Logical Reasoning

PT7 · S4 · Q6 The government provides insurance

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The government provides insurance for individuals’ bank deposits, but requires the banks to pay the premiums for this insurance.

Conclusion (thus / should)

The government should make depositors pay the premiums for insuring their own accounts.

Intermediate Conclusion (should)

The government should take steps to ensure that depositors who want this security bear the cost of it.

Evidence (since)

The insurance provides security for individuals' bank deposits. The banks pay the premiums for this insurance, but depositors are the primary beneficiaries of this security.

Evaluate

There seems to be a pretty apparent Missing Link assumption:

The author is arguing that since depositors are the ones who benefit, they (not banks) should be the ones paying the premium.

If we were trying to argue the Anti-Conclusion, can we think of any way to say, ?

Nothing obvious comes to mind. Maybe there's just a logistical reason why it's way easier to have banks pay it. Maybe if we switched to having depositors pay it, that plan would backfire (they would just refuse to put their money in banks) in some way that would be a net loss.

Goal

Let's look for an answer linking or an answer that, if negated, would allow us to argue that the current system is fine / switching would be bad.

6.

Which one of the following is assumed by the argument?

  1. Banks are not insured by

    Out of Scope: default-insurance

    This is unrelated to the argument, which is concerned with who should bear the cost of deposit insurance rather than loan defaults.

    9% picked this

  2. Private insurance companies do not

    Out of Scope: private insurance companies

    Whether or not private insurance companies can provide deposit insurance isn't relevant to the argument about who should pay for the existing government-provided insurance. The fact that the government currently provides the insurance doesn't imply that private insurance companies couldn't do so.

    5% picked this

  3. Correct

    Banks do not always cover

    Why this is right

    This has the lovable Defender "not", so we want to negate it and see if this would weaken. If banks DO always cover insurance costs by reducing depositor interest rates—then the argument's suggestion that depositors need to bear the costs becomes irrelevant because they already do, indirectly. There would be no reason to switch who pays for the premiums, since the premiums are not currently costing the banks any money. They found a way to cover the cost by giving customers less money back as interest on their accounts.

    Skill tested: Necessary Assumption · how this choice captures the argument's function is the move to repeat next time.

    63% picked this

  4. The government limits the insurance

    Out of Scope: defined limit

    This is an outside knowledge trap because many people probably know that the FDIC insures accounts up to $100k (pre-pandemic, I think it increased to $250k, at some point). It doesn't make any difference to this argument whether the insurance protection is limited or unlimited. In either case, the banks are currently paying the premiums and the author thinks the depositor should be paying them.

    3% picked this

  5. The government does not allow

    Opposite (if anything)

    This does have a lovable "not". If negate it, it's saying "the government does allow for banks to offer accounts that aren't insured". Does that weaken? No. The author seemed to actually be allowing for that possibility when he said, "depositors who want this security". That suggests that having the insurance is an option, not a given. If banks are allowed to offer uninsured accounts, that's fine. Those are beyond the scope of this argument. This argument is about accounts that do have insurance, and is arguing that for those types of accounts, which come with insurance premiums, depositors rather than banks should pay the premiums.

    20% picked this

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