Deductible Information

B

The answer is B. Deductible.

A deductible is the initial amount of a loss that is not covered by an insurance policy, and therefore the responsibility of the insured. It is a fixed dollar amount or a percentage of the total claim amount, and it can be determined on a per-occurrence or per-illness basis, or on a calendar-year basis.

For example, if an insurance policy has a $500 deductible and the insured suffers a loss of $5,000, the insurance company will pay only $4,500, and the insured will be responsible for paying the first $500 of the loss.

The purpose of a deductible is to reduce the number of small claims, which can be costly for the insurance company to process, and to encourage policyholders to be more careful and take preventive measures to avoid losses. The higher the deductible, the lower the insurance premium, as the insured is assuming more risk.

Participation clause (A) is a provision in an insurance policy that requires the insured to pay a portion of the loss even if the policy limit has not been reached. Internal limits (C) are sub-limits within an insurance policy that restrict the maximum amount payable for a particular type of loss. Co-insurance (D) is a provision that requires the insured to share the loss with the insurance company on a percentage basis, after the deductible has been met.