Property Insurance FundamentalsQuestion 257 of 531
The purpose of a deductible in a property policy is to:
a.Reduce premiums and discourage small or frivolous claims
b.Guarantee the insured a profit on each covered loss
c.Remove the need for a coinsurance clause entirely
d.Increase the insurer's exposure to very small claims
Explanation
A deductible is the portion of a loss the insured pays before the insurer pays. It reduces premiums by eliminating small claims that are costly to process, and it gives the insured a stake in preventing losses. Deductibles do not guarantee profit and are a separate concept from coinsurance, which addresses the adequacy of the amount of insurance carried.
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Related questions on this topic
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