What best describes the deductible amount paid by the insured before coverage applies?

• A. The policy maximum
• B. The premium amount
• C. The replacement cost
• D. The deductible amount paid by the insured before coverage applies

Answer: (D)

The deductible is the portion of a loss the insured must pay out of pocket before the insurer starts paying on a covered claim. It reduces the claim payout and is separate from other policy terms like the premium (what you pay to maintain the policy) or the policy maximum (the most the insurer will pay). For example, if a loss is $5,000 and the deductible is $1,000, the insurer would pay $4,000 (assuming the loss is covered and within limits). In many plans, the deductible applies per claim, meaning each incident requires paying the deductible again.