Texas All Lines Adjuster Practice Test

What defines a fixed deductible?

1. A percentage of the insured value

2. A specific, predetermined amount that must be paid out-of-pocket

3. Payments that vary based on the damage amount

4. A type of deductible that changes over time

The correct answer is: A specific, predetermined amount that must be paid out-of-pocket

A fixed deductible is defined as a specific, predetermined amount that an insured party must pay out-of-pocket before an insurance policy covers any remaining costs associated with a claim. This means that when an insured individual experiences a loss, they are responsible for paying the exact amount stated as the deductible, regardless of the total cost of the claim. For instance, if a policyholder has a fixed deductible of $500 and sustains damages amounting to $2,000, they would first pay the $500 deductible, and the insurer would then cover the remaining $1,500. The predictability of a fixed deductible allows policyholders to easily understand and plan for their potential out-of-pocket expenses in the event of a loss. Other options describe different types of deductible structures or features. A percentage-based deductible, for example, varies with the value of the insured asset, while deductibles that change over time or fluctuate based on the amount of damage introduce unpredictability in the amount the insured is responsible for paying. Thus, the clarity and consistency of a fixed deductible make it a straightforward choice for policyholders.