Risk Managers Are Concerned with Policy Limits and Deductible Size

question 21

Multiple Choice

Risk managers are concerned with policy limits and deductible size contained in insurance contracts because:

• A) an increased deductible amount increases the policy's premium
• B) the policy limit and the deductible are the only determinants of whether the policy will pay the claim
• C) they determine how much of the exposure the insured retains and transfers
• D) premiums set by policy limit and deductible are not tax deductible whereas uninsured losses are deductible

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Definitions:

Nature and Effect

A term used to assess the inherent characteristics of something and its resulting consequences or impacts.

Good Faith Purchaser

A person who buys property without knowledge of any existing claims or defects in title, thus protected under the law.

Valuable Consideration

Any benefit, right, or interest that has tangible or intangible worth, which is provided by one party to another as part of a contract.

Reasonable Value

An estimated worth based on what is fair and sensible, considering the circumstances and context.