What is a percentage deductible based on?

What is a percentage deductible based on?

• A. The total premium paid for the policy
• B. The market value of the insured property
• C. A fixed rate for all property
• D. The age of the insured property

Answer: (B)

A percentage deductible is based on the market value of the insured property. This means that when a claim occurs, the deductible that must be paid by the policyholder is calculated as a percentage of the property's market value. For example, if a property is insured for $100,000 and the deductible is set at 10%, the policyholder would need to pay $10,000 out-of-pocket before the insurance coverage kicks in. This method of calculating deductibles is particularly common in property insurance, especially for high-value items or assets. It ensures that the deductible is proportional to the value of the property, making it fairer and more relevant to the insured value at the time of a claim. The other options do not accurately represent how percentage deductibles are determined.

A percentage deductible is based on the market value of the insured property. This means that when a claim occurs, the deductible that must be paid by the policyholder is calculated as a percentage of the property's market value. For example, if a property is insured for $100,000 and the deductible is set at 10%, the policyholder would need to pay $10,000 out-of-pocket before the insurance coverage kicks in.

This method of calculating deductibles is particularly common in property insurance, especially for high-value items or assets. It ensures that the deductible is proportional to the value of the property, making it fairer and more relevant to the insured value at the time of a claim. The other options do not accurately represent how percentage deductibles are determined.