How does the deductible affect premium and payout, and what is the difference between a per-occurrence and an aggregate deductible?

How does the deductible affect premium and payout, and what is the difference between a per-occurrence and an aggregate deductible?

• A. Higher deductibles generally lower premiums; payout is reduced by the deductible; per-occurrence applies to each event; aggregate applies to total losses in a period
• B. Higher deductibles raise premiums; payout is independent of the deductible; per-occurrence covers all incidents; aggregate covers only one event
• C. Deductibles have no impact on premium; payout is the full limit; per-occurrence is a single deductible; aggregate is per policy year
• D. Higher deductibles lower premiums, but payout is not affected; per-occurrence and aggregate are interchangeable

Answer: (B)

Deductibles determine how much you pay out of pocket before insurance kicks in, and they influence the premium you’re charged. When you choose a higher deductible, you’re taking on more of the loss yourself, so the insurer’s risk is lower and the premium typically goes down. For any given claim, the payout you receive from the insurer is the amount covered under the policy limit after you’ve paid the deductible, so a larger deductible reduces the amount the insurer pays on that claim. The difference between per-occurrence and aggregate deductibles is about how the deductible applies across multiple claims. A per-occurrence deductible is applied to each separate incident, so you pay that deductible for every incident before the insurer pays for that incident. An aggregate deductible, on the other hand, is tied to total losses over a policy period; you add up deductible payments across multiple claims, and once you’ve satisfied the aggregate amount, the insurer starts paying for subsequent losses (subject to policy limits).

Deductibles determine how much you pay out of pocket before insurance kicks in, and they influence the premium you’re charged. When you choose a higher deductible, you’re taking on more of the loss yourself, so the insurer’s risk is lower and the premium typically goes down. For any given claim, the payout you receive from the insurer is the amount covered under the policy limit after you’ve paid the deductible, so a larger deductible reduces the amount the insurer pays on that claim.

The difference between per-occurrence and aggregate deductibles is about how the deductible applies across multiple claims. A per-occurrence deductible is applied to each separate incident, so you pay that deductible for every incident before the insurer pays for that incident. An aggregate deductible, on the other hand, is tied to total losses over a policy period; you add up deductible payments across multiple claims, and once you’ve satisfied the aggregate amount, the insurer starts paying for subsequent losses (subject to policy limits).