56. An insured has a policy with a 75%/25% coinsurance and a $100 deductible. This means that the total amount that the insured will have to pay equals
Answer: D
The total amount that the insured will have to pay equals $100, plus 25% of all further covered losses.
An insured with a 75%/25% coinsurance policy will incur a $100 deductible initially, followed by a responsibility of 25% of any additional covered losses after the deductible has been met.
A) 25% of all covered losses.
This option incorrectly states that the insured pays 25% of all covered losses. While the insured does pay 25% after the deductible, they must first pay the $100 deductible before any coinsurance applies, making this statement incomplete.
B) 75% of all covered losses.
This option is incorrect because it suggests that the insured pays 75% of all covered losses. In reality, the insurer covers 75% of the losses, and the insured is responsible for the remaining amount after the $100 deductible and the 25% coinsurance.
C) $100, and the insurer will pay all further covered losses.
This option is misleading as it indicates that the insurer will cover all further losses after the $100 deductible. However, after paying the deductible, the insured will still need to pay 25% of any additional covered losses, making this statement false.
D) $100, plus 25% of all further covered losses.
This option accurately describes the payment structure of the coinsurance policy. The insured first pays a $100 deductible, and for any covered losses beyond that, they will pay 25% of those losses, while the insurer pays the remaining 75%.
Conclusion
Option D is the only choice that correctly represents the financial obligations of the insured under a 75%/25% coinsurance policy with a $100 deductible. All other options fail to account for either the deductible or the correct proportions of payment responsibilities, thereby misrepresenting the insured's total financial liability.