How Does a Deductible Affect the Amount an Insurance Company

question 1

Multiple Choice

How does a deductible affect the amount an insurance company must pay?

• A)not at all; the deductible is a matter between two insureds
• B)the insurance company pays the loss less the deductible
• C)the amount of the deductible is added to the loss amount
• D)the deductible is added to the annual cost of premiums

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Definitions:

Inelastic

A situation in which the demand or supply for a good or service is relatively unresponsive to changes in price.

Price Elasticity

The measurement of demand's elasticity to price changes for a particular good.

Midpoint Formula

A method used in mathematics to calculate the midpoint, or average, of two points on a line segment.

Price Elasticity

The degree of interplay between a good's demanded quantity and its price movement.