Difficulty: Hard

Average Score: 0%

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

Rationale

$100, plus 25% of all further covered losses.

In this insurance policy, the insured must first pay a $100 deductible, after which they will be responsible for 25% of the covered losses while the insurer covers the remaining 75%. This structure outlines the financial obligations of the insured in the event of a claim.

A (25% of all covered losses.) YOUR ANSWER

This choice incorrectly implies that the insured only pays 25% of all covered losses without considering the deductible. The requirement to first pay the $100 deductible must be accounted for, making this option incomplete and inaccurate.

B (75% of all covered losses.) YOUR ANSWER

This option misrepresents the insured's responsibility. While the insurer pays 75% of the covered losses, the insured's obligation includes the deductible and 25% of the losses, not solely 75%. Therefore, this choice fails to reflect the correct payment structure.

C ($100, and the insurer will pay all further covered losses.) YOUR ANSWER

This choice suggests that the insured only pays the $100 deductible and nothing else, which is incorrect. After the deductible is met, the insured is also responsible for 25% of the covered losses, making this statement misleading.

D ($100, plus 25% of all further covered losses.) CORRECT

This option accurately represents the insured's cost structure, indicating that they pay a $100 deductible followed by 25% of any additional covered losses. This correctly outlines the insured's financial responsibility in the event of a claim.

Conclusion

Understanding coinsurance and deductibles is crucial in insurance policies. The insured's total payment in this scenario consists of a $100 deductible and 25% of subsequent covered losses, which accurately reflects their financial obligations under the policy. The other choices fail to properly account for the deductible or misstate the insured's payment responsibilities, highlighting the importance of clarity in insurance terms.

Related Questions

View all