The deductible is defined as which of the following?

• A. The dollar amount the insured pays before the insurer pays the remainder
• B. The total policy limit
• C. The premium
• D. The coinsurance percentage

Answer: (A)

Deductible is the amount the insured pays out of pocket before the insurer starts paying on a covered loss. It sits at the start of the claim, reducing the insurer’s responsibility for small losses. After the deductible is met, the insurer pays the remaining eligible amount up to the policy limits (and this may be influenced by any coinsurance terms). This is different from the total policy limit (the maximum the insurer will pay), from the premium (the cost of the policy), and from the coinsurance percentage (the insured’s share of the loss after the deductible is satisfied). For example, with a $1,000 deductible on a $5,000 claim, the insurer would pay about $4,000, assuming full coverage and no other limits.