The insurance study toolkit
Understand the math. Not just the answer.
Three common insurance calculation patterns, explained step by step. Try a worked example, then change the numbers to see why the result changes.
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01—06
Plan · Understand · Prepare
Understand the answer
Try the example, then change a number.
The fields already contain a worked-example scenario. Calculate it to reveal the formula and reasoning—not just the final number.
Simplified exam model: apply the coinsurance ratio to the covered loss, subtract the deductible, then cap payment at insurance carried. No agreed-value waiver, special sublimit or valuation dispute.
Educational use only. This is not a claim estimate or coverage determination.
The reference desk
Insurance math formulas and worked examples
Property coinsurance: required insurance = property value × required percentage. In this simplified model, payment = covered loss × min(insurance carried ÷ required insurance, 1), less the deductible, bounded by zero and the insurance carried. With a $200,000 property, 80% requirement, $120,000 carried, $40,000 loss and $1,000 deductible, required coverage is $160,000, the ratio is 75%, and the model payment is $29,000.
Actual cash value: replacement cost minus depreciation. A $10,000 item with 30% depreciation has $7,000 ACV. After a $1,000 deductible, the model payment is $6,000, assuming the policy limit does not reduce it.
Health cost sharing: apply the remaining deductible, then the member’s coinsurance percentage to the remaining allowed charge. Cap the combined member cost at the remaining out-of-pocket maximum. For $10,000 allowed, a $1,000 deductible, 20% member coinsurance and $3,000 remaining maximum, member cost is $2,800 and insurer cost is $7,200.
Property coinsurance penalizes insufficient insurance in this model; health coinsurance shares a covered cost. They are different concepts. Actual contracts, endorsements, state rules and exam question wording determine which assumptions apply. Calculations retain precision internally and display dollars rounded to cents.