Laura Bailey has a plan to buy health insurance. She surveys several health insurance companies and compare the insurance's quotes. She is interested in buying health insurance with co-insurance terms. Later, Bailey choose health insurance company "C" and settle 80/20 split in co-insurance agreement. Beside 80/20 split, Bailey has a $1,000 deductible and a $5,000 out-of-pocket maximum in her co-insurance provision. Bailey need to understand that 80/20 term only apply after she met her deductible for the year. However, something unfortunate happen and she need surgery early in the insurance agreement year that costs $5,500. Since she has not meet the deductible yet. the first $1,000 is not covered by the insurance company. Bailey have to pay $1,000 first and responsible to pay 20% of the remaining cost. And later her insurance company will cover the rest expenses. Here's the calculation:

In the same year, Bailey needs another expensive procedure. Since she already met her deductible, the insurance provision will work right away. The maximum amount she will required to pay for the rest of the year is $3,100 because she already paid a total $1,900 out-of-pocket during the policy term. Her insurance company is responsible for the bill up to Bailey's maximum policy limit.

Irvin Saga own a building with replacement cost valued at $2,000,000 and has an 80% coinsurance clause which means the building insured for at least $1,600,000. However, Mr. Saga decides to purchase a $1,200,000 insurance. As time passes, the building suffer damage from fire that cost $400,000. The insurance company find that the building value is $2,000,000 and being under reporting by Mr. Saga. Insurance company apply penalty which reduces the claim payment. The claim is calculated by dividing the purchased insurance by the supposed amount of insurance. In Mr. Saga case, the claim will be 75% from $1,200,000/$1,600,000. The percentage multiplied by the amount of the loss.

$400,000 x 75% = $300,000

This means Mr. Saga will receive only $300,000 (less any deductible) for the $400,000 claim.