What is a fixed deductible?

• A. A specified dollar amount a policyholder pays before indemnification
• B. A deductible based on a percentage of the insured value
• C. A deductible that allows coverage for the full amount of damage
• D. A deductible that changes based on the policyholder's age

Answer: (A)

A fixed deductible is defined as a specified dollar amount that a policyholder must pay out of pocket before their insurance coverage kicks in for a claim. This means that when a loss occurs, the policyholder will be responsible for paying the predetermined amount directly, and then the insurance company will cover the remainder of the loss up to the policy limits.

This structure helps in managing risk by having policyholders share some of the financial burden associated with claims, which often leads to more responsible claim behavior. A fixed deductible is straightforward and easy for policyholders to understand, as it does not fluctuate based on other factors or the insured value. This type of deductible does not change based on variables such as the insured value of the property or the policyholder’s demographic factors, making it predictable for both the insurer and the insured.