible amount.

So upto,

Claim of 1500, amount paid is zero.

Any claim of above 101,500 will have an amount claim of maximum 100,000.

Anything in between will be as per the formula I wrote above.

jeff jeffy answered 2 years ago
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