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    Question

    What is the purpose of a "deductible" in an insurance

    policy?
    A To reduce the premium cost Correct Answer Incorrect Answer
    B To avoid small claims Correct Answer Incorrect Answer
    C To encourage the insured to take precautions Correct Answer Incorrect Answer
    D To limit the insurer's liability Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    Deductibles serve multiple purposes:

      • Reduce premiums: By paying a portion of the loss, the insured helps reduce the overall cost of insurance.
      • Avoid small claims: Deductibles discourage the filing of small claims that are not economically significant.
      • Encourage risk management: Deductibles incentivize the insured to take precautions to prevent losses.

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