Question:
If an insurance policy covers individual losses up to $10,000 and has a deductible of $500, the insured will be paid how much in the event of a covered loss of $5,000?
Answer:
A deductible is the amount the insured pays before the insurer pays their part. It is deducted from the value amount that the insured should receive.
In case of an accident resulting in a loss of $5,000, this will be compensated because it is within the $10,000 bracket of the policy cover. However, deductibles will have to be subtracted because they are a liability of the insured and not the insurer.
Thus insurer will be paid $5,000 – $500
= $4,500
