Question 62

A specified amount the insured must pay on a claim before the insurer will cover the rest of the claim

A deductible for a first-party automobile loss refers to a specified amount that the insured must pay out-of-pocket on a claim before the insurance company will provide coverage for the remaining costs associated with that claim.

A) An amount the insured must pay on a claim after the insurer has paid to the maximum policy limits

This option is incorrect because it describes a situation that occurs after the insurer has fulfilled its obligations, rather than addressing the initial out-of-pocket expense required from the insured before any payout occurs.

B) A specified amount the insured must pay on a claim before the insurer will cover the rest of the claim

This option is correct as it accurately defines a deductible. It highlights that the insured is responsible for paying a predetermined amount first, after which the insurer will cover the remaining expenses of the claim.

C) A variable amount the insured must pay to a third party towards damages for which the insured is liable

This option is incorrect because it describes liability payments rather than the deductible associated with first-party claims. A deductible pertains to the insured's own policy claims, not payments to third parties.

D) An amount by which the insurer may discount the insured's premium as a reward for a loss-free policy term

This option is incorrect as it refers to premium discounts rather than deductibles. A deductible is an amount paid by the insured when making a claim, whereas discounts for loss-free terms are separate considerations.

Conclusion

The correct answer is definitively B, as it precisely captures the essence of what a deductible is in the context of first-party automobile losses. Options A, C, and D do not accurately represent the concept of a deductible, as they either describe different aspects of insurance claims or misinterpret the nature of deductibles altogether.