The insurance company will pay $23,200 towards the family's medical expenses.
The Watson family has a family medical policy with a $250 deductible per person, with a maximum of three people.
The policy also has a $1,000 out-of-pocket limit and an 80/20 coinsurance provision.
In this case, four family members were injured and each incurred medical expenses of $7,500.
To calculate how much the insurance company will pay, we can follow these steps:
Calculate the total expenses incurred by the four family members: $7,500 x 4 = $30,000
Apply the deductible: Since the deductible is $250 per person, the total deductible for four people is $250 x 4 = $1,000.
This deductible is subtracted from the total expenses: $30,000 - $1,000 = $29,000
Apply the coinsurance provision: The coinsurance provision states that the insurance company will cover 80% of the expenses.
The remaining 20% is the responsibility of the policyholder.
In this case, the insurance company will pay 80% of $29,000 = $23,200
Check the out-of-pocket limit: The out-of-pocket limit is $1,000.
Since the deductible and coinsurance payments add up to less than $1,000 in this case, the insurance company will cover the full $23,200.
Therefore, the insurance company will pay $23,200 towards the family's medical expenses.