Deductions, Taxes, and Insurance

Question 1

Taxes

Answer 1

a payment to the federal or state government out of a person’s paycheck

Question 2

Federal taxes

Answer 2

taxes paid to the US government

Question 3

State taxes

Answer 3

taxes paid to your state government

Question 4

Dependent

Answer 4

a person that you can claim that you support and is an example of an allowance

Question 5

Allowances

Answer 5

exceptions that decrease your tax liability

Question 6

Net pay

Answer 6

the amount of money earned in a pay period after taxes are taken out

Question 7

Gross pay

Answer 7

the amount of money earned in a pay period before taxes are taken out

Question 8

Progressive tax

Answer 8

Take a larger percentage of income from higher income taxpayers (proportional taxes)

Question 9

Regressive tax

Answer 9

As income increases, taxes remain the same or decrease (disproportional taxes)

Question 10

FICA

Answer 10

Social Security tax plus Medicare tax. Totals 7.65% of one’s gross income. If you are self-employed, you are responsible for the entire amount of your FICA/SS tax figure, which is 15.3 percent. You actually are paying into your own Social Security account.

Question 11

Social Security tax

Answer 11

Social Security tax helps to pay for one’s retirement. Social security tax is 6.2% of one’s gross income.

Question 12

Medicare tax

Answer 12

Your employer pays half of this, while you pay the other half.
If you are self employed, you pay the entire amount (2.9%). To calculate your portion of the Medicare payroll tax, take your gross pay and times it by 1.45 percent.

Question 13

What types of deductions are taken out of a paycheck and how do you calculate them?

Answer 13

Social Security, Medicare, federal withholding, and state taxes are taken out of your gross paycheck.
To calculate FICA tax (social security plus medicare), multiply your gross pay by 7.65 percent (.0765)
Federal withholding tax is determined on your filing status and number of exemptions, and is set by the government.

Question 14

Exemptions

Answer 14

one of the factors that determines how much tax is taken out of your paycheck

Question 15

Tax filing status

Answer 15

how your deductions are calculated for taxes that are taken from your paycheck

Question 16

Rate class

Answer 16

how whole life insurance is based and assessed

Question 17

Whole life insurance

Answer 17

Insurance policy that never expires as long as premiums are paid.

Question 18

Life insurance

Answer 18

Contract that pays a beneficiary in the event of a death.

Question 19

Deduction

Answer 19

tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee

Question 20

Term life insurance

Answer 20

Has an end date and the policy expires after that date. The most basic and least expensive type of life insurance. You buy coverage for a certain amount of time.

Question 21

Who needs life insurance?- Life insurance for single people

Answer 21

Consider life insurance for retirement and estate planning. If you’re young and healthy, now may be the best time to lock in a low rate.

Question 22

Who needs life insurance?- Life insurance for married (or getting married) people

Answer 22

Spouses depend on each other in a lot of ways. Losing your spouse (or vice versa) in an accident or illness would be a huge emotional loss for them. Having the right amount of life insurance can help make sure it’s not a huge financial loss as well.

Question 23

Why do life insurance companies generally require medical exams?

Answer 23

You will be classified based on age, height, weight, nicotine and other drug use, and other health factors like high blood pressure or history of depression. Your health status will determine what rate class category you fit in, so even if you have some health problems, you could be covered.

Question 24

Rating class

Answer 24

The rating class that you fit into will determine the price you pay in premiums. More health issues= higher premium.

Question 25

Why do you need health insurance in the US?

Answer 25

Seeking medical treatment for illness or accidents would be very expensive without health insurance. It can offset the cost of doctor bills, surgery, hospital stays, and pharmacy costs.

Question 26

Deductible

Answer 26

The amount you pay before your insurance starts to pay. In general, the higher your deductible, the lower the premium.

Question 27

Co-pay

Answer 27

A fixed amount the subscriber pays at the time of service (like when you go to the doctor). The amount will differ based on the type of doctor you visit. Co-pays exist for both doctors and prescription medications.

Question 28

Premium

Answer 28

The monthly fee that is paid to an insurance company or health plan to provide health coverage, including paying for health-related services such as doctor visits, hospitalizations, and medications.

Question 29

In-network provider

Answer 29

A healthcare provider or facility that has a contract with the patient’s insurance company.

Question 30

Out of network provider

Answer 30

A healthcare provider or facility that does not have a contract with the insurance company. Treatment at these facilities will cost the patient more.

Question 31

Types of insurance policies

Answer 31

Managed care
Preferred provider organizations (PPOs)
Health maintenance organizations (HMOs)
Fee-for-Service / indemnity plans
Point-of-Service Plan

Question 32

HMO- Health Maintenance organization

Answer 32

You will be assigned a general practitioner (GP) who will determine when and if and to whom you will see for more specialized treatment. You may receive a list of PCPs (primary care providers) to choose from. Typically no deductible is charged with the HMO, but you may have a small co-pay fee for visiting a doctor in network.

Question 33

PPO- Preferred Provider Organization

Answer 33

Patient may see any doctor on list of PCPs. Patient may visit specialist without referral from a GP. May pay greater co-pay, deductible, and out of pocket expenses.

Question 34

Fee-for-Service (Indemnity) Plan

Answer 34

Obtained by individuals on their own, or though groups such as employers or associations. Generally offer the freedom to choose your own healthcare providers including specialists and hospitals. Medical costs are split between the insurance company and subscriber, and each pays a fixed percentage of the medical costs. These plans have set maximum “out-of-pocket expenses” the subscriber will have to pay.

Question 35

Point of Service Plans

Answer 35

A blend of elements of managed care and indemnity plans. Every plan is different, so read the fine print and understand the terminology. If you have a pre-existing condition, or if you have regularly prescribed medications (birth control, anti-depressants, blood pressure, insulin, etc.) make sure costs for those will not be exorbitant.

Question 36

Does smoking affect your monthly payment for life insurance?

Answer 36

Yes. Smokers pay more for life insurance.

Question 37

Why is it important to have health and life insurance?

Answer 37

It’s important to have health and life insurance to make sure you yourself are able to afford medical costs and that family members or your estate will be taken care of in the event of your death.

Question 38

How do you make sure that you get the right coverage from health and life insurance?

Answer 38

Determine realistically your medical needs, and pay close attention to benefits of different plans. Note the lifetime maximums paid by the insurance company, and decide whether or not you need more coverage. For example, $30,000 will not go far towards long-term hospitalization. Can you purchase optional medical coverage? How much will co-pays, deductibles, and out-of-pocket costs be?

Question 39

Income

Answer 39

money coming from a paycheck

Question 40

Expenditures

Answer 40

what you spend your money on each month

Question 41

Budget

Answer 41

a plan on how to spend your money

Question 42

How do we recognize when it is appropriate to use a table or a graph to represent a real world situation, and what are the benefits of using a table or a graph to answer questions about the situation?

Answer 42

It’s appropriate to use a graph or table to represent a real world situation when percentages and values come into play. An example would be seeing your monthly expenditures broken up into categories to create a more effective budget. The benefits of using a visual aid for these types of situations is that it’s easier to visualize how much of your money goes into each category.

Question 43

Deductions

Answer 43

an allowance you can use for tax purposes- the amount of money subtracted from your gross pay

Question 44

William Right broke his leg in an accidental fall. He has a deductible of $250 and a coinsurance payment equal to 20% of the cost less than the deductible. The entire bill for medical services was $750.00.
1. How much did William pay?

Answer 44

1. How much did William pay?
   a. He paid his deductible, $250
   b. He paid 20% of the remaining bill
   750-250=500
   500x.20
   William’s total is $350.

Question 45

William Right broke his leg in an accidental fall. He has a deductible of $250 and a coinsurance payment equal to 20% of the cost less than the deductible. The entire bill for medical services was $750.00.
2. How much did the insurance company pay?

Answer 45

2. The insurance company paid 80% of (750-250).
   The insurance company’s total is $400.

Question 46

How do you calculate a coinsurance payment?

Answer 46

First, you need to know the total amount of money owed, the deductible, and the rate of the coinsurance payment.
Next, take the total amount of money owed and subtract the amount of the deductible.
With that sum, multiply it by the rate of the coinsurance payment, which will give you your final answer.

Question 47

How do you use your deductions, taxes, and insurance knowledge in real life?

Answer 47

All of these factors are important in determining your remaining income, and in turn your budget. Knowing how taxes, deductions, and your insurance operate can help you to feel more prepared.