Impact of Insurance Payment on Assets, Liabilities, and Net Worth

If you paid $1200 cash for one year of insurance, the impact on your assets, liabilities, and net worth would be as follows:

Assets: Your cash would decrease by $1200 as you used it to pay for the insurance. Cash is considered an asset, and by using it for a payment, you reduce the cash you hold.

Liabilities: Assuming you paid for the insurance in full and do not owe any future payments or premiums, there would be no impact on your liabilities. Liabilities represent debts or obligations, and since you paid for the insurance upfront with cash, there are no outstanding liabilities related to the insurance payment.

Net Worth: Net worth is calculated by subtracting liabilities from assets. In this case, since there is no change in liabilities and your cash decreased by $1200, your net worth would decrease by $1200. This is because your asset (cash) decreased by that amount, resulting in a lower overall net worth.

In summary, your assets would decrease by $1200 (due to the decrease in cash), your liabilities would remain the same, and your net worth would decrease by $1200.