What does a franchise deductible typically require of the policyholder?

• A. Payment for all damages regardless of the deductible
• B. Only to cover small claims up to the deductible amount
• C. That the insurer pays full damages above the deductible
• D. No payment at all for claims

Answer: (C)

A franchise deductible is a specific type of deductible often found in insurance policies, particularly in property and casualty insurance. It operates differently from standard deductibles. When a policyholder has a franchise deductible, they are required to cover losses only for claims that fall below a certain deductible threshold. However, when a claim exceeds that threshold, the insurance company is obligated to pay the full amount of the covered loss.

This structure is designed to provide policyholders with a safety net for larger claims. By requiring the insurer to cover the entirety of damages once the deductible limit is surpassed, it eliminates the burden of partially covering larger losses. This can be particularly beneficial for businesses or individuals who may face significant financial setbacks due to large, unexpected claims.

The other choices misinterpret the functions of a franchise deductible. For instance, requiring the policyholder to pay for all damages regardless of the deductible does not reflect the shared responsibility that exists in a franchise deductible scenario. Similarly, suggesting that the policyholder only covers small claims up to the deductible amount does not encompass the full scope of how franchise deductibles operate concerning larger claims. Lastly, the option stating no payment at all for claims does not apply, as there are conditions under which the policyholder still has financial responsibility based on