Which statement best describes a straight deductible in property coverage?

• A. It requires paying a fixed amount before the insurer coverage applies.
• B. It eliminates small losses entirely.
• C. It is the same as a franchise.
• D. It is a premium discount only.

Answer: (A)

A straight deductible is a fixed dollar amount you must pay out of pocket toward a covered loss before the insurer contributes anything. For example, with a $1,000 straight deductible, a $5,000 claim means you pay $1,000 and the insurer pays the remaining $4,000 (within policy limits). If the loss is only $800, you pay all of it and the insurer pays nothing. This shows that small losses aren’t eliminated; you simply share the cost up to the deductible amount on each claim. This differs from a franchise, where the insurer pays nothing unless the loss exceeds a set amount and, once that threshold is passed, pays the full loss. The deductible concept is not just a premium discount; it’s about how costs are shared when claims occur.