Describe a franchise deductible.

• A. No payment is made until the loss equals or exceeds the deductible, and then the loss is paid in full
• B. Payment is made up to the deductible amount only
• C. The deductible is waived for certain perils
• D. The insurer pays the full loss up to the policy limit regardless of the deductible

Answer: (A)

A franchise deductible works as a threshold: you don’t receive any insurance payment until the loss reaches or exceeds that deductible amount, and once that threshold is met, the insurer pays the entire loss amount (up to the policy limits). This means small losses below the deductible are borne entirely by the insured, while larger losses are paid in full, not just the portion above the deductible. For example, with a franchise deductible of 5,000, a claim of 4,000 pays nothing, but a claim of 6,000 is paid in full at 6,000. This differs from a standard deductible, where the insurer would pay the loss minus the deductible, and from options where the deductible is waived or the payment is limited to the deductible amount.